Narayana Murthy, Founder, Infosys

Narayana Murthy returns to Infosys. Narayana Murthy’s return hailed by leaders of the IT industry.

In creating the powerhouse that became Infosys, Mr. Murthy demonstrated an ability to recognize what the market needed and put together a strategy that leveraged those conditions. He has to do the same thing today, in a very different scenario. 1. The world economy and the IT industry are not the same. 2. Infosys is not a startup but a behemoth trapped by its own character& design (much like IBM in the 90s)

As he steps into this role, the first bit of advice Narayana Murthy can heed is from Albert Einstein who said “You cannot solve a problem with the same mindset that created it”. And indeed that is what he needs to achieve: Help Infosys develop a new mindset about doing business.

The critical change required at Infy is new thinking: diversity of thought and leadership, risk taking and experimentation. And these need to begin at the top. Let’s take a look at the composition of the executive leadership team. For a global organization, you have one non-Indian leader. A pre-dominance of South Indians on the executive committee. And 1 woman. While it may not be conscious, there is certainly an unconscious selection going on here. Which could indicate the lack of a conscious focus on what will the future look like and hence, what leadership qualities and mix do we require?

When he speaks on Strategy, Prof. Ranjan Das of IIM-Calcutta, speaks more about Talent than about strategy. He asserts that strategy is an outcome of the quality of leaders who devise it. And he encourages organizations to map their leaders’ achievements and strategic ability against the best in class. Your marketing strategy will only be as brilliant as your Chief Marketing Officer, he says.

The best service that Mr. Murthy can provide for Infy is to re-staff the leadership team that runs the organization – and he must do this within 18 months. Bringing in outsiders is fraught with risk; there is enough research that indicates how often this fails. However, I believe that Infosys already has many diamonds in the rough, who are not noticed because they don’t “fit the mould”. This outdated and now irrelevant mould must now be discarded and a new one reconstituted.

Finding radical thinkers, explorers, pioneers, experimenters is critical. Giving a voice to the larger organization via processes like

English: Wordmark of Infosys (Photo credit: Wikipedia)

Vision Communities will help throw up strategic/business ideas and pinpoint fresh thinkers from within the organization. Developing a more dynamic and inclusive leadership concept for the future, will ensure this is not repeated. Leading a redesigned talent assessment and identification process, rapidly bringing younger leaders up the ranks and restaffing the leadership team and board are the need of the hour.

All strategic thinking is an outcome of the quality of the thinkers, their alignment with each other, driven by a common purpose and objective. As soon as you ensure the right set of drivers on the bus, the direction (aka strategy) will begin to fall into place.

And in doing this, Mr. Murthy will need to get his hands dirty. A consultative approach will not work. Being nice will not work. He will need to place the greater good above individuals. And he will need to respect the needs of the future to pick a leader who will renew Infy and lead it into the next orbit. He can be aided and supported on this journey if the current leadership team realizes this and with humility seeks to support him in making this happen, even if it means a significant change for themselves.

Will he, or won’t he? Will they or won’t they? Time will tell. And in these times, rather quickly.

Today, I am sitting alone at home, in the same state. Having just seen Tanishqa’s results online. She’s passed her ICSE board exams with flying colors. She will probably be among the top 5 scorers in Art across the ICSE board for this year. I am unable to stop the tears of joy that are streaming down my face. My heart wants to burst with pride and I am filled with gratitude for this universe that seems to shower endless happiness upon me and smoothens the way for me and my family to constantly achieve our dreams.

And I want to thank each one of you, who has encouraged Tan, believed in her, complimented her art, from near and far. Those of you who have her paintings hanging on your walls – It is your belief and support that emboldened her and helped her to believe in herself. Thank you

Parenting can sometimes seem like a thankless job, but only in the short-term. In life you look for lag indicators. You wait 5 years or 10 and then you realize the distance you’ve traveled and how much things have changed. All I can say today about the first 16 years of fatherhood is, that it’s worth it.

One more milestone crossed, but I am waiting for the big one – 10 years from now, when someone points to me on the street and says, “Isn’t that Tanishqa’s father?”, I will weep again.

alarm clock, bought from IKEA (Photo credit: Wikipedia)

The changing face of the world and of organizations, as a result, means that HR too must evolve. That’s not rocket science, we all know that. The challenge is in predicting some direction and opinions. So I thought I might as well throw in my 2 cents worth of opinion.

