In the early eighties, just
as the personal computer entered the market, a few friends
came together and formed a
software company with very little capital. The fact that they were colleagues
in an established company and decided to quit en masse raises ethical questions
that have not been answered till now.
Framed in the context of knowledge management, how ethical is it for a team of
technocrats to leave a company in limbo?
Just as Bill Gates happened
to be in the right place at the right time, these gentlemen were also in the
right place and the right time, albeit in a different part of the world. The
government of the day went all out to support the IT sector. Thus, the
idealistic entrepreneurs had the good fortune of a scarce resource like land being given to them at favorable prices. They
were idealists. Right from day one, they
espoused the highest standards of governance and transparency.
Several factors helped the
company (and many others) to grow at a blistering pace.
Large corporations in the
industrialized world wanted affordable solutions. Thus were born what some critics have called the “sweat shops” of the IT sector. They hired the best available talent
in the country, provided great working conditions and soon became the
envy of established entities.
To place
things in perspective, the initial public offering was nothing to
write home about. Almost revolutionary concepts such as Employee Stock Option Plans, generous
bonuses, and good management
practices were in place thick and
fast.
Then came the Y2K problem, like the proverbial manna from heaven. Hirings went through the
roof. 24x7 became the new norm.
Revenues and profits zoomed. Share prices started rising exponentially. The
initial investors suddenly became Rupee millionaires
and Rupee billionaires. The company soon debuted on the NASDAQ. The Rupee millionaires became Dollar millionaires. The
country had a new generation of entrepreneurs.
One
of the founders who was the CEO did something unprecedented. He stepped down on
reaching the “Government Retirement Age” of 58. Another founder stepped in as
CEO. Over the next decade or so, the company saw the founders rotating the CEO
position. In hindsight, this was a colossal mistake.
The company that had so
assiduously cultivated an image of transparency and governance appeared fallible
after all. When it became apparent that the CEO position was reserved for the promoters, a few talented people at the top left.
Things came to such a pass that the retired
CEO came back to resurrect the company. In typical dynastic style, normally
witnessed in politics, the CEO brought on a family member. Again, in hindsight,
these decisions are open to question.
In 2014, for the first time,
a non-promoter professional became the
CEO. A grand vision came very quickly. For almost two years, the company turned
in good though not spectacular performance.
Early
in 2016, the first signs of trouble surfaced. Without going into
all the details, the problem was the alleged severance package given to some
top executives, issues of corporate governance, the fancy hikes in top-level
compensation while offering measly increases at the bottom of the pyramid,
questionable acquisitions, and in a sense, a perceived deviation from the
values of the founder-promoters.
Soon
the problem turned into a no-holds-barred war of words between the board of
directors and one of the founder promoters.
Last
week, in a sudden move, the CEO quit. An interim CEO is in place.
The CEO has cited pressures from some
quarters as the distraction and the reason. Strangely, the CEO who stepped down
is now the Executive Vice Chairman. The Board already has a Chairman and a
Co-Chairman. The Executive Vice Chairman will receive a salary of $1 a year.
In
the two days since the CEO quit, the share price took a beating. The company
lost its coveted place among the top ten most valuable companies in the country.
Since this is only a blog, I
have left out many details. What
fascinates me is the uncanny parallel to family businesses across the world and
a reminder as to how the mighty might fall.
Contrary to what many may
think, a large majority of public corporations across the world are still
family businesses at their core. Of course, the corporations have hundreds of
thousands of shareholders. The promoters still wield considerable influence and
expect to be heard.
Perhaps
the most challenging question that such businesses face is the question of
succession planning. Empirical evidence shows that rarely do these businesses
retain their original values or intent beyond the second generation.
In the present case, the first error appears to have been to
bestow the CEO position as a kind of
entitlement on the promoters.
The second error appears to have been the founder CEO returning from retirement. In one action, the iconic
stature had a mighty fall.
The third error has been the inability
of the board and the promoters to sort out their differences through dialogue. Washing dirty linen in public is
never a nice spectacle.
The most important error, in my humble view, has been the organization’s failure at innovation. With nearly a 100,000
talented people, surely it was well within the organization’s capabilities to
come up with world-class products. That it chose to focus on providing services
to large corporations is a sad commentary on the fallacy of the tall claims
made time and again.
Finally,
leaders, however great, need to know when enough is enough.
Let
us face it. Each one of us will have our day of reckoning. It will be in the larger interests of everyone if
one realizes that one can only do so much and leave the rest to others. Dishing
out sagely wisdom ad infinitum is a sure recipe for disaster.
I do hope the organization
can sort out the issues and once again be on the path to success and glory.
More importantly, I do hope that leaders
and entrepreneurs learn to shed their egos. No one is perfect. Or does someone
doubt that?
Perhaps they do. This morning
brings a report that the promoters are plotting a coup to replace the board.
Can it get more bizarre than this?
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