Value Cells - Anecdotal Caselet
The concept of value cells is neither new nor novel. As a youngster at Tata International,India, shortly after my MBA, I was heading a "Value cell" for this trading organisation. The bank accounts and books of sixteen such "value cells" employing 1500 persons were separate; the value cells had their own budgets, business plans, Profit & Loss accounts and Balance Sheets. Each value cell's performance would be reviewed every month by the CEO very month. The metrics were the Profit & Loss account, Balance sheet, and milestone events. The metrics had to be tabulated against the budgeted figures and the forecasted milestone events.Deviations had to be highlighted. Those were the days of manual MIS. No computers were there. To ensure that long term objectives of the organisation were not compromised, the value cell heads would, once a year, make a presentation of their annual projections. Once accepted by the board, they would become the control documents for finance and accounts. Finance would report directly to the CEO, but all accounts were reporting to the value cell heads. The annual revenue of the company (Then called Tata Exports Ltd.) was USD 100 million appx. The smallest division (Value Cell) was USD 100,000 strong. I was the sole signatory of my "Value Cell" bank account. Like an owner. That gave an enormous sense of responsibility and satisfaction. Value cell heads had not to seek day to day approvals for decisions.
Employee Impact
The system was very satisfying for the employees. The employee turnover ratio was very low as compared to industry standards, despite below industry wages. The competency levels of the personnel were amongst the highest in the industry. The employees would not change jobs for higher salaries. To illustrate, my former boss at Tatas received an offer from an organisation that offered to double his pay package. He declined the offer even though the new job promised to change his lifestyle, simply because it did not offer the same autonomy. The person concerned is now the CEO of a USD 1.5 billion organisation. People with high skill levels and from the best of BSchools would prefer to work and contribute to the organisation. Ethical standards of employees and the organisation were high. The employees would get a well rounded knowledge, whereby they could easily shoulder responsibilities as heads of larger value cells.
The Tatas of India, the most respected Business Conglomerate of India, have a holding pattern that could be called a "Nested Value Cell Structure" The holding company, Tatasons, spawns new value cells in profitable areas. The famous ones are Tata Consultancy Services (TCS), Tata Motors, Tata Steel and Tata Tea. With this structure they control a conglomeration of more than 50 companies in diverse fields, present turnover exceeding USD 15 billion.