It is clear that complexity is only going to increase. Economic and organizational life-cycles are going to reduce significantly. Economies and organizations will need to change on a dime. Aside from disruption caused by rapid innovation and disintermediation, socio-cultural forces will cause a level of disruption that will be rapid and wide-ranging in its impact. Disruption will be quicker, and have far greater destructive/transformative impact than ever before. If  ”Built to Last” was an earlier ethic, we must now begin to think of “Built to Survive” or “Designed to Adapt”. The world will belong to Adapt-adept organizations and economies.

What will this mean for HR? What kinds of demands will organizations place on the HR function?

Definitely HR will need to play a more strategic function than ever before. It will need to own change readiness and adaptability as a core cultural pillar. It will need to ensure that organizations are more conscious of their destiny and competence. And to do this, the function will need to ensure that talent and leadership measurement and development revolve around dynamic characteristics. It will need to own rapid (yes I mean Rapid) succession and development of talent. And to do all this, the function itself will need to develop an agility never seen before.

How can HR do this. Some simple to conceive but difficult to implement steps that are evident today are:

1. Drastically Reduce operational overhead – Separate the doers from the thinkers. Ensure day-to-day routine functions are passed on to people with an administrative mindset. Payroll, mass-hiring, C&B, Exits etc. can be outsourced or handed over to an HR Operations team that reports into an Operations head.

2. Develop and Invest in specialization: OD, Talent Management, Culture, Leadership Development, Strategy, Systems thinking, Organizational Effectiveness, Lean, Six Sigma. All these are critical for HR to either acquire themselves or to ensure acquisition by key functions that impact cost structures.  Practices like these need to be owned in-house as far as possible and the organization has to recognize that competitive advantage will be drawn from leveraging this kind of thought leadership.

strategy (Photo credit: Sean MacEntee)

3. Become advisors and internal consultants to the CEO/Board. From a service function to a strategic enabling function. HR will achieve this by being diagnostic and advisory in nature. As well as by building the capabilities to drive and implement change. Replicating a consulting structure will make this happen. But more importantly, acquiring the capabilities and skills that will enable them to be seen as thought leaders is what will make the leadership team reach out to the function proactively for support and guidance.

4. Change the performance metric: I have long believed that measuring and rewarding a CEO on P&L is a fallacy. That is the reason the CEO has a job. The CEO has to be held accountable for the future. The CEO has to be held accountable for sustainability. Rewriting performance measures and tweaking reward systems will help drive the behaviours that will lead to greater adaptability for the organization. HR has to take more risk in this area and break away from status quo. Similarly, a Sales Head should not have a large percentage of his KRAs devoted to delivering sales results. Instead his KRAs should focus on building sales-force capability, building sales-force processes that are market-beating etc.

5. Education: Last but most important, none of this will happen in the long-term if the education industry doesn’t recognize the changing needs and demands from the function. Curricula must change. Methodology and content has to be contemporary. Entry criteria have to be stiffer. If an HR head and his key second line are expected to be advisors to the CEO and the leadership team, then the standards of entry to this role, right at the start have to be far stiffer than they currently are. As soon as norms are tightened, the esteem and perceive brand association of the function will change and we will have more serious aspirants opting for the function, versus the present trend of 20% opting and the rest gravitating towards the HR function.

Zetamandel (Photo credit: Arenamontanus)

Essentially, HR must refocus. They must walk away from non-value-adding routine activities  and invest greater time on organization building, developing talent, ensuring structure and culture support strategy. measure success and challenge the leadership.

This is the way forward I see. What do you see? Help add and grow this discussion.

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I am a little fed up with the awards, the constant dialog on the processes and policies that make a Great Place to Work. So I thought I’d just get my voice out there.

First up, I don’t believe what makes one place Great is what makes another place a Great Place to Work. I also believe that what is Great for one person is not for another. Why do I say this?

I remember being in a role a few years ago and I was MISERABLE! There were a few more like me who were miserable. So we quit. One by one. Over a period of about 6 months, all of us had moved on.

However, and this is the KEY; However, there were many others who had been working in that organization for a long many years, who continued to work on and enjoy their jobs. They came in on time, they were well engaged and they added value. They aspired to rise up and one day head that organization. For them, this was a Great Place to Work. For us, it wasn’t.

