Dharmic Principles In Organisations Can Create Conscious Decision Making

Professor G Ramesh retired from the Center for Public Policy of Indian Institute of Management Bangalore after serving for about two decades and has been the Chairperson of the Center for Public Policy of IIM Bangalore. He is a Fellow of the Indian Institute of Management, Ahmedabad (1990) and was Member of the Indian Economic Service (1980 batch) for a brief period.  

Presently, his interests lie in IKS and its interface with Public Policy and Management and focused on promoting research on Dharmic style of public policy and management. He has undertaken studies in the areas of temple economics and management, and management of mega events like Kumbh. He runs a Think Tank on Public Policy in Bangalore. It functions as a think tank and research center in public policy and public administration. In this interview he speaks about Dharmic influences on management and corporate decision making.

How do the principles of Dharma influence ethical decision-making?

The best definition of dharma is: Dharaya iti dharma: that which upholds, sustains, and uplifts. It also means that which unites.

Dharma is holding fast to principles which have to be sustained and uplifting. It should hold forth strong principles, but should contain principles which help sustain quality, nature and culture of the organization which binds everyone together. The contrast in what organizational academicians call as satisficing outcomes or solutions or exploiting opportunistic behavior.

Dharma should also be a factor which binds organizations. It should be a shared value system which holds employees together like a glue.  Organizations are not held together by just systems, control and outputs. These are held together at subtle level by norms, customs, stories, and culture.

All organizations lay for themself certain principles to be followed, just like what the Courts specified as basic structure of the Constitution. These principles are not necessarily laid down through written rules, and these include unwritten rules as well.  These specify what are non-negotiable areas of discretions. These are no-go areas of decision making and operations. Dharma is holding to one’s principles even under adversarial conditions.  Which means any violation of these not only can jeopardize business interest but can also attract severe penalties.

Organizations are heavily concerned with risk management. Laying down principles also helps derisking large organizations engaging a diverse range ofemployees from a diverse range of backgrounds.

Organizations may have different threshold levels of dharma or ethical standards. Defining and enculturing the overall organizational ethical ambience and standards is the role of the Board and top management. This is an important aspect of corporate governance.

These are certain ethical standards specified for organizations as aspects of corporate governance by the Ministry of Corporate Affairs, SEBI, etc. These are mandated norms of compliances.  Dharmic principles are more than this and refer to intrinsic value system which are self-prescribed and self-regulated. These are far superior, enduring and overarching than mandated regulations.

In corporate reporting, there is an attempt to report triple bottom line with reference to sustainability. In dharmic management, this is far from being prescribed. But we can recommend one thing.  Dharmic principles should enter the economic calculus of decision making.  Where a firm has to choose an option which is ethical but comes at cost the trade off due to dharmic principle has to be specified enabling the decision maker to make a conscious choice.

What can be plausible areas of conflicts in choices that can happen with ethical bearing. It can be with reference to employee consideration, client consideration, stakeholder interests and not just investors and promoters, sustainability, long term considerations, etc. These can be cases of outcomes which have external diseconomies.  Some of these pertain to the interests which are external to the organizations but involving costs to the stakeholders.

We said dharma is holding on to principles even under adversarial positions. This was amply demonstrated during Covid when several corporates and firms refrained from retrenching their employees even when there were drastic cuts in orders and under severe cost pressure. Similarly, corporates like Tatas practise strict principles with reference to integrity and commitment to promises. Similarly, it has been observed that lakhs of small borrowers from banks are quite conscious of the commitments and try to avoid being NPA at any cost.

There is now a push back on adharmic decision making. The reporting standards make mandatory for firms to report on decisions having negative environmental impact, transparency, unhealthy practices in product or promotion, etc. It is important these are inherent and intrinsic to the organization rather than externally driven.

Can personal and organizational dharmic principles determine ethical decision making.

