PRINCIPLES OF TRANSFORMATIONAL LEADERSHIP

When we talk about ‘Leadership’, what is the first thing that comes to your mind?

An Executive, busy developing a Company’s strategy to compete in the market; or a Political leader pursuing his passion; or maybe an Explorer, cutting a path through a dense jungle for the rest of his group to follow. One thing remains common in all cases – Leaders set directions, build an inspiring vision and create something new for others to follow.

In this article, we are focusing on the process of leadership – particularly the “Transformational Leadership Model in the workplace”. This model was first proposed by James MacGregor Burns and then developed by Bernard Bass. This model highlights visionary thinking and bringing about change, instead of management processes that are designed to maintain and steadily improve current performance.

According to the idea of Transformational Leadership, an effective leader is a person who does the following:

1. Creates an inspiring vision of the future.

Vision for a business is basically where you want to be in the future. It provides directions, sets priorities, timelines and finally, a model to analyse if you have achieved your milestone. Leaders should focus on an organisation’s current skills, analyse situations and then proceed with innovation by shaping the business and strategy in such a way that it creates something meaningful to the people being led in the organisation. A very important aspect of this theory is that a leader should be “Proactive” and should not be satisfied with things as they are.

2. Motivates and inspires people to engage with that vision.

The ability to motivate your employees inspires them and helps to deliver the vision. Effective leaders link motivation under two segments:

  1. The expectation that hard work will lead to good results.
  2. The expectation that good results will lead to attractive incentives and rewards – intrinsic or extrinsic.

People believe in and admire leaders who have an expertise in that area. A leader must have a proven record to support that he can lead people, which means he should have earned such power and not by mere position in the organisation.

3. Managing delivery of Vision.

A leader must make sure that his vision is followed and managed effectively – either by himself or by dedicated managers under him to whom responsibilities and roles are clarified. They should set KPI (Key Performance Indicators) for each employee to make sure they are on the right track and working collectively towards achieving their goal. This stage may also include certain changes and a leader should ensure that changes go smoothly and with the support of all employees in the organisation.

4. Coaching and building a team to achieve Vision.

A leader must understand the team dynamics in order to strategise his vision. He needs to make sure that the required abilities and skills are set to move forward. This is an ongoing process under which the team is mentored, various training and coaching is provided along with appropriate feedback and analysis by way of KPIs.

Leadership includes searching for and grooming leadership skills in others. Once the skills are developed in the team, success continues for the long term- and that’s the true measure of Great Leadership.

Leaders become great, not because of their power but because of the ability to empower others – John C Maxwell

Written by

Nihar Kothari

Nihar@affiniax.com

OUTSOURCED CFO SERVICES

Case Study

We were recently approached by a mid-sized Events Management Company having a successful track record across several GCC countries. The Company performed much better than the young entrepreneurs had expected in a short span of time. Due to the inherent nature of their business, most of the revenue was collected in advance, thus making it a cash-rich Company. The entrepreneurs were happy to see their bank account flowing with cash and resultantly began to indulge in fancy business meetings, business class travel and investing in Associate Companies that were not doing so well.

Suddenly, they got the shock of their life when one of their suppliers refused to provide any further event management related services to the Company – followed by a few more suppliers. As expected, the event was the biggest failure in the history of the Company. The event sponsors blamed the Company’s management for making false promises and underperforming. Aggravated with the sudden change in attitude of suppliers, the Management decided not to renew their contracts and appointed an alternate chain of suppliers. Surprisingly, the same issues started trending for other events which affected the reputation and goodwill of the Company even more.

The Board of Directors identified key problem areas in the business cycle:
  • Continuous decline in revenue. Due to them having a lesser number of projects in hand, the sustainability of the Company was being questioned.
  • Bank account balance was used by Management. Looking at the declining trend of business, bankers reduced their facility limits and charged a higher rate of interest to safeguard their interest.
  • Low-quality services were provided by suppliers
  • Employee turnover started rising in the Company
Since most of the issues were finance related, they hired Affiniax to provide Outsourced CFO Services. The intention was to identify the root cause and provide solutions. After two months of interaction with their team and suppliers, we came up with the following observations:
  • The Company hired the best category of suppliers in the first place. Their services were at par with their big brand competitors. However, they were not paid in a timely manner. This exposed the Company to various legal cases. Even though the Company was cash-rich, the process of approval and payment took a long time. As a result, these suppliers stopped engaging themselves with the Company for any future projects. 
  • The news was widespread in the market for non-payment of dues which ultimately affected sales and impacted negatively on the goodwill of the Company.
  • The Company was making reasonable profits from all their projects individually. However, the Company was not prepared to incur the additional expenses of the young entrepreneurs. The money they spent on their lifestyle was supposed to be paid to their suppliers in the first place. It is a common practice and a big mistake for entrepreneurs to consider bank balance as their profits. 
  • Employees started leaving the Company as they felt stuck in the same position in the Company for years. Regular appraisal/performance-based bonus was never made a part of the Company’s policy. As a result, they lost their best talent to their competitors.
  • The Company maintained a very high level of inventory. This not only exposed the Company to obsolete items but also increased the cost of storage.
  • We helped the Company to re-negotiate terms and conditions with their bankers.
  • We gave them an insight into market conditions and recommended they amend their contracts to ensure compliance with local authorities.
  • Potential business opportunities were discussed with the management.

Concept

Outsourced CFO is a financial management solution that renders a combination of visionary and technical service to accomplish the ambitions of SMEs.

How it works

An outsourced CFO model involves a part-time, temporary or project-based CFO. This gives small business owners the strategic financial expertise they need while saving them money in terms of salary, benefits and additional overhead that is typically associated with hiring a full-time CFO with a hefty salary.The responsibilities of an outsourced CFO may include overseeing financial and accounting functions, training staff on accounting best practices, developing cash flow improvement programs and evaluating internal controls.

Services Provided under Outsourced CFO

  • Management of the finance infrastructure (accounting, treasury, finance)
  • Financial, business, and strategic planning and implementation
  • Hands-on guidance during transitions
  • Cash flow management and projections
  • Budgeting and forecasting
  • Assisting with private equity and debt financing
  • Bank financing and investor meeting preparation
  • Key metrics benchmarking and trend analysis
  • Accounting software selection and implementation
  • Financial and operational improvement plans
  • Mergers and acquisition support
  • Risk management
  • Contract review

How Affiniax Partners can help?

We have a talented and purpose-driven team of Chartered Accountants and finance professionals that help entrepreneurs to identify their key areas, focus on providing customised business solutions, report on cost-benefit analysis, provide market updates, automate systems and scale up their competence in pursuit of business eminence. Article written by Nihar Kothari, Partner, Affiniax PartnersThe author can be contacted at nihar@affiniax.com

NEW LAW GOVERNING JOINTLY OWNED PROPERTIES IN DUBAI

The Law No. (6) of 2019* regarding Ownership of Jointly Owned Properties in the Emirate of Dubai has been issued to regulate the joint ownership of real estate in Dubai.

The Law applies to all major real estate development projects and jointly owned properties in Dubai, including those located in free zones and special development zones.

The new Law repeals Law No. (27) of 2007 Concerning Ownership of Jointly Owned Property in the Emirate of Dubai and any other law that contradicts it.

Jointly Owned Properties (JOP) are now divided into three categories with different rules for their management of common areas. The Law has enhanced the powers of RERA such as selection of the members of the Owners’ committee, appointment of specialized management company for third category of jointly owned properties and to replace the management entity in case they are found inefficient. The Law is designed to boost competitiveness and ensure the rights of all parties are protected.

Key Elements of the new Law
  • Components of the common area of the building and land of the JOP along with components of the unit are clearly defined in the Law, which regulates the ownership of developer-owned areas.
  • The Developer should allocate parking space for owners of the unit, which cannot be sold separately.
  • The Management Entity cannot charge fees for managing, operating, maintaining common facilities or for any other purpose unless it receives an approval from RERA.
  • The Management Entity shall provide RERA with a periodic report every six months on the management of the jointly owned properties, common areas and the maintenance works carried out therein. At any time, RERA can request for information on the revenues and expenses related to service charges.
  • The Developer shall establish the building management system for major projects and hotel projects managed by them which must be approved by RERA. RERA shall establish the building management system on the other common properties.
  • Service charges and utilization charges collection, disposal and use are clearly set out under the new Law. The Management Entity shall deposit the service charges and the Utilization charges into the licensed bank account within seven (7) working days from the date of payment of service and utilization charges. The competent execution judge may, when necessary, sell the unit through public auction in the event of continued payment default by the owner.
  • RERA can appoint a specialized Management Entity to manage and operate common property in case the developer or hotel project management company are proven inefficient. Similarly, in the case of an inefficient management entity, RERA may appoint an alternative Management Entity to manage the common property.
  • As per Article 41, the Management Entity must maintain comprehensive insurance coverage for the JOP.
  • The Management Entity, which includes the developer, the management company or the hotel project management company, as the case may be shall be, shall replace the owner’s association in rights and obligations stated before the application of provision of new Law (Article 49).
  • The Rental Disputes Settlement Centre in Dubai will now have jurisdiction to hear and settle all disputes that fall under the purview of this Law. Violators are subject to financial penalties up to AED 1,000,000 and can be penalized up to AED 2,000,000 in case of repeat violations within one year of the previous violation.
Common Property Register
The Dubai Land Department shall prepare a special register of Jointly Owned Properties which would include details about the ownership of land and units, area owned by the developer, members of the owners’ committee, building management system, contracts for the management of common areas and details about the common areas and private jointly owned parts.