And that’s where I think organizations get it wrong:

• They participate in surveys that will tell them whether or not they are a Great Place to Work
• Then they look at how far below the leaders they are
• Then they do their best to figure out what the leaders do? aka Best Practices (Read my take on best practices here)
• Then they replicate those Best Practices into their own organization
• And then, not much changes
• I am not surprised

Surveys, by nature of having to be applied across a large cross-section of organizations have no choice but to become cookie-cutters, in that they have to homogenize and come to a few core areas that they can measure and compare across organizations. Nothing wrong with that. But like all cookie-cutters, they leave a lot of things OUT.

Don’t get me wrong, surveys are good. They serve a useful purpose i.e. they help you identify whether or not you meet basic hygeine. Do you disburse salary on time? Are most decisions transparent, objective and balanced? Is the work environment safe and equal. And others. All good areas to know about and to be able to work on.

But surveys stop there. They don’t tell you what’s unique about you. They don’t tell you that while you lose 12.34% people every year, WHY do the remaining errrrrr…. (damn I dug this grave for myself) … 87.66% (YES!!!) continue to cherish and stay!

Here’s what I think organizations should REALLY do if they want to find out whether they are a Great Place to Work. Figure out:

• Which kind of people who work here think we are a Great Place to Work
• Why do they think so? What is it about us that makes us Great?
• Does this align with our Strategy, Vision and Cultural pillars?
• Does it differentiate us from the competition?
• Are there enough people spread across the talent pool who would appreciate a culture like ours?
• How do I find them? How do I let them know I exist?
• What disturbs my people? How do I minimize the irritants?

Now you’re talking. Now you’re being respectful of your unique identity as a complex organism and not something that can be measured and compared on a scale.

In all my life I have never seen people engaged by policies or processes. They are best engaged when they are doing good work, when they are respected, challenged and continuously growing.

There are people who love mercenary cultures; there are others who love directive cultures and, there are those who would shun both. What matters is for an organization to recognize itself, recognize it’s unique identity and strength and then find people who think that is Great. Those people will feel at home.

Go ahead and debate this!

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Fundamentals will stay the same

Talent Management will become more important than ever. Supply-demand gaps will mean it will become a competitive differentiator even more so than before, and will be on the CEOs agenda. Evolved companies already have boards focussing on key talent issues.

Talent Acquisition will become a specialist area

Talent Assessment at recruiting and promotion will become more important than ever and companies will realize the importance of getting the right fit

We will also see more multi-cultural workplaces with talent migration moving the other direction. Indian consulates in Germany, France, USA, China have seen a 100% increase in Indian work visas in the last 3 years. The ability to manage expats, will be a key issue. Government policies will need to be modified.

Analytics will play a greater role – Some companies are already using algorithms to identify which employees are likely to quit. The similar technology will find ways into identifying which employees are likely to click.

Clarity and Communication – Social media will play a large role

2. What are the critical areas that future people strategy will demand with respect to its approach and execution?

Blend of FTE, Outsourced, PTE, Consultants, Project teams – Lego blocks approach- Organizations will be run by a mix of red, blue, green, yellow blocks

Build + Buy – Organizations will invest in partnerships or build internal capability to train and develop future employees. Industry-education partnerships will increase.

I have always held that SCM principles can be applied to people strategy and with the world becoming more dynamic, a lot can be learned from there. JIT, Supply-Demand metrics etc.

Employment contracts will get clearer and more direct

Leadership style will need to be flexible – millenials have high need for freedom and direction/structure – Set the direction/structure and then set them free with broad controls.

In continuation of the above point, the concept of Self Managed Teams (highly prevalent in factories) will make it ways to the white collar corporate world. This will provide the empowerment and freedom that Gen Y wants, and enable organizations to reduce supervisory overhead and build leaner, more empowered structures. This will also energize lower levels of the organization to be more independent, responsible and responsive, leading over time, to better developed leaders for the future.

Emerging markets will see an increasing demand for experienced talent in newer industries which will taper off after about a decade when internal and local pipelines are built – Expat hiring at local costs will become a reality. So the unemployed in the West today have some respite. The next gen will not have this benefit.

