Alacrity Housing - Ethics First

Details

Themes: Coporate Governance
Period : 1990 - 2001
Organization : Alacrity Foundations Pvt. Ltd.
Pub Date : 2001
Countries : India
Industry : Housing and Construction

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Case Code : CGOV002
Case Length : 12 Pages
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Background Note

Alacrity Foundations Private Limited (Alacrity) was founded in 1978 by Amol Karnad (Karnad)⁴. Karnad believed that personal dignity and integrity were vital for an individual's spiritual progress in life, and that work was the medium for the true expression of these qualities.

Karnad's views on the dignity and glory of the human being were influenced by philosopher and novelist Ayn Rand. His views on organisation and management by Peter Drucker⁵. He set up a management consultancy to test his ideas. The consultancy showed mixed results. Though clients seemed happy and did not mind paying a fee to listen to the recommendations, they were not very enthusiastic when it came to implementation. They felt that the consultancy comprised of "smart young people with ideas, but really quite impractical."

However, Karnad was not discouraged by the response. He decided to pursue his convictions by launching his company operations in 1981.

With the help of research in management and some propositions (Refer Exhibit II for the propositions), he formulated Alacrity's corporate mission: "To try and prove that organized business when deeply committed to human values is the best equipped to lead society to a better quality of life." Karnad strongly believed that business could play a crucial role in evolving a new ethical social order.

Alacrity planned to establish businesses, which were in line with national goals and generated both employment and purchasing power. Accordingly, Alacrity identified three thrust areas: Housing, Electronics (Energy Management), and Healthcare and Education. Of these, urban housing and energy management were chosen as Alacrity's first streams of business.

When hunting for a flat after marriage, Karnad realized that he could not afford one. It seemed very strange to him that there were no large corporations in a field as basic as shelter. Karnad said, "This gave me an insight into the manner in which the construction industry functioned. Market confidence in the developer was low, mainly because the industry was not organised. Clearly, there was a niche for a construction firm which promised reliability and accountability."

This prompted Karnad to enter the housing business. So when Karnad's uncle, Indukanth Ragade (Indukanth), who went on to become the Vice President of Alacrity, wanted to develop his property in Chennai, Karnad took up the project even though he was not a civil engineer. Consequently, in the early 1980s Alacrity started its housing operations in Chennai. The housing sector was then marked by fly-by-night companies which did not have a favorable market regulation and which associated with bribery, time and cost overruns, and poor quality and service.

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4] Amol Karnad was a chartered accountant from a middle class family. After stints in Cheeseborough Ponds, Hamilton Cycles Pvt Ltd and B.P.Vaidya & Co. he decided that he would be his own boss
5] A management guru. Peter Drucker is one of the world's most influential writers on organization and management. Karnad was influenced by Drucker's concept of profit as the cost of survival.