Institution Building: Experiences,

Lessons and Challenges†

Kavil Ramachandran*

I
feel privileged to have been invited to deliver this speech. I had the fortune
of interacting with Mr. Yasaswy closely for over a decade. He was one of the
geniuses with a huge sense of practical wisdom. We used to spend hours
discussing many things. Every such conversation was enriched with new knowledge
and ideas. One of my last conversations with him was in the context of the visit of
the current head of the Mewar royal family of Rajasthan to Indian School of Business
(ISB). We shared our thoughts on the legacy of 76 generations of continuous
service of the Mewar dynasty to the society even post-independence, and the
challenges of building an institution across the centuries. Our efforts to recollect
the names of families and organizations with similarly rich heritage did not yield
much. We concluded that institutions are rare and building and preserving them
are not easy tasks.

In fact, the meaning and challenges of building everlasting institutions has been
an area of enquiry for me for some time. I thought this would be an appropriate
topic for today given that Yasaswy spent a considerable part of his life building the
ICFAI as an institution. I was fortunate to have interacted with him during this
phase of his life when ICFAI grew as a banyan tree. I shall share with you the
essentials of those thoughts today.

What Is an Institution?
Basically institutions are organizations with a unique identity and respect. We feel
proud to be associated with them. They are unique in a number of ways, and they
are not easy to be copied. It is not just for a moment in history that they shine, but
they continue to shine, spreading light of guidance, inspiration and leadership
across many decades, and sometimes centuries. Three such pillars of global
eminence in the educational field are the Universities of Oxford, Cambridge and
Harvard. The earliest records on the Oxford University date back to 1036 AD, almost
a thousand years ago. Cambridge University, again in Britain, is over 800 years
old. Harvard University in the USA is close to 400 years old. These universities
have been the destinations of the brightest minds of the world across countries, Author pls. chk
the details of
† Paper presented at the N J Yasaswy Commemoration Lecture on Insitution Building:
Challenges, Experiences and Learnings, October 8, 2013, IFHE Campus, Hyderabad. the lecture and
confirm.
E-mail id of * Professor, Thomas Schmidheiny Chair Professor of Family Business & Wealth Management,
Indian School of Business, Gachibowli, Hyderabad 500 032, Andhra Pradesh, India.
the author E-mail: xxxxxxxxxxxxx

Institution
© 2013 IUP. Building: Experiences,
All Rights Reserved. Lessons and Challenges 1
and they continue to be so. There are many other widely admired institutions, in
academics and outside, several with shorter histories existing in India and
elsewhere. Some of the familiar names are the Indian Institute of Management
Ahmedabad (IIMA), the Indian Institute of Science (IISc), Bengaluru, the
Ramakrishna Mission, and the Christian Medical College (CMC), Vellore, besides
commercial entities such as the General Electric, TATA Group, Unilever and Merck
Pharmaceuticals, Germany. Let us look at some of the common features of these
institutions.

Clear Sense of Purpose

Jim Collins and Jerry Porras, in their famous work, Built to Last, had identified the
presence of a clear purpose of long-term existence as a critical element of distinction
in the widely respected and long-lasting companies they had studied. Most such
institutions have a vision articulated in a social context that they vigorously pursue
to accomplish. They see themselves adding to the richness of the society through
their activities. It is worth recalling the tremendous efforts made by the Tata Group
with a clear purpose of contributing to nation building. Proud of India’s heritage of
industrialization prior to the industrial revolution, 150 years ago, Jamsetji Tata
wanted to provide Indians with an opportunity to rebuild the nation. To quote JRD
Tata, “With that object in view, he decided, almost single-handed, to launch India
on the path of modern science and industry and to risk his fortune in the process.
That the great projects he conceived and his sons carried through were successful
is less important than the motives with which they were launched, than also the
sense of social consciousness and trusteeship which Jamsetji inculcated in his two
sons and my father, R D Tata, and which have continued to this day to inspire and
guide his successors and through them, the management of the various enterprises
which they promoted” (Lala, 2004). Such clarity of purpose creates enthusiasm
among like-minded people to come together and contribute to the creation of social
wealth. People associated with such institutions feel delighted to contribute to
their efforts to accomplish the vision. This is what Dr. Vikram Sarabhai did when he
constituted the founding team of the IIMA. In recent years, the ISB was the vision
come true of a number of people who wanted to create an institution of global
eminence.

Shared Values
Values that are identified and nurtured carefully as the building blocks of the
institutions are preserved carefully by great institutions. Some of the common values
often noticed in institutions are: Integrity, Transparency, Excellence, Caring,
Independence, Societal Orientation and Custodianship. It is easy to make a list of
such values, but those who have attempted to make them practiced across in
organizations would know that it is not easy to do so particularly when the
organization grows in size and complexity. Organizations do not imbibe values
automatically, particularly after the generation of founders have left the scene.
One can build concrete structures but cannot buy its soul from outside. Once lost,

2 The IUP Journal of Management Research, Vol. XIII, No. 1, 2014

it is difficult to recreate. It is soft, delicate but very powerful. Handle them carefully is
the norm. IBM, like others, recognizes the significance of discussion, clarification and
reclarification of their values constantly, particularly during major points of transition.

Custodianship Value
To me, the most essential value is custodianship. Individuals associated with
institutions identify themselves so closely with them. They believe that they are the
custodians of their wealth; they have a responsibility to preserve, enrich and pass
the same over to their succeeding stakeholders. They are the informal trustees of
the concerned institution. Such a value has a number of manifestations. Individuals
directly associated will see the organization beyond themselves. Their decisions,
particularly those of the leaders, will be driven basically by a single criterion of
relevance to the organization. They stand by their principles and strictly adhere to a
code of conduct. They are the embodiment of passion for the concerned organization.

Adaptability
It sounds simple, but adaptability is a great capability to avoid ‘dinosaurianism’. An
institution has to be relevant in the socioeconomic and cultural context it is created.
To be so, it has to influence and also adapt itself to the changes in the external
environment. In fact, institutions are themselves change agents as they are
inhabited by thought leaders. All great institutions have done so. Institutions such
as the Harvard, Stanford and Princeton have always been identified as both change
agents and change adapters. The Tata Group itself has pioneered a number of
economic and social fronts, while themselves reconfiguring their portfolio at different
points in time to retain their relevance.

Dynamic Resource Building

Institutions do not rest on their past laurels, but this requires not only an openness
to adaptability, but a conscious effort towards evaluating the relevance of the mix
of resources they have, and proactively reconfiguring the same to retain their
relevance. Hard and soft resources are constantly blended to create unique and
relevant resources and capabilities. Institutions do not experience any major jerk
when there is a change in leadership. It happens like a smooth relay race, with all
runners sharing a passionate goal and doing everything to accomplish it.

Leadership
Fundamental to all efforts at institution building is the presence of high quality
leadership. It is not just about one leader at the top and a number of soldiers
ready to take instructions, but about a family of leaders with different levels of
involvement and responsibilities.

There are a number of other dimensions one can identify with institutions. Professor
Udai Pareek, one of the early-day stalwarts associated with building the IIMA believed
the following as the three features that characterize an institution (Pareek, 2002):

Institution Building: Experiences, Lessons and Challenges 3

 1. Its functions and services are related to the society’s commonly agreed
requirements, at tested by its adaptability over time to handle human
needs and values,

2. Its internal structures embody and protect commonly held norms and
values of the society to which it is related, and

3. Its achievements over time include influencing the environment in

a positive way.

In essence, institution building is different, very challenging but very enjoyable

too. Pareek (2002) distinguished an institution from an organization and said that
while an “organization is both a system of consciously coordinated activities and a
rational instrument engineered to do a job, an institution is a responsive, adaptive
organism which is the natural product of social needs and pressures”. He was one
of the pioneers in India to work on institution building. He defined institution building
as “the process of establishing or transforming an organization into an integrated
and organic part of the community in a way that will help the organization play a
proactive role in projecting new values and become an agent of change in the
community” (Pareek, 2002).

There is sometimes an assumption that institutions are primarily driven by social

purpose with very limited economic purpose. I do not believe that economic
organizations cannot be institutions. They too do. The extent to which different
organizations contribute directly or indirectly to the society would vary. All of them
have a role to play. The essence of an institution is the constant process of evolution
and revolution that an organization undergoes while continuing to be an important
contributor to the preservation and growth of the society.

We realize that institution building is not easy. It does not come automatically
to all. Besides all the qualities discussed earlier, it requires leaders to possess
qualities of what I call, detached passion. It sounds like an oxymoron! Detached
passion assumes one to be passionate with the ideas and goals, but also have
the ability to take a couple of steps backward and look at the organization, self
and one’s own thinking and activities objectively, all done in the interest of the
long-term sustenance of the organization.

Learnings
I have attempted to capture some of the key learnings on institution building from
the experiences of a number of organizations. The core to all these learnings is the
recognition that it is easy to create a document of strategy but it is not always easy
to achieve the same in practice. Executional excellence is core to institution building.

One Should Enjoy What One Does

Work is joy and not a duty to all those involved in institution building. This means
that those who are chosen to be members of an institution should share the purpose

4 The IUP Journal of Management Research, Vol. XIII, No. 1, 2014

and process of institution building. Ganesh and Joshi (1985) had in a study of
Vikram Sarabhai’s leadership noted that “the process of institution building is the
energizing of people so that not only they internalize values that transcend narrow
self interests, but they also become infused with a sense of mission in their total
life”. Jamsetji Tata’s selfless efforts at creating high quality education in India is
worth recalling. In 1898, he took the initiative to set up a world-class academic
institution and contributed a donation worth 30 lakh in those days. It was half his
wealth. The other half he left to his sons (Lala, 2004). That was the origin of the
IISc. Sacrifice for the society was a joy for him and his successors.

Preservation of Core Values

Institutions not only identify their core values but preserve them through their
practice across the organization. For example, the 102-year-old IBM, the institution
that constantly transformed itself and maintained respect and leadership across
the world did something about 10 years ago, normally unbelievable for an
organization of its size to do. In 2003, it ran interactive exercises with 50,000
employees across the world as part of revisiting and refining of its core values.
Incidentally, IBM’s three core values are:

• Dedication to every client’s success;

• Innovation that matters for our company and for the world; and

• Trust and personal responsibility in all relationships

In 2004, they did a similar massive exercise covering 52,000 employees

worldwide to share their best practices. IBM leadership did not see such exercises
as rituals but serious and dedicated efforts to strengthen their organization.

Need to Learn from Institutional History

All institutions draw energy and confidence from sharing the elements of culture,
values and best practices. They get inspiration from experiences when they
withstood tests of their greatness. One of the reasons I consider the IIMA as a
great institution was one such incident that a senior faculty member narrated to
me soon after I joined there as a young faculty. In the early days of discussing the
proposal for government funding for the Centre for Management of Agriculture at
IIMA, Professor Mathai had a meeting with a senior cabinet minister in Delhi. The
minister agreed to support, but at the end of the meeting, he apparently asked for
a favor—admission to IIMA for one of his close family members. Professor Mathai
stood up and politely told the minister, “Sir, we have a very transparent and objective
admission process without any interference even by the Director. If you wish to
link the grant money with the admission of your ward, I am sorry, I will have to
politely decline the offer”. This gave me the confidence and reassurance that the
IIMA was beyond any individuals’ influence under any circumstances. Also, I could
always stand up to my principles and values. I wanted to be associated with it

Institution Building: Experiences, Lessons and Challenges 5

always. Yet another incident I recall is when a very senior professor walked up to
the 4th floor office of mine in my very first week at the IIMA to offer me any support
in building up our activities on the entrepreneurship front. You should remember
that this was something he had been passionately pursuing in the previous years,
and I would be taking it away from him. That was Professor Vora for whom
institutional continuity was the most important criterion in his decisions.

Passing Over the History and Experiences of Excellence

Across Generations
I am told that Goldman Sachs, set up almost 150 years ago, and which has been a
heavyweight in financial services and banking, retains several offices of very senior
retired executives for their use whenever they visit the office. They are encouraged
to interact and share experiences with younger executives whenever possible.
Also, they have several executives who have been with the company for 10, 15,
20 or even 25 years. They pass over the history and experiences of excellence
across generations. News about them are shared with the existing staff. They
retain an atmosphere of familiness and constantly build their institutions.

Well-Established Family Businesses

Well-established family businesses follow exactly the same principle. For instance,
Merck GH, the German pharmaceutical giant, proudly talks about their humble
beginnings for the benefit of their members of multiple generations. Merck is currently
led by members of the 11th generation of their family. The family knows that its
members are not the most competent people to manage the company. The family
is involved in governance and strategy, leaving the overall strategy formulation
and implementation to non-family executives.

Institution Building Is Like a Relay Race

The founding leaders who realize this and set norms for the successors to follow
do well for the creation of institutions out of organizations. The greatness of
Professor Ravi Mathai was in doing this and setting a norm for others to follow in
all IIMs. He took over as the Director of IIMA without any specific end to his tenure.
He could have continued indefinitely, but chose to step down after six years because
he believed that the institution required fresh thinking on a regular basis. After
stepping down, he set a new norm by becoming a regular faculty member like all
his colleagues and worked from a faculty office like anybody else. For him, what
mattered more than anything else was the continued success of the institution.
He was not at all worried about the size of the room or its location. Succeeding
generations get inspired by the examples set by leaders like Professor Mathai.
Institutions that believe in the relay race principle have clear succession plan as
well. They try to build as many towers as possible, and avoid posts in between.

6 The IUP Journal of Management Research, Vol. XIII, No. 1, 2014

The efforts made at the General Electric to find a new Chairman is well-known. Welsh
and Byrne (2003) detailed how Jack went about identifying Immelt as his successor.

Trust
Another key observation is that people trust each other a lot in such institutions.
There is always an element of informality, and colleagues can get a lot of things
done over phone or across table, all based on mutual trust. You can always follow
up many things through an e-mail confirmation but action is not delayed for want
of an e-mail or formal communication. Trust will grow only if it is practiced as a
value, top down.

Freedom to Operate
Team members, particularly division heads and faculty members in academic institutions,
need a lot of freedom to operate. While accountability is a critical must, individual
team members should have adequate freedom to do things, all for the benefit of the
organization. In essence, empowerment should happen regularly and routinely.

Listening to Others, Encouraging Criticism and Disagreements

One of the key qualities of a good institution builder is his or her ability to listen to
others and encourage criticism and disagreements. Such leaders know that there
are smarter and more capable people around, and there are many ways of
addressing organizational challenges. All great academic institutions have
completely open faculty meetings where leaders encourage dissenting views.

Challenges
Let us now look at some of the key challenges of institution building that we face today.

Leadership Vacuum
I believe this has two dimensions: (1) The pool of candidates to select from, and
(2) The process per se. Unfortunately, leadership selection process is often either
biased towards job skills or inadequately careful about the emerging needs of the
institution. Attitudes are equally important, if not more important than skills and
knowledge. It is also increasingly becoming more difficult to identify leaders with
the true spirit of custodianship values. The whole challenge boils down to succession
planning. There is a lack of anticipation and homework completed in time. The
recent selection of the Director of IIMA and the Chairman of the Tata Group took
more than a year of search and short listing. Institutions should deliberate and list
down the qualities of the leader they look for. The same applies to faculty members
of an academic institution. Some of the young academic institutions forget that
research and publications alone are not good enough to build institutions. You
need faculty members to have dedication to the organization. You need people
with ownership passion for the organization.

Institution Building: Experiences, Lessons and Challenges 7

Horizontal Entry
We often find recruitment of leaders at different levels in the organization without
any appreciation for the rich heritage of the organization. This is one reason why
respected institutions very often prefer one among them as the best choice to be
their leader. Cultural synergy is very important if the prevailing culture is good. Of
course, institutions that need some resurrection may benefit from fresh food,
provided the person coming in is aware of the context and is appreciative of the
institution’s past strengths.

Shortening Life Span

Similar to shortening of product life cycles, executives tend to move from job to job
frequently. This has become a challenge for anybody to develop a shared culture
in such organizations. Unfortunately, educational institutions and hospitals with
larger social purpose have also become a prey to this trend for a variety of reasons.

Vulnerability to Pressures
Many institutions are threatened when leaders take decisions to protect others
under the influence of colleagues, friends and influential people. Little do they
realize that such decisions, apparently small, affect the health of the organization.
Very often the drift from clear and established norms takes place gradually. Such
deviations, particularly compromising values and codes of conduct, cut at the very
roots of the organizations. Many organizations do not tolerate instances of honor
code violations.

Organizational Politics
Power and politics is present in all organizational entities. The question is only
about its intensity and spread. Institutions constantly resist forces of power and
politics from spreading and killing them. A powerful manifestation of the same is
lack of appreciation and recognition for people who slog selflessly.

Too Much of Systems and Too Little Human

For a variety of reasons, we are all becoming prisoners of systems and processes.
An unfortunate outcome of the overemphasis on systems is the neglect of the
importance of values in organizations. This leads to a breakdown in informal
communication across departments. Institutions of repute do emphasize the roles
of both and work out a way for the coexistence of both synergistically. In other
words, balancing the roles of structure, systems, processes on the one hand, and
culture and values on the other is not always easy.

Arrogance and Lack of Benchmarking

Success in institution building sometimes becomes the very reason for them to
become arrogant, lethargic and passive towards dynamic benchmarking. Several
organizations, set up with a very clear vision and other building blocks of institutions,

8 The IUP Journal of Management Research, Vol. XIII, No. 1, 2014

have fallen under the weight of their past success. Let us remind ourselves that
humility is never a weakness but a virtue.

No Life Beyond the Founder

Founders have a responsibility to ensure that leadership succession takes place in
time and that too into safe hands. This does not always happen because the
leaders themselves cling on to positions beyond their relevance. Because of their
overbearing image and clout, other members of the organization dare not broach
the topic. There are plenty of instances of organizations that show characteristics
of becoming institutions crumbling under their own weight. Pareek (2002) had
noted that institution builders voluntarily dispose themselves of, as they see it as
a means to build the institution further. Unfortunately, we have many leaders of
lasting organizations refusing to step down from their long possessed positions.
They seldom realize that such institutions may crumble in the absence of smooth
and prepared leadership succession.

In essence, all stakeholders should proactively nurture the institutions they

are associated with. They should remember that they will not be able to build
anything if the foundation itself disappears.

Challenges of Nation Building

I would like to close with some thoughts on the challenges of nation building we
face today. This is not limited to India. Most countries face a dearth of leaders with
a strong sense of custodianship. The scenario is very alarming in countries such as
India, struggling to be on their own and yet to build strong economic foundations.
Sacrifice of millions of people for our independence seems to have gone in vain
when we look at the thoughts and actions of most of our politicians, jailed or
otherwise. Two or three generations ago, Indians en masse sacrificed their lives
with the hope and satisfaction that their efforts would make the future generations
happier. They were driven by a purpose and custodianship values. They wanted to
transform the country and make it a rich and happy place for everyone to coexist.
Unfortunately, down the road, there are many instances of drift, and we have
fallen into a morass from which we need to get out at the earliest. We need to
improve our governance drastically. I often reflect over what Mahatma Gandhi had
said. To quote, “Whenever you are in doubt, or when the self becomes too much
with you, apply the following test. Recall the face of the poorest and the weakest
man (woman) whom you may have seen, and ask yourself, if the step you
contemplate is going to be of any use to him (her). Will he (she) gain anything
by it?” (Pyarelal, 1958).

I would urge the students to be realistic of the challenges ahead and their
implications, and do whatever is possible to build institutions in the society. That
alone is the way to make our society an institution. There are sparks of change, on
line with the message from The Gita about the arrival of a messiah to lead us.

Institution Building: Experiences, Lessons and Challenges 9

There are elements of the messiah in all of us. Let us do our bit. I am hopeful because
I believe in humanity, and our responsibility to the future generations.@

References
1. Ganesh S R and P Joshi (1985), “Institution Building: Lessons from Vikram
Sarabhai’s Leadership”, Vikalpa, Vol. 10, No. 4, pp. 399-413.

2. Lala R M (2004), The Creation of Wealth: The Tatas from the 19th to the 21st
Century, Penguin Books Pvt. Ltd., India.

3. Pareek U (2002), Effective Organizations: Beyond Management to Institution

Building, IBH, New Delhi.

4. Pyarelal (1958), Mahatma Gandhi: The Last Phase, Navajivan Publishing House,
Vol. 2, p. 65

5. Welsh J and Byrne J A (2003), Jack: Straight from the Gut, Business Plus, New
York.

Reference # 02J-2014-1-0x-01

10 The IUP Journal of Management Research, Vol. XIII, No. 1, 2014