Returnees will be challenged. Expats returning to the developed world will find it difficult to settle into 0-1% growth rate scenarios. They will miss the “action”. Returness to emerging markets (from the developed world) will face reverse-culture shock and will find it hard to adjust to the pace, lack of structure and resultant chaos

3. How can organizations optimize the new characteristics of the future workforce/ talent?

Flexible

Love challenges

Are used to moving from project to project

Use them for idea generation

Enjoy working in teams and collaborating – cross-functional teams – breakdown silos

Challenging projects – questioning status quo – driving change

Multi-tasking – Social – Networked – Great Sales professionals – Great Relationship managers

Very driven – if you can find the route to their motivation, you’ve got them hooked and self-driven

Intuitively understand technology, internet, connections, networking

4. What are the top 3 myths about next gen talent entering the workforce today?

That they’re unconcerned and disengaged – They need a different style of leadership and challenge to be engaged

That they are in it only for the money – give them a great role and see them deliver

Want to go up the corporate ladder quickly. A lot of them want to find a space that gives them balance and stay there

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Nelson Mandela (Photo credit: Festival Karsh Ottawa)

The first step to being an effective leader is self awareness. How conscious you are of the leadership you practice, defines how effective you are.

My friend, mentor and leader Karen West says the most fundamental question is: Why do you want to be a leader? What fuels your desire to lead?

If the desire is to give, to add value, to make a difference – you will be one type of leader

If the desire is to compete, win, overthrow – you will be a different type of leader

If the desire is to fulfill your internal needs for social approval, have the good things in life – you will be yet another kind of leader

In reality, there are parts of each one of the above that drive our desires. The key is to be conscious of them, the key is to be aware of which desires can create blind-spots and become derailers. The key also, is to know which ones will fuel joy and success.

A wise man I knew once said, we’re all running in life. Some of us are running towards something we love and value. Others are running away from something we fear or dislike. We are all running, but the quality of the race is very different.

Do you know why you are running?

This is a good time to take a pause, sit back and think about why you want to be a leader.

My list is:

1. I believe I have the ability to provide clarity and direction – even when things are chaotic – I want to be able to help a team navigate through tough times in order to be successful

2. I believe I am able to help individuals harness their strengths and perform to their greatest potential

3. I believe in thinking out of the box and trying things differently and leadership gives me the ability to be able to do that

4. I believe in making a difference to the larger ecosystem that is our society, nation, environment and humankind. Leadership gives me the platform to be able to influence such a direction

5. I get bored by routine and doing the same thing day after day. I believe leadership enables me to have more “play” and influence on doing different things and taking on a variety of challenges

What’s your list?

Leadership is also about agility and being dynamic. The beliefs, styles, skills and attitudes that succeed for you in a particular context will not work all the time. Your ability to learn. To flex. To change. Will define sustainable success.

This is another good point to pause, and reflect on how you have changed in the last 10 years. An equally important question you must ask yourself is: What am I continuing to do that is either irrelevant or is not adding value, and I must change?

To paraphrase Jim Collins: Great leaders look to the window to shower praise and look to the mirror to find fault.

So what kind of leader do you want to be? Why? How are you going to make it happen? What do you need to change, starting now?

Become self-aware. Be more conscious of who you want to be and who you are being. And you will be on your way. Enjoy the race!

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• Leadership~continually improving skills

English: Signature of Mahatma Gandhi. (Photo credit: Wikipedia)

You can’t learn swimming in a classroom. A powerpoint presentation won’t teach you how to ride a bicycle. Getting “coached” on how to bake an apple pie won’t complete the learning.

Leadership, is a practice.

It is something you do. It is something that is experienced and felt by others. Leadership is an expression of your life-experiences and the values and beliefs you have developed as a result of those experiences.

I believe organizations are wasting a lot of time, energy and money on sending batch after batch of leaders to workshops. Leadership Workshops will NOT build skill. They serve a purpose and the purpose is:

• Building perspective
• Building knowledge
• Introducing a concept

So how do you do it? How do you build great leaders? 

Skill-building always has been and will be an outcome of practice and experience. Create experiences and situations that test their skills and raise the difficulty levels of the challenge from time to time.

Some ways you can do this are:

1. Job rotation: This does not mean some namby pamby name change for the role or a 1 degree change that the individual will hardly notice. A job change that challenges skills that have not yet been tested is the most appropriate way to do this.

2. Location change: Managing a team in NY is very different from managing a team in Cincinnati. As is the difference between leading people in North India versus South India, or Shanghai versus Singapore.

3. Situation change: Running a sales outfit in an area where you have leading market-share is very different from running a sales outfit in a region where you are the slacker

4. People Challenge: Get them to lead a team of youngsters. Freshers. Folks who’re older than them. Mixed groups. Cross-functional teams. Each one will develop new skills

Regional Leadership Forum (Photo credit: Wikipedia)

5. Context change: Manage a start-up business/project. Lead a turnaround situation. Lead a high growth, rapid ramp-up situation. New territory expansion. New product category.

