In search of "Common Sense"

Feb 15, 2009

Leadership character and quality will make or mar Satyam’s chances of regaining lost glory

Satyam is experiencing an unprecedented crisis. The uncertainty surrounding what future holds for each of the stakeholders – Associate, Investor, Customer and Society (AICS in SatyamWay lingo!), is causing lot of anxiety. Initial days saw lot of knee jerk reactions and panic actions taken by some of the stakeholders like cancelling / postponing of long term contracts, electronic media going on in a hyperactive mode Etc.

Now that some definitive actions have been taken due to active involvement of the government in appointing the board of directors, auditors, investment bankers, CEO Etc with surprising but refreshing alacrity, begins the real test of character of leaders who are going to chart the road ahead. There is lot of interest amongst the various suitors who would like to have the various assets that Satyamites have built over a period of time. There is enough reason to believe that sufficient efforts will be put to make Satyam viable again.

But, whether it will reach the glorious heights again depends on how the leadership at Satyam responds to this crisis situation.

The crisis at Satyam needs two types of responses.

The first is along the lines normally suggested i.e. communicate, be candid, have a plan, be ready to modify the plan as needed etc etc. This response is like routine text-book hygiene steps in any run-of-the mill crisis arising from events outside the control of people in the organization. The leadership team not knowing these basics is not worth its salt.

The second is related to the root cause of current crisis. This crisis has been precipitated by gigantic fraud (If it wasn't a gigantic fraud, it would have been a colossal farce) committed by a set of people most unexpected to do kind of things that have been done. This has resulted in a crisis of confidence and the new team appointed by the government would be wondering, who among the old crew they can trust.

Our Satyamway says "Every Satyamite is a leader". It is a time where each one of us has to introspect whether we would be able to step forward and play the role.

"Caesar's wife must be above suspicion"

The current set of designated leaders need to bear in their mind that, whether they like it or not, their proximity and close working with the self-confessed fraudsters rubs lack of credibility onto them. The implicit trust that they have hitherto enjoyed amongst the stakeholder community has been reset to zero. This is demonstrated by the government by summarily sacking the independent directors. Although, they might not have any inkling of the fraud and they are world renowned professionals in their own right. It is due to operational complexity reasons that the current set of designated leaders are allowed to continue in their roles. This arrangement will logically last till the new owner of the organization brings its own dispensation.

Many of the designated leaders are at their place because they truly deserve to be there and their position is based purely on merit, diligent hard work and track record. But some of them are there at their designated station by being there at the right place, at the right time, i.e. by chance and not necessarily by their merit. Some find themselves in their situation by ingenious / devious design of their own or by leaders who wanted a coterie around them.

Irrespective of the reason why they are designated leaders, each leader needs to be conscious that her / his actions now will decide whether they would be considered worthy of trust now onwards.

I guess there is a need for a great catharsis for Satyam to regain TRUST of different stakeholders. We do not have eternity to reach there. There is a small window of opportunity within which a lot needs to happen else Satyam will be relegated to tier 3 or 4 and not considered fit ever to compete with likes of IBM, Accenture, EDS, Infosys, Wipro, TCS, Cognizant etc, if not actually dismantled and pieces sold to different buyers.

There is a need to take a very high moral ground to recoup the lost image with respect to corporate governance and moral standing, quickly.

There is an interesting post on HBR Editor's Blog - Rebuilding Trust. The author says, while there's no single way to create trust, humanist psychologists agree that the best way to generate it is to show competence, integrity, respect, and consistency. Certainly it's no coincidence that these are the qualities of timeless leadership. The TRUE leaders would conscientiously act demonstrating their competence, integrity, respect and consistency with a fresh vigor because they really care to win-over the trust of their stakeholders again. Whereas, the pseudo leaders, who are there by chance and devious design, will not be able to sense the changed scenario. They will continue acting as if it is business as usual. They will continue to be surrounded by their favored coteries, continue to play their petty corporate games and shun honest communication with team members at large. Some of the pseudo leaders would go into shell not knowing what to do and what to communicate.

I have TRUST in the wisdom that inspired the slogan "Every Satyamite is a Leader". I see following SIMPLE link to visibly stand by this commitment in these trying times.

Every Satyamite will be a leader

When

Every (designated) "Leader" in Satyam becomes* a Satyamite.

* become = try to be in the shoes of, empathize with, understand the situation in which a troubled Satyamite might be finding herself / himself in.

A basic decency, compassionate and logical treatment is a fundamental right for any Satyamite. Once the leaders get into this mindset, it will be easy to get ideas and thoughts to build trust afresh. The Choice needs to be exercised actively.

Sunlight Is The Best Disinfectant

The serious fraud has placed Satyam is such a precarious position that it has had to mortgage its buildings and other assets to borrow funds to cover the short term expense requirement. The maximum cash required is to meet the salary expenses. Satyam has historically has had a very high "Associate Cost to Revenue" ratio (62% compared to industry norm of 50-55 %). It is also a fact that the top strata of leadership at Satyam has been customarily paid much more than their compatriots in the industry. (Ref List of highest-paid executives compiled by Business India magazine). The entry level salaries offered to ELTPs and Management Trainees are, on the contrary, amongst lowest in the industry. This can be seen from the fact that there is difference of multiple of 100 between the salaries of the entry level management trainees (Indian Rupee 350,000) and the highest paid individual (Indian Rupee 35,000,000 or USD 700,000).

The loss of revenue from customer attrition is going to put pressure leading to a thought of layoffs. As things stand today, there is a visible campaign to reassure the associates that there are no immediate plans for large scale lay-offs, but there is no plan articulated how this will be handled and what kind of sacrifices will be expected from whom.

Infosys has come out in media very explicitly how they would be handling recession and slowdown in the economy. In a recent interview, Mr. NR Narayana Murthy, Chief Mentor of Infosys, explained how they are going to ensure that instead of lay-offs, it would be tightening of belts by the leadership in terms of pay cuts. Infosys will do in such a manner that leaders will lead by example and younger people can adopt it. Infosys leadership has always set a bench mark by personal sense of probity.

It would be clear to anyone who understands systems thinking or holistic thinking that an organization is like a living organism. The different units / divisions are like parts of the body. The system exists, thrives and survives not as a collection of parts but rather because of interactions between the parts. Each part is essential and important for proper functioning of the system.

In times of crisis, like scarcity of nutrition, it necessitates that the body survive with whatever limited nutrition is available and become lean and trim. This does not mean that it should cut-off limbs or throw away some parts which appear to be extra (e.g. a human body has two kidneys but can do with just one of them). It means that it dips into its reserves and burns excess fat. It would not be difficult to identify what fat means in our context.

At Satyam, sometimes, there has been lack of sagacity on these lines. Even before this scandal broke out, the talk was in the air of how the leaders are being forced to take "tough decisions" due to recession and slowdown in economy. Unlike at Infosys, these tough decisions involved mindlessly putting control on costs and displacing associates and even forcing them to resign to avoid notion of lay-offs.

It is a fond hope that the designated leaders draw their lessons from visibly available examples to follow. And since the financial crisis at Satyam is more pronounced, it would be interesting to see if even a single leader comes forward and publicly declare to work for a nominal salary of $ 1 till the company returns to profitability and stability!!!. In fact, people will fall off their stools, if any of the designated leaders offers pumping in cash earned by selling shares obtained via stock-options over last few months. The fun of entrepreneurship in the current opportunity can only be enjoyed by risk taking and putting money where one's mouth is.

It would be great if more transparency is practiced as regards the financial condition of the company. It would not harm if high level projected cash balances, cash flow are shared online so that associates get confidence in the words being shared through in-house communication mailers. The stinginess at Satyam in investing in state-of-the art web 2.0 infrastructure is going to be a major weak point in these trying times. A mature and user friendly blog, wiki, enterprise search and expertise location platform would have been ideal for ensuring that peer-to-peer communication happens smoothly and communities are formed around common professional as well as personal interests.

I wonder if our internal team would be able to take it up on a war footing!!

"I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel." - Maya Angelou

"Remember, people will judge you by your actions, not your intentions. You may have a heart of gold -- but so does a hard-boiled egg."

As the organization comes out of the daze, there is going to be a frenzy of activities. We can already see the sign of times in the flurry of internal mails from support units which are spamming our mailboxes.

In our zeal of going ahead and diving into ACTION, there are many things that might be wrongly done. We are in a situation where we absolutely cannot afford the luxury of missteps. The things that can be wrongly done can be divided into two categories

  1. Things that should be done but are unfortunately NOT done
  2. Things that should NOT be done but are nevertheless done.

The first category of mistakes means missing out on vital actions because they appear to involve tough choices, which managers and associates tend to postpone or plainly ignore. The impact is directly felt in terms not meeting the commitments and expectations of our stakeholders. The result is that the stakeholders consider us "UNRELIABLE".

The second category of mistakes means that a lot of time, energy and resources are wasted without having any impact on the betterment of the stakeholders. This category is very insidious as it gives the initial comfort of being busy but ultimately does not help in delivering the results. The impact is that the stakeholders look at the song and dance being executed ostensibly in their name without any salutary effect and hence consider us "INEFFECTIVE".

The beauty of above categorization is that it covers ALL the possible things that can go wrong and there is NO overlap. It can be very SIMPLE provided we set up the right kind of metrics / measures. (Our first language is metrics, right!!)
It need not be gibberish but something simple and sensible which any ELTP should be able to understand without much clarification and should invoke right behavior which is good for the whole organization not just some vague part / unit. The current metrics framework has been built on a fundamental flaw. The basic assumptions here is that the parts of the system of Satyam are independent and their interactions need be handled through 'business judgment' whenever a conflict is thrown up through 'Reviews and Escalations" as well as "Testing and Validations". If the organization is considered as a single whole system and the interactions of the parts are taken into consideration then the metrics would be very simple and quite different the ones currently in vogue.

Here is the wish - May god give our designated leaders wisdom to distinguish between the above two and courage to draw a strict line to prevent any such missteps!!! Looking forward to a reliable and effective Satyam under their able and inspiring stewardship!

All make believe leadership; comforting song and dance without the above essential elements will break associates' hearts. They would slowly start losing interest and faith in future of Satyam, and begin looking out for opportunities outside as economy picks up in months from now and jobs become aplenty.

I ain't sayin' you treated me unkind
You coulda done better but I don't mind
You just kinda wasted my precious time
But don't think twice, it's all right
-

Bob Dylan

Feb 9, 2009

Business Stripped Bare – A Book Review

Business Stripped Bare – Richard Branson

This is an inspiring personal account by Sir Richard Branson about his 'Business' journey which, I believe, should be a recommended reading to all the people who have done their MBAs, have tried and failed getting into a MBA institute and even those who have not tried this route to learn art and science of entrepreneurship.

The book is very easy to read and peppered with interesting anecdotes that the author brings to demonstrate his points and principles. The tone of the entire book is very engaging and not at all intimidating. If one were to go through the mind boggling accomplishments of the author in his career spanning 40 years, it would be natural to consider it almost impossible what he has achieved in his lifetime setting up 200 companies in over 30 countries in the Virgin Group. We might be tempted to treat this phenomenon as an exception, which ordinary mortals cannot aspire to achieve. This book is his attempt at demystifying the track record and distilling the principles that he has naturally followed.

Through this book, he has actually laid bare the principles of success and gives hope and inspiration to all the current and aspiring entrepreneurs that whatever situation one is in, one can entertain dreams of achieving feats unimaginable now in terms of scale and impact. The generation of personal wealth and celebrity status could be interesting side-effects but not the real purpose of the enterprising individuals.

One basic theme that he has lived is that if one shifts focus to the concerns and issues of a larger set of stakeholders and genuinely try to come up with ideas, drum up collaboration and cooperation amongst the stakeholders and work towards resolving these issues diligently, then the current personal and lower level concerns and issues get resolved on their own. He has recounted how in his lifetime he has reached a stage where he can now play a key and exciting role as an acknowledged leader in addressing global and seemingly intractable issues like climate change and struggle against HIV/AIDS without anyway jeopardizing his commercial interests. This did not happen overnight but as he moved from founding one Virgin business to another, doors kept on opening through his contacts. Although, he is humble and acknowledges the role of luck, but one can easily realize that, had he been selfish and petty, none of these strokes of luck would have occurred in the first place and they would not have propelled him to these dizzy heights. By the way, he is fond on dizzy heights literally also through his interests in ballooning, aviation and space tourism.

The other two prominent themes are having fun while being serious about business and being inspired by great individuals like Nelson Mandela.

All the markets in which Virgin operates tend to have features in common: they are typically markets where the customer has been ripped off or under-served, where there is confusion and/or where the competition is complacent.

Contrary to what some people may think, this constantly expanding and eclectic empire is neither random nor reckless. Each successive venture demonstrates their skill in picking the right market and the right opportunity.

The book is divided into chapters related to – People, Brand, Delivery, Learning from Mistakes and Setbacks, Innovation, Entrepreneurship and Leadership, and Social Responsibility. Below is a compilation of things that I consider highlights in these chapters

  1. People – Find good people, set them free
  • Business has to give people enriching, rewarding lives, or it's simply not worth doing
  • Find energetic and enthusiastic people with the right attitude who can learn and grow into their work.
  • Put people together in a way that will have them bouncing ideas off each other, befriending each other, and taking care of each other, and suddenly they are coming to you, not with gripes and problems, but with solutions and great ideas.
  • Keep businesses small, spin-off when any business grows beyond a certain size, say strength of 100 people, promote from within
  • Enjoyment at work begins where all other enjoyments begin; in good health
  • A manager should be a considerate person who is as interested in the switchboard operator and the person who cleans the lavatories as he or she is in the fellow managers.
  • Encourage people to take ownership of the issues that they confront in their working lives.
  • A self disciplined employee will have the patience to conduct the routing business routinely, the talent to respond exceptionally to exceptional circumstances, and the wisdom to know the difference between the two.
  • The more you free your people to think for themselves, the more they can help you. You don't have to do this all alone.
  1. Brand – Flying the flag
  • Virgin is an exception. Being in the top 20 global brands, unlike other 19, it does not ply a well-defined trade. It is the only brand that is diversified into a range of business activities, including airlines, trains, holidays, mobile phones, media – including television, radio, cable – the Internet, financial services and healthcare.
  • We offer our customers a Virgin experience, and we make sure that this Virgin experience is a substantial and consistent one across all sectors of our business.
  • We move into a sector to fulfill our key role as consumer's champion only when we feel that we can potentially turn an industry on its head
  • Brands exist as a means of communicating what to expect from a product or service. A brand should reflect what you can do. You have to deliver, faultlessly and for all time, whatever your brand promises. So it's better to make your offering sound witty and innovative than to pretend you're more than you are.
  • Customer is the only common factor to all the range of things we are involved in.
  • The idea is to find newer ways to give customer a good time, have fun, a 'Way of life'.
  • This has evolved over a period of time by simply following our appetites and the things we were curious about.
  • I've always and continuously been interested in learning new things and, equally important, I've always wanted to share wanted to share what I learned with other people.
  • Irreverent humour is one of Virgin's brand values.
  • Befriending one's enemy is a good rule for business – and life.
  • Get the brand right from the start, by being honest with yourself about what it is you're offering.
  • Remember, a brand always means something, and ultimately, you can control the meaning of your brand only through what you deliver to the customer.
  • Publicity is absolutely critical
  • Virgin Brand is a flag
    • Virgin group is managed under branded venture capital governance model
    • Its bonding power gives many entrepreneurs an opportunity to run their businesses provided they pay due respect and agree to protect the integrity of the brand while doing business under the Virgin Umbrella
    • We've never let a Virgin company go bankrupt
  1. Delivery – Special Delivery
  • We thrive on ideas but our day-to-day business is about delivery
  • Two most important elements of good delivery are – good communication and attention to detail
  • Letter writing is an important way of communication
  • Keep talking, keep explaining
  • It's attention to detail that really defines great business delivery
  • Keep a notebook and jot down things that need doing.
  • The main reason why staff become frustrated is that the same problems and complaints keeping cropping up and never seem to get properly sorted.
  • I think company owners and chairmen should get out from behind their desks and go and sample their own products as often as possible.
  • Every change ushers in unforeseen consequences
  • Success one day does not give you a free lunch everyday thereafter.
  • Delivery is not just hard work: it's endless.
  • Keep a cool head. You're in business to deliver change, and if you succeed, the chances that no one will get hurt are virtually zero.
  • Engage your emotions at work.
  • Plans acquire detail as you test them against questions that on the face of it are really quite simple – and more to do with emotions than figures.
  1. Learning from Mistakes and Setbacks
  • One thing is certain in business. You and everyone around you will make mistakes
  • Face the facts – however unpalatable they might be. Failures usually occur when leasers avoid the reality of business
  • Trust the people around you to learn from their mistakes. Blame and recriminations are pointless.
  • Protect your reputation. Don't be afraid of making mistakes.
  • The first thing we do when we're faced with a problem at Virgin is to promptly look for the answer to a single question: "Is there a way out?". And then we do right to the endgame and ask:"What is the ideal way out of this problem for everyone?" Get 100% focused on finding that way out
  • If you're hurt, lick your wounds and get up again. If you've given it your absolute best, it's time to move forward.
  1. Innovation – A Driver for Business
  • The best, most solid way out of a crisis in a changing market is through experiment and adaptation.
  • If your operations are smaller, the distinction between innovation and day-to-day delivery is barely noticeable.
  • Larger complex businesses have higher chances of getting bogged down by normal activity related to delivery and innovating is seen as something extra, something special separated from routine activity.
  • Innovation can occur when the most elementary questions are asked and employees are given the resources and power to achieve the answers. E.g.
    • Virgin America (an airline) asked "What does a great travel experience look and feel like? How would it be different from anything else US travelers have experienced? What would it take to knock their socks off?" The result of letting lose people's imagination – Customers are generating a huge word-of-mouth advertisement through their blogs, photos uploaded on Flikr etc.
  • Government and powerful philanthropists have understood the power of direct research and development and harness innovation to their own long-term purposes by instituting prizes.
    • In 1714, British government created a prize (UKP 20000) for inventing a device capable of measuring longitude within half a degree of accuracy
    • In 1912, a French industrialist offered a trophy for seaplane race. To win a prize of 75000 francs a pilot needed to win three races in five years
    • In 1919, Raymond Orteig offered $25000 for the first non-stop transatlantic flight between New York and Paris.
    • In 1997, Ansari X prize offered $ 10 Million to carry three people 100 Km above the Earth's surface
    • In 2007, Richard Branson instituted $ 25 Million worth The Virgin Earth Challenge to demonstrate to the judges' satisfaction a commercially viable design which results in the removal of anthropogenic, atmospheric greenhouse gases so as to contribute materially to the stability of Earth's climate
  • Business has a duty to continue to push the boundaries to help resolve future challenges
  • Local solutions and small initiatives punch well above their weight while broad-brush initiatives get horribly bogged down in their own complexity.
  1. Entrepreneurs and Leadership – Holding on and Letting Go
  • You shouldn't blindly accept a leader's advice. You've got to questions leaders on occasions
  • True leadership must include the ability to distinguish between real and apparent danger. Beware of overreaction.
  • There is something that should – no, must –be written into every business plan: This company will have lots and lots of parties and social get-togethers. Parties are a way of galvanizing teams and allowing people to let their hair down.
  • There is a fundamental difference between an entrepreneur and a manager. Don't try to be both.
  • Entrepreneurs have the dynamism to get something started. They create opportunity that others don't necessarily see and have the guts to give it a go. Yet an entrepreneur is not necessarily good at the nuts and bolts of running a business.
  • The entrepreneur's job is effectively to put themselves out of a job each time the new company is up and running.
  • I don't think there have even a letter from my office which criticizes the staff or an individual. Virgin Group has always tried to look for the best in people. That way, you get the best back.
  • On firing people – "Decent leadership is about explaining clearly and unemotionally why a decision has been taken."
  • I think there is such thing as natural leadership. It takes a certain generosity of spirit to trust people, and to judge their merits and limitations fairly. It takes not a little bravery to bear bad news to people. Optimism, openness to possibilities and sheer self-confidence – some people have more of these qualities than others.
  1. Social Responsibility – Just Business
  • There is such a thing as enlightened self-interest, and we should encourage it. It is possible to turn a profit while making the world a better place.
  • Inasmuch as there can ever be answers to the problems of the world, capitalism – generously and humanely defined and humbly working with others who understand the issues and solutions – can create some of those answers.
  • It's more important to do what you believe to be right in life, and if this contradicts your business interests, so be it. Business can't be allowed to float above ordinary morality.
  • No one is asking you to save the planet. Just dream up and work on a couple of good ideas. No one expects you to find a global solution to everything. Just make a difference where you can. Local solutions have value in themselves, and some can be scaled up, so it doesn't matter how modest your budget, you can and will make a difference.