Organisations are a creature of their environment. Just like people-organisations, in essence, are people too-they derive their beliefs, objectives, systems, and mores from what's around them. At a fundamental level, they symbolise an arrangement with the society they inhabit. In the 17th century Europe-and India too-the first (trading) corporations were 'chartered' into existence. The typical deal was rather straightforward: a group of enterprising men would be allowed to conduct business under His Majesty's name in return for a share in the wealth they created and for territorial expansion of the empire. In fact, America was settled by one such corporation, the Massachusetts Bay Company, which King Charles I chartered in 1628 for the purpose.

The pact that a nation makes with its corporations, then, determines its economic evolution. The American settlers were people who had sailed to a new land to seek personal fortune. Greed was, and still is, good. A Supreme Court ruling way back in the 1880s allowed corporations to be treated as persons and, thus, extended them the right to ''life, liberty and property''. Since then, American companies have used this law to nix governmental attempts to limit their powers.

The Indian corporation, in contrast, is a product of Hindu fatalism. Its psyche is bathed in the spirit of non-aggression and contentment. Unlike America, where individual rights were guaranteed and respected, India had a well-established caste system. That automatically predetermined the roles members of the four castes would play in the family-owned businesses. The trader was the new owner; the brahmin, the manager; and the other two castes had to supply muscle power to work the assembly lines.

Independence and Nehru's strong belief in socialism made private wealth an undesirable, if necessary, evil. The power of private enterprise was curbed and the state became the new businessman. Licensing of industries and import restrictions further circumscribed industry. Devoid of real competition, organisations became corpulent, complacent and internally focused. A typical family-owned business had many companies in different industries, but none that could compare with the corporations that America was building.

The spirit of enterprise per se suffered because, again unlike America, capital was scarce and concentrated in the hands of a few. Rewards of labour were small, and wealth sharing among the constituents of the corporation, unheard of. If our corporations did invest any money in social activities, it was because they were either mandated or incentivised to do so.

The 90s have changed the organisational equation. The rise of the knowledge-entrepreneur has transformed the organisation's character. Equality is assured, wealth is shared, ideation is not just encouraged but required, and work is not a 9-to-5 chore, but a microcosm of entrepreneurship. Transnational competition is also forcing Indian businesses to be more like them. In size, systems, reach, innovation, and people practices. In the final analysis, though, all organisations-Indian or foreign-must return more than what they take from the society. That is the only sustainable raison d'etre of organisations.

How The Organisation Morphed

In the late 19th and early 20th centuries, cotton and jute mills dotted western India and Bengal. These were small outfits, family-owned and-(agency) managed, and quite haphazard in their structure. In the 40s and 50s, larger organisations from the Tata and Birla groups began to emerge. The 60s ushered in another variety-the public sector companies-and the decade thereafter yet another: nationalised companies. Alongside these, there were hundreds of small companies, which were at mercy of their industry big brothers. Thanks to the policy of industrial licensing and anti-trust laws, the divide between large and small organisations widened. Strategy essentially meant managing bureaucracy, and businessmen had to come to Delhi for all clearances.

With little need for competent managers, loyalty-and not capability-came to be valued. A strong feudal culture made the organisational structure hierarchical, with 15 or more layers. Functions, and lesser divisions, controlled their structure. Owners saw themselves as benefactors, while workers perceived them as unjust capitalists. Therefore, workers formed unions to protect their rights. In some state-owned organisations-especially the nationalised banks-even officers and managers formed unions.

The 90s brought forth a new organisational structure: they were flatter, departments were replaced by business groups, and joint ventures were added to the different kinds of corporate ownership. Cross-functional training and 'intrapreneurship' became the norm. The corporate centre assumed greater importance in coordinating and directing the group's various business interests. Here again, technology companies led the big shift.

WorkPlace: The Changing Rules

An early white-collar army at Tatass Bombay House

In a country where business was born and operated from the gaddi (literally, the seat of the money lender) the workplace consciously reflected the rules of engagement between the employer and the employee. For example, in one of Delhi's old business houses, the size of the room, the carpet area, and even the quality of wood used to make the work desk were strictly determined by hierarchy. In another south Indian group, the corridor on the Chairman's floor was emptied every time the gentleman walked into or out of his room. These were the organisation's ways of reinforcing the hierarchy it had established. In a feudal society, equality was neither expected nor given.

In terms of ergonomics, Indian offices had nothing to speak of. A pedestal fan, a desk bell (to ring for the peon), drinking glass, and a hand towel were usually part of the officer's office supply. The lot of the blue-collar workers was worse still. He worked in a downright dangerous environment.

When the geeks came in the 90s, they brought with them unique rules for the workplace. First to go was hierarchical demarcations; open offices, with the CEO packed into one of the many cubicles, became the norm. Their 24/7 workday demanded that the office double up as home. Sauna, creches, gymnasium, library, cafeteria, and even golf courses became part of the workplace. And the place of work was no longer impersonal.

Compensation: From Pay To Performance

In the past there were no strategies to speak of. Help was hired for a specific task and, when over, was paid a pre-determined amount. The early mill workers were routinely exploited. The introduction of the Payment of Wages Act, 1936, and Minimum Wages Act, 1948 improved conditions. But since markets were captive and the companies worked on a cost-plus basis, there was no need to incentivise productivity. Therefore, a star perfomer and the shirker took home the same amount of money, as long as they belonged to the same level. Increments were an annual feature and almost a given.

It's only in the last five years that corporate India has-forced by global competition and harder times-paid closer attention to compensation. The operative word now is pay for performance. Therefore, compensation is structured to reflect the spike or dip in performance of individual employees. Some recent studies indicate that performance pay ranges from 20 to 30 per cent of total cost to company in many organisations. However, in some industries-such as the financial sector and information technology-a major component has been the variable pay (in the form of bonuses and stock options).

The tech tumble has taken the sheen off esops, but compensation methods continue to evolve. Broadly, the compensation structure is being simplified to reduce administrative hassles. Simultaneously, functional benchmarking is driving compensation towards the best market rate, instead of merely industry standards. The Godrej Group has gone a step ahead and moved its variable pay based on pre-tax profits to one based on the economic value added (EVA). In times to come, compensation will be more directly linked to profits and some other intangibles.