6. Business change: Manage a not-for-profit

Through each assignment, monitor how the individuals are handling people, decisions, analytics, relationships, intuition, growth, resolution. Elicit in partnership with them, the values and beliefs that seem to be driving their choices and behaviours. Develop high levels of self-awareness, reflection, critical thinking and insight. These are long-term differentiators of great leaders.

Don’t molly-coddle. Allow failures. Ensure that challenges are real and steep. Dealing with failures will build both, Resilience (ability to learn and bounce-back) and Humility.

Appoint mentors/coaches who will hand-hold them through the transitions, so that you enable a support structure that fosters success (instead of a sink or swim). The benefits of Transition Coaching are manifold and derisk leadership transitions for organizations.

Not only will the above process develop leaders, it will also bring a new pair of eyes to a lot of roles and throw up things that will benefit the organization as whole. It will raise the levels of engagement and challenge at work thereby increasing retention. Of course, it will derisk the leadership pipeline and succession significantly.

Don’t delay. Pick a cohort. Even if it is just 4 people. Get the sign off from the CEO, and put this into action. At least 2 of the 4 will make it for sure.

Read the IBM interview down below and discover how IBM is reaping multiple value from following a similar process.

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Exactly a year ago, I had written a blogpost (CEO HR) on how the skills of a CEO are ideally suited to lead the HR function, especially in organizations that require a transformation of the HR function. I had argued that retiring CEOs should be given this charge and that they would add tremendous value. A few days ago, Les Hayman left a comment on that post about how he had been asked to take up the Global HR Head role at SAP when he was about to retire as CEO/Chairman SAP EMEA. I requested Les to share his journey and experiences with us and he immediately agreed. This is a Guest Post by Les. I am deeply grateful to him for taking the time to share his story. Read on…and be inspired!

After 35+ years of working in IT, mainly in management roles, when I finally tried to retire from large corporate life in 2003 I was asked to postpone my retirement and instead to take responsibility for HR at SAP.

It was an unusual move for me as my career had followed fairly traditional business lines, initially as a programmer, systems analyst and CIO. Then, apart from a 4 year stint in my own software business curtailed by a bout with cancer, I had moved to the vendor side of the industry in various national and global management roles, in companies such as Digital Equipment, Sun Microsystems, and finally SAP where through 1994-2003 I had been President/CEO of both Asia Pacific and also EMEA Regions.

I had been appointed to the SAP global board in 1999 and I believe that being asked to take the HR role may have had more to do with the board’s disappointment with previous global heads of HR, and the fact that I was a known quantity, rather than any serious belief that I was the right person for the job. It was sold to me based on the fact that I had shown a greater people focus than had other board members, and it was felt that the head of HR should be on the board anyway.

I took the role however because I believed I could make a difference. As CEO Asia Pacific I had driven HR initiatives that I considered critical to business success, and that I considered to be the role of the CEO anyway, such as management development programmes, mentoring, performance reviews, succession planning, and had moved these across to SAP EMEA when I moved, and I felt that I could globalise these programmes for the benefit of SAP.

It was the toughest assignment I could have given myself towards the end of my career.

When I had been running a business region and presented my business report at the monthly board meetings in Germany, I had the attention of all the board members. Now when I presented HR issues at the board meetings half the board members would be checking their emails. I realised that it would not be an easy task and started to understand some of the barriers that had been faced by previous heads of HR, who did not even have the benefit of a seat on the SAP board.

I started by reviewing what projects were currently underway in HR by having project owners come in a and present to me for 10 minutes each what it was that they were working on, and what impact they believed it would have on the business. We then met with all the board members and some senior business heads to determine their pain points. When we merged the two inputs we realised that more than 2/3 of what HR was working on were “nice to have” or ”interesting to have”, rather than things that were critical to company success, so we scrapped those, added some new ones and began to focus the HR organisation on helping to solve the business issues.

I had long believed that a critical element of business success is the ability to have the right people in the right roles, and yet most managers are not very good either at promotion or recruitment (see http://leshayman.wordpress.com/2011/12/12/why-are-so-many-managers-so-bad-at-recruiting/ ), so we put major effort into upskilling managers in these areas beyond using “gut feel” as the major selection criