Interview with Dr Ajay Kela, CEO Wadhwani Foundation, Jun 2016

“Focus on Impact”

Dr. Ajay Kela, CEO, Wadhwani Foundation

Dr Ajay Kela is the President and CEO of the $250mln Wadhwani Foundation, founded by well-known Silicon Valley entrepreneur and philanthropist Dr Romesh Wadhwani.  Under his leadership, the Foundation has undertaken the ambitious mission of Creating  Jobs for Millions– via entrepreneurship and skilling. Dr. Kela discusses corporate philanthropy, CSR and business-government collaboration. He also discusses the Wadhwani Foundation’s vision and strategy, and the all-important issue of evaluating the returns on social investment.

How do you see the interplay of your philanthropic and business roles? Is running a charity exactly the same as running a business? What metrics do you use to evaluate progress?

The primary objective of a business corporation is to grow the business and its profitability. The metrics are related to revenues and profit. In the case of the foundation, the ‘customer’ is the beneficiary of the programme or intervention. Measurement is tied to the impact on the beneficiary and it is harder to measure. For every result there are many contributing factors and it is difficult to isolate the contribution of one programme alone. In our foundation, we look at number of jobs, revenues generated, employees hired – by the entrepreneurs and small businesses supported by us. Apart from the nature of the impact metrics, there are several similarities between running a business and a foundation.

There are many corporate foundations. What do you think about their functioning, in terms of ‘social return’ on investment?

All corporations are measured in terms of EBITDA, which makes it possible for us to compare companies on the same standard. However, we cannot compare foundations as easily. Different foundations track their performance by different parameters, some look at the total value of grants made, and other input-side metrics, and some look at the outcomes. But even the outcomes cannot be compared. We can only compare like-to-like foundations, which is quite limiting. One of the key challenges is to have a standardisation of output to measure social impact.

In the corporate sector, there is a natural balance between the number of big corporations as opposed to others. In the NGO sector, it is very skewed, with very few at the size and scale required to make massive impact. In our case, we are focusing on direct and indirect job creation. We have started tracking everybody that we have touched. We are conducting an end-of-year assessment on a scale of 1 to 10. We only count those who rank us above 6, in terms of our impact on their lives. Grant-making to grassroots organizations is not our model. Our focus on measurable impact makes us quite different to other foundations.

 What if – businesses did not undertake charitable and philanthropic works? What difference are businesses making via CSR?

Philanthropy in India is very nascent. There are hundreds of thousands of NGO’s but they function at a very basic level. Business foundations are very few. We give more in donations to religious institutions and to known individuals, such as family members and dependents than to those not known to us. In the US, philanthropic funding every year is in the region of $200 to $300 billion, whereas in India it is in the region of $1 billion. If the top business houses like Ambanis can add business after business, they could as well add social causes. For example, such a large corporation could take up the social cause of access to electricity for all – without a for-profit motive.

But this is  a complex problem. There is the huge size of the problem itself and then there is the added complexity of a non-profit model. Can this really work?

Billionaires can take on large challenges and they are. Whether it is a 4-G challenge in telecommunications via a Jio initiative or a social challenge such as access to electricity – it is the same from the standpoint of the ability to mobilize resources and talent and deliver and manage efficiently.  The top say 0.1% can easily contribute both financially and in terms of business acumen and capacity to solve social problems.  For example, Romesh Wadhwani himself contributes not only in terms of finances (he has signed the Giving Pledge, pledging all his wealth to charitable causes) but also his brain power and experience. A seasoned business person can do these things. As individuals, they do not need their wealth, nor do their children.

In fact, every single person can do this, albeit at a different scale. In India, a lot of us are privileged compared to the 90% who are not and everybody has a duty to give back over time, in terms not only of money, but skills, etc. This is a type of culture that needs to be built.

Speaking of culture, not everything from the Silicon Valley can be replicated elsewhere. So, what are the transferable elements in the Silicon Valley model of innovation and entrepreneurship that you are trying to replicate in India?

We looked around the world and the Silicon Valley stands out. Decade after decade they  re-invent themselves with ever-new innovations and business models. Our approach is to learn what we can about that system and tweak it to suit a different place. That is the journey everybody who is in this space has taken. All the entrepreneurs for example – whether an Amazon-Flipkart, Ola-Uber or MakeMyTrip-Travelocity. It’s always good to start with what has worked. There is no need to re-invent.

However, one thing we learnt about India was that the city ecosystems are unique and need targeted ecosystem building efforts. In our earlier model, we had one national network of academic institutions, of entrepreneurs, of mentors, etc. In the Silicon Valley, the mentors, investors, angels, innovators – are all in geographic proximity. Thus, now we have tweaked the India model to run two ‘experiments’ – by focusing on three cities, Bangalore, Delhi and Indore. Bangalore and Delhi are similar in terms of the ecosystem maturity and infrastructure, and Indore provides a laboratory for testing out a different ecosystem maturity pathway.

It is said that entrepreneurship has slowed down in India, with more caution among VCs. Do you accept this view? Where is entrepreneurship flourishing in India – in the smaller businesses, larger businesses or in the middle?

Both Government and Ecosystem go through cycles of speed and slowdown. During 1990-99, for example, in the Silicon Valley, we experienced massive hype, followed by a sharp correction. Now it is back on an upswing. A correction is happening in India likewise.

The good news is that at a deeper level, there is a massive mind-set change and ecosystem development. These are here to stay. The first choice of an IIT-ian is no longer to get a job in an MNC, but to start-up or join a start-up. The best and brightest are taking eagerly to entrepreneurship. Similarly, the hype from the last few years has raised HNI (High net-worth individual) channel interest. Global VCs have established huge funds in India. They will ride the wave of growth.

India’s entrepreneurs have gone beyond copy-cat. Solid business models and products for the global market place are coming up. Paytm is an example.

What about the differences owing to different regulatory environment between operating in the US and in India? Do public partnerships slow down the Foundation or speed up its work?

Government is not keeping pace with us entrepreneurs and businesses, but then as a businessman, I am trained to run a 100m sprint, whereas  government is trained to run a massive, slow marathon. Our objective is on impact, whereas government focus is ultimately on votes. Impact may or not give votes. Innovation is a 5-10 year cycle or longer, but governments are under pressure to show quick results. Game-changing developments do not happen in a short time.  Thus, there is a mis-alignment of objectives between the entrepreneur, business & corporate foundation, vis a vis government – and this is true everywhere.

However, government sets the rules of the game. One rule change will have a huge impact. For example, a rule which says that every school will run a vocational education stream.

Wadhwani Foundation has played a significant role in getting this rule change, is it not?

This change has happened not through legislation, but via incentive. Indeed, it has already happened in 1500 schools, spread over several states. A 7th subject has been introduced at Class X level – viz. vocational education. Every year, the incentive programme for introducing this subject is offered. Wadhwani Foundation made a major push to make it happen. The programme itself started in the Kapil Sibal era. The first pilot – in which we were deeply involved -- made it a success story and set the stage for scale up.

On April 20, cabinet approval was also obtained for a programme on Udyamita Vikas (entrepreneurship) – whereby entrepreneurship education programmes will be run in 3000 colleges, including ITI’s, through digitization of content, via a collaboration between Wadhwani Foundation and Government of India.

The next step is to make a part of the programme compulsory – which will change the attitude of all stakeholders towards vocational education and entrepreneurship.

Is there a difference between innovation and entrepreneurship? Is innovation flourishing in India?

In the knowledge economy, the driver of growth is innovation. Yes, India is phenomenal at innovation at the livelihood level, where you have to feed yourself or a small community. At the Silicon Valley level, we are far behind, though. Indians in the Silicon Valley are leading, but not back here in India. Game-changing innovation via academic institutions and corporations is missing. The mind-set itself may be a block. Even a small country like South Korea has global brands, but not us. The intellectual sector should drive this process. We have the ambition of First in India/ Best in India, but not First/ Best in the World.

We are lacking in role models. For example, if IISc (Indian Institute of Science) in Bangalore produces a Nobel laureate, it will energise the other institutions as well. In the Silicon Valley, every social gathering is talking about ideas. The entrepreneurial ecosystem has to be built up. At the grassroots level it exists, at the college level and corporate level, it is beginning to grow via mass leadership in products and services.

What are the risks and governance challenges in running a corporate foundation?

I would like to speak of a key challenge in this area. As a philanthropic foundation, our sole focus is or should be on how to achieve impact and how to truly measure that. There should be no fudging of data. This pitfall represents one of the key corporate governance risks for a charitable foundation.

I can give you an example from our initiatives in the disability sector, where we try to ensure that persons with disability are trained and qualified for jobs via a third party. We incentivised placement, to avoid the usual situation which is that people are put through a training programme but there is no outcome in terms of jobs filled. We paid the third party 70% for training and gave the balance of 30% on successful placement. Soon we realised that we were being scammed by the third party, who collected the 70% for training and did not bother about the remaining part. The governance issue here is about making a quick buck.

We then changed our incentive model such that for every placement we gave them 1.3 times the amount but we gave it only upon placement. However the vendors were a step ahead again. They created sham companies for placing the candidates!

Thus, governance is critical in every field.. Objectives should be driven through governance.

The corporate side has checks and balances via statutory audits. However, on the philanthropic side, there is no such thing. Therefore leadership needs to drive a focus on ‘why we are in this business’.