Ethical policy framework and action agenda are the overall ambience that envelop the decision-making framework of an organization.  It is the Board and the top management which sets the ethical culture of the organization. The Board has to be self-governed by Dharmic principles to enable overall dharmic standards by which the organizational decision making and outcomes will be evaluated. It is the Board and Top Management that align the strategic direction and control of the organization with the ethical policies. Often organizations make laudable statements about dharma but implement incentives that run counter to the stated principles.

Ethical Decision Paradigm can be seen under the Principal - Agency framework which is about the alignment of the goal of the agent with that of the principal, and the evaluation and incentive system that reinforce this alignment. For the Principal Agency system to operate in dharmic way, Governance system addresses the question ‘who guards the guardians’. If there is mis alignment because of the divergent personal goal of the individual or counterproductive incentive system, then there is possibility misalignment between the individual and organizational goals which could undermine the ethical health of the organization.

At a personal level too, individuals carry their own threshold levels of dharmic principles and ethical standards. It puts individuals in dilemma when organizational ethical standards are in conflict with his standards. In extreme cases either he becomes a whistle blower or exists the organization. It is a challenge. There is also self-selection which happens.  Professionally run firms try to recruit individuals who are in alignment with their standards and also attracts ethically strong professionals. It is important for the organization to establish and articulate the dharmic principles in clear term.

Many organizations follow what I call as compliance culture. These fir ms look at prescriptions as compliances that are mandated and try to meet it. Mandated prescription often set the floor and are expected to be met at the minimum. But firms take these as goal, like in the case of CSR which they look at it as compliances. I call this as tick box approach. These try to observe compliance culture than a culture of fulfilment. If the management does not believe in what it says it always runs the risk of mis-adventure or disaster at some point.

This makes the job of Board even more important. There is huge literature on CEO selection. The board has to appoint a CEO who can lead the organization ethically and can set the ethical standard of the firm. This in turn determines how ethically the firm would be run. The dharmic CEOs have to look for themselves and  self-realization in fulfilling organizational goals, than in maximizing his returns.

These days it is not unusual for CEOs to look for Gurus who can mentor; it is obvious they are looking for guidance outside the management and domain.

In what ways can Dharma be considered both personal and universal in its application.

It works at individual levels, firm level and industry ecology level.

In economic perspective we look at it from micro and macroeconomics. The principles that govern at work at individual level work at macro as well, for example demand and supply. Macro can be considered as aggregate of micro units.

In organizational perspective, locus of organizational study is classified micro (intra organizational) and macro-organizational level (organization wide and interorganizational). There are certain principles that govern individual level and some which are organizational level.

Building dharmic perspective at organizational level has to be seen as Institution Building exercise. Left to itself organizations follow market-based principles of profit seeking, compensation, rewards and punishments. Ushering in dharmic principles takes strong institution building interventions to ensure alignment across the organization. Firms struggle to find alignment between dharmic principles and profit seeking behaviour as there could be tradeoffs between these.  Left to itself organizations will slide into market behaviour which is a self-regulatory system indeed but can go awry sometimes in the absence of dharmic governing principles.

The dharmic principles between organization and its individual employees have to be aligned. If it is misaligned it can cause high risk to the organization. The alignment is represented below.

This stresses dharmic qualities have to be hallmark of both the organization and individuals. If one of them is aligned it can cause business and reputation risk to both the individuals and organizations.

We have seen it during the period of meltdown and recent bursts of unicorns of how valuation driven business model bereft of dharmic principles ran into trouble and posed serious challenge to the investor ecosystem itself.  Greenspan, the Chairman of Federal Bank mentioned in the Congressional hearing that he had underestimated the ‘greed’ of the bankers in risk taking abilities. He said he thought CEOs would be governed by their sense of risk management, and market corrections would happen automatically which did not happen. All these boil down to lack of dharmic considerations in assessing business practices and financial health.

While organization dharmic principles we may say are institutional, individual principles are highly idiosyncratic, contextual, intrinsic, and intangible. It is here that organizations face challenge of selecting people with appropriate value systems and enculturing them. Organizations need people who raise common concerns as organizational conscious keepers.

What are some examples of Indian management practices rooted in the principles of Dharma?

Indian Style of management was much talked about subject in 80s but lost traction. One concept which used to be mentioned is Paternalistic style of management. Indian Style of Leadership, for example, is supposed to be Trust Based, Ethical, Charismatic etc.  In India, employees expect a familial and supporting ambience than competitive pressure.  Increasingly even management experts have come to the view that team performance and supportive environment is more conducive than competitive environment internally.

Our management practices were more accommodative of stakeholder considerations. Old industrial houses like Tata, Birla, Kirloskar were always mindful of their social obligations and these did not require mandated CSR laws. These were also employee friendly. These took care of the neighbourhood with schools and hospitals, and the society at large. These even contributed to independence struggle and for them industrialization was nation building. We have also developed community-based organisations like cooperatives like NDDB. Mandis are operated on mutual basis and long-term relationship basis.

There is a branch of study propounded by Neil Fligstein who stresses kinship in market relationship. This has been broadly the governing factor in our market regulation.  Our markets have been self-regulated through communities and kinship than state regulation.  So much so that the market players step in to help any player who find it difficult to meet the obligation. They ensure the market as a whole thrives in all weather.

Community and stakeholder management is also way of manging risk.  Community steps in to save firm in distress and similarly stakeholders are accommodative when the firm is facing crisis. Firms are generally considerate towards employees and count loyalty a lot. They don’t strictly treat it as contractual obligations, firms go beyond that.

In organizational control literature, control is discussed in terms of market, hierarchy and clannish mode of controls. By default organizations are market based (incentive driven) or hierarchy driven. It is difficult to attain clannish mode of control, for example of an employee says he is an IITian, IIMite, etc.  This clannish system is difficult to ensure in organizations and requires intensive enculturation and support. We call establishing a Dharmic culture as ushering a clannish system.

Our management style stresses trust-based relationships than contract based. Under the branch of Institutional Economics, contract theory discusses relationship between principal and vendor and the principles that govern it. It is based on economic principles, and it is about designing contracts to minimize moral hazard problems and minimize information asymmetry. Later theory stresses the overall regulatory environment that determines the effectiveness of the contract theory. Corporates increasingly adopted vendor management systems, pre qualifications and ratings to communicate trust and quality. In Indian contractual systems, we primarily rely on vendors promises and track record and comfort level.  It is trust based system of contracting. The world also realizes that the reputation of the vendor is more important than all the specifications and pre qualifications that one can set in the tender.

I was writing a case on a leading poultry grower, and I asked him about his philosophy towards charity and CSR. He said since he is fair to his stakeholders and supports thousands of growers and lakhs of traders, he did not feel the necessity for CSR. This has been our philosophy. Charity and fair business practices are basic to our business than mandated contributions through CSR. Fair business is intrinsic to our thinking than external and mandated.

In Indian conditions we refrain from exploiting advantageous position. Our position during Covid was ilustrative of this and we were aiding other countries even when we faced pressure of vaccines. Similarly, our mandis operate such that even smallest trader can survive.

How does the concept of karma yoga align with modern productivity and performance management?

This can be viewed under various frameworks.

The most spoken about theory of motivation is Maslovs hierarchy of needs or motivation which starts with Hygiene factor with the highest factor being Self Realization. Later he in fact extended it to Transcendence. Our philosophy has always spoken about higher goals.

Another approach is, we discuss under the framework of do end justify means or means justifies ends. We believe if means are proper, end will be appropriate. Other view is that only success counts. Increasingly experts qualify this saying only sustainable success matters. The principal agent framework as mentioned before expects the Principal – Agent will act in his self-interest and the organization's challenge is to design a system which will be minimize the mis alignment between the principal and agent.  The agent is supposed to pursue opportunistic goals with guile.  The organization is expected to minimize the information asymmetry, moral hazard, and hidden agenda. In our culture these are taken care through dharmic behavior from both the principal and agent and these are unwritten and unspoken. These come through enculturation and organizational culture.  For a long time, the management literature used to speak about enabling Japanese work culture.