The developer is required to submit all necessary documents of the jointly owned real estate project to the Land Department within 60 days of the completion date and receipt of completion certificate. The Department can extend the deadline for this by 30 days. If the documents are not submitted, the Department can request the documents from any other party it deems appropriate and will charge the developer all related fees and expenses.

Management of Common Areas
Under the previous Law, the Owners’ Association board was formed and was entrusted with the management of the common areas of the building, and they could delegate these responsibilities to an Association Manager to perform.

According to the new Law, jointly owned properties are divided into three categories: (1) Major projects, (2) Hotel projects, (3) Real estate projects other than major projects and hotel projects, with different rules pertaining to the management of each type of jointly owned property.

Owners’ Committee
An Owners’ Committee for the first and third categories must be formed with its members selected by Real Estate Regulatory Agency (RERA), which shall not exceed nine members and should be established when at least 10 percent of the total number of units in the jointly owned property are registered.

The Developer cannot be part of an owners’ committee unless there are unsold units.

The functions of the Committee are listed under Article 24 of the law which mainly relate to advisory, reviewing and verifying the operations of the Management Entity. The Owners’ Committee shall be required to hold quarterly meetings every 3 months with a total of four meetings in a year.

Obligation of the Property Developer
The Developer is under the obligation to repair or correct any damage to the structure of the jointly owned property occurring within a period of 10 years from the date of issuance of the completion certificate.

The Developer is further obligated to replace or repair any defective fixtures in the individual units within a period of one year from the date of delivering the unit to the owner.

*The new law is effective within 60 days of its publication in the Official Gazette.

Affiniax Partners joins Allinial Global

Affiniax Partners is very pleased to announce it has joined Allinial Global (formerly PKF North America), a member-based association that has dedicated itself to the success of independent accounting and consulting firms since its founding in 1969. Allinial Global is based in North America but offers international support by connecting its firms to providers and global networks of accounting firms worldwide, fostering the independence, profitability, and continuous improvement of its members. Affiniax Partners has 4 partners and a total of 60+ employees.

“We joined Allinial Global because of our strong commitment to our clients,” said Sumeet Nayyar, CEO & Partner. “Through this global association, we will have access to cutting edge skill-building and niche information designed to bring greater profitability to the business owners we serve. We will enjoy all the advantages of national firm resources while still maintaining our independent status.”

Allinial Global firms continually seek new ways to better meet the needs of their clients. In this cooperative environment, firms share ideas, training programs, and technical expertise. “We look forward to being active participants in the Allinial Global association, working closely with other successful firms nationwide,” commented Sumeet Nayyar.

TRANSFORMING HR AND STRATEGIZING CHANGE MANAGEMENT

We were recently honored with “Mark of Excellence” for “Best HR Transformation & Change Management Strategy” at the Future Workplace Awards on November 13, 2018 at Park Hyatt, Dubai.

The initiative to transform the HR practices at our workplace was rolled in the last quarter of 2017 by our leadership team with the goals of improving productivity and performance management, automating HR, developing people- friendly policies and redesigning HR processes.

Therefore, the focus was on ‘the big picture’ for successful transformation.

“We intended to boldly pursue today’s inevitable journey to transform the traditional HR operating model via fully integrated change management strategies and strategically managed HR transformation.”

Sumeet Nayyar-CEO& Partner

“We aimed to develop and execute on the right plan by focusing on the people first.”

Nihar Kothari –Partner

“We encouraged curiosity across all facets of the organization which opened people’s minds allowing them to try new things differently.”

Abeer Syed – Partner

” We created a vision for change which helped us to direct, align and inspire employees.”

Tanmay Saxena – Senior Manager, Tax and Compliance Advisory
ACTION PLAN:

Our leaders recognized the huge trends that are emerging very rapidly and started working proactively to respond strategically every step of the way. The following action-plan was laid down.

GoalAction
Transform HR practicesHire a dedicated HR personnel
HR Audit
  • Audit policies according to UAE Labor Law
Establish retention strategies that promote the Firm as a great place to work/live.
  • Develop people friendly policies and procedures
  • Employee engagement activities
Employee HandbookComprehensive development of handbook including updated policies
HR Automation by ensuring process simplification and retaining the “human touch” and avoid creating a feeling that the HR function has been depersonalized
  • Employee self service
  • Automating leave management
Revamping Performance ManagementDevelopment of a PM model that aligns with business objectives
IMPLEMENTATION

“We adopted a realistic approach towards change management as it concentrated on reinforcing the people side of equation combined with effort to manage and execute the change.”

Affiniax Management

“Our most senior leadership believed in and supported the idea of revamping the Performance Management Framework — a framework focused on fueling performance in the future rather than assessing it in the past.”

Sheeba Mirza, HR Executive

We introduced the KPI and MSC model to develop our employees by weighting the KPIs and competencies so that there is a clarity of goals and competencies among the employees to deliver business outcomes.

Challenge: The challenge was just around change. We were sort of used to the rhythms of the old system

KICKOFF: There were phased roll-outs:

  • Mid-2018: May- We chose two departments with a pilot approach – Consulting and Corporate.
  • Training session was held by the HR Executive for the line managers and their direct reports to make them understand the model.
  • July 2018- We added the other departments – Audit, Accounts, Administration and Taxation later in the year.
  • Formation of steering groups consisting of HR Executive, Director and the Line Manager of each department.
  • And by the end of August 2018 we have covered all the departments.
RESULTS
CONNECTING CHANGE TO BUSINESS RESULTS
ProjectPurpose
Revamping Performance Management Framework – MSCs and KPIsEmployees are clear in understanding “how” to deliver on the expectations of “what” is expected. 70% weightage: KPIs and 30% weightage: Competencies
Free HR softwareAutomating HRMS thereby saving time, cost and increasing employees’ productivity.
  • Online Leave application system
  • Employee self service
People friendly workplace
  • Work from Home – 10 working days in a year.
  • Employee Referral Program
  • Complimentary Paid Leave – 2 festival leaves and a Birthday Leave every year.
  • Harassment Policy & Procedure
  • Team building activities such as monthly birthday celebrations, IWD 2018.
L&D Programs – YLP, FLP and Management Development ProgramDevelopment of employees at the entry, mid and senior level through customized learning programs.

THE VALUE OF BUSINESS CONSULTING IN THE UAE?

Determining the value you can derive from business consulting is one of those things that often comes with hindsight and, on occasion is overlooked or missed entirely. Having expert specialist advise or guidance often leads to the right decisions being made on a day to day basis and that can be mistaken for ‘business as usual’ rather than seeing it’s true benefit.

One way to highlight the real value of business consulting is to think of it terms of dentistry (let’s think way outside the box here).

Some people are methodical and make regular appointments to visit their dentist for a checkup. During that checkup, they will look at the health and vitality of the teeth and gums and look for any hidden problems or potential future issues that can be resolved and removed before they happen. When bigger problems are present, remedial action can be taken and they leave in the knowledge and comfort that they are likely to be incident free in the period until their next visit (and even if that is not the case, they know exactly where to go if something does happen)

At the other end of the scale are those who will only visit the dentist once the pain of a problem has reached the point that they can’t continue to operate without remedial action right now. This is often painful, disruptive and, more often than not, extremely costly as the actions required to get back on track are far more extensive and potentially difficult to administer.

This principle fits well with business consultancy. Having highly skilled business professionals giving your business a check up on a regular basis helps anticipate and tackle problems of all shapes and sizes on the go. If you consider the cost of remedial action at the dentist being high, compare that to having to perform a root canal to your corporate finances or poor due diligence and you start to appreciate the real value of consultancy as a regular input rather than an emergency procedure.

Business consultancy from Affinax covers a broad spectrum of key aspects that absolutely must be delivered with the utmost accuracy and professionalism. Whether you are valuing your business or a potential investment through to drafting commercial agreements or even winding up an organisation, make sure you are best placed to make effective and correct decisions. Few of us are lucky enough to have experience in every aspect of business and commerce and even larger corporations don’t always have the core competencies on their staff full time.

Why not speak to the professionals at Affinax and explore their scope of services and what benefits they can deliver to help you maintain a vibrant healthy smile in your business.

The Trends changing the Business Landscape and the Role of the Board

I recently had an opportunity to attend a seminar by the Australian Institute of Company Directors (AICD) on how the business landscape is changing and the vital role of the Board in ensuring that their respective organizations are ready to embrace such change.

I was pleasantly surprised to observe that the discussion on the “Role of the Board” went beyond its traditional boundaries. Whether it is the new “Technological Revolution”, Cyber Risks or even a matter of “Trust”, the disruption to businesses is forcing the role of the Board (and for a good reason) to go beyond the usual realm, such as, providing continuity and direction for the organization, selecting c-level executives, governing organization based on broad agreed objectives and policies and fiduciary duties.

The fast changing and uncertain business climate, in my opinion, have pushed the Board members, to evaluate their role and forced them to make some radical changes to have a Board Composition which necessarily does not reflect the traditional Board cohort. The challenges of “today” faced by organizations have resulted in the Board to have diversity in their “functions”, “thoughts”, “experience”, “gender” and “culture”.

The role of the Board is evolving and is more proactive than reactive. The burden, of risks to organization’s reputation, of commitment to their stakeholders, and to the larger society is vital in shaping the new role of the Board. The extended role shouldn’t just take into consideration what’s disrupting the business today but also how businesses and larger industry sector will be in 5, 10 or even 20 years. The role needs to include more strategic responsibilities, focusing on future transformations and not just current changing trends.

The Board needs to be hands on and be involved throughout the strategy formation process and hence the responsibilities of the Board need to go beyond the board meetings and should be more collaborative in nature with the management of their organizations. This will help the Board to be more responsive to current threats to the organizations from various factors such as Cyber Risks and data thefts.

Furthermore, uncertainty in the businesses caused due to increase in continuously changing global regulatory and compliance requirements and keeping up with the demands of investors is forcing the Boards to come out of their protective shell, be more accountable, and to embrace the shift in their role from just awareness to governance. 

IS THERE A LINK BETWEEN A CORPORATE CULTURE BASED ON SHARED VISION AND VALUES AND ORGANISATIONAL PERFORMANCE?

I have been pondering over this question for many years and now believe that more and more companies are beginning to recognize the importance of strong corporate culture based on shared vision and values of all stakeholders (more importantly of their own employees) in achieving the bottom line.

Even though the idea of vision and values has been explored extensively by numerous academicians and business leaders, and the impact or consequences of developing effective values and vision are well documented, I am surprised to observe that many organisations fail to develop a vision and values that are lived and are resonated with everyone within an organisation.

Furthermore, in recent years, the question about increased investments in people processes has become topical and it is argued that building intellectual capital of employees based on the shared vision and value is connected to a better degree of employee’s alignment with their organisation, and hence is crucial to any organisation’s success story.

Most organizations, in response to the needs of the global competitive environment, require their managers and executives to deliver products and services that are in line with external or environmental requirements, stakeholder expectation and to be profitable while all the time working to appease a diverse community of consumers worldwide.

Many argue that the enhanced organisation’s performance can become a reality once the leader becomes a visionary leader and cultivates the strategic intent of the organizations. And for many businesses, leadership with vision as a core component is the answer or at least the most important piece of the Jigsaw puzzle.

However, in my opinion, for a vision and corporate values to have an impact on the organisation’s performance, having a visionary leader is just a starting point. The real impact should come once the corporate vision and values are fully integrated and shared among all employees of an organisation, which forms the basis of the organisation’s culture.

Similar to a shared vision, building a values-driven culture where employees find an alignment between their personal values and the organization’s values is the key to organizational success. In my opinion, employees should be included in the development process of core corporate vision and values. This will lead to improved internal communication, building a performance-enhancing corporate culture that facilitates leadership and employee’s alignment with the strategic goals of the organization and in the end the organisation’s bottom line.