What are the key differences between Western management theories and Indian management philosophies based on Dharma?

These differences we have to infer. These require in depth research.

• Western management principles stress Individual utility maximization, organizations for maximizing, maximization whether is profit or resource utilization, short termism, incentive driven, distribution efficiency through market and control over resources, innovations and IP for individual benefit, growth, contracts, etc.
• Dharmic management principles stress individual utility but at the cost of society, organizations for stakeholders, more equitable distribution, institutional mechanisms to ensure welfare and distribution like temples, sustainable long term goals, incentives as well as intangible goals, IP for common good, common property, trust, etc.

These are concepts worth exploring and researching.

How can leaders balance personal ambition with adherence to Dharma in a corporate setting?

Once the Chairman of Infosys said the corporates have to temper the expectations of investors rather than fuelling these. This is rue of compensation of employees also. Today it is a rat race. Leaders should set right goals, expectations, and fulfilment. These should not fall to the Greed. Greenspan post meltdown in the Congressional hearings he said,  he thought market would correct itself, but the leaders were overtaken by greed.

Dharmic system requires self-regulation than some authority to command and comply. Dharmic leaders set the right governance culture of the organization. Dharmic leaders cannot be rewarding themselves when the firm is underperforming. Studies have shown thst CEOs have rewarded themselves in US even on the face of declining performance. In modern day parlance, I would say being professional is being dharmic.

How can the Indian concept of satyam (truth) be applied to maintain transparency and integrity in business practices?

In a management way, Satyam is viewed as eradicating Info Asymmetry, disclosure, standards, ratings, etc. These methods have been devised to control Asymmetry and communicate credibility and quality. In dharmic culture these are assumed and it goes by reputation. In deep cultural society, if one doubts quality they take it as personal affront, just as some Doctors or Lawyers would take it. The dharmic practices reduced the risk of trading and business. It is this that enabled global trading in the absence of shipping documents and bank guarantees.

In what ways can understanding the idea of detachment from outcomes improve leadership qualities?

A leader lives in a VUCA world. He is alone and he is swayed by uncertainty, shocks, complexity, etc. He needs strength of personality, detachment, and stability, Increasingly CEOs seek Mentors, Coaches, Gurus to handle stress and the competitive world. This comes lack of self-searching, reflection, and strength of character. Even Arjuna had self-doubts at the battlefield, which provided us with the invaluable Gita.

What challenges might arise when applying Indian management principles in a global, multicultural work environment?

Global market is highly competitive, and dog eat dog markets. There are severe cost pressures, profit pressures, and pressure to cut corners. Also, we live in a globalized world. Our corporates operate in multiple markets and multiple culture. These need to adopt and compete.

One positive factor, globally there is now pressure to comply to transparency, open border, quality, and multi culturalism. There is growing manifestation of India’s soft power. We are also appreciated for our work culture, skills, and loyalty to organization. Our philosophy of Vasudeva Kudumbakam fits very well globalization and multiculturalism. We need to deepen this awareness.

What role do festivals like Mahakumbh play in connecting us to our past, our spiritual core?

Festivals like Mahakumbh are about connecting with our past, renewing ourselves and also about charity or service to community. These are not just about taking a dip in sacred river.

The purpose of maha kumbh is for people to purify themselves internally through yoga, meditation, vrats, and giving. In fact rich people gifts resources liberally in these melas. These are for self reflection and self realization. It helps to reawaken our spiritual core and connect with ourselves. In fact, these are also occasions when pilgrims give away their desires and take resolutions.

Kalpavas is one such practice. Through long vrats and meditation kalpavasis rejuvenate oneself. It's very historicity, adds mysticism and aura to it. It is an immersion programme. It also signifies to us the importance of rivers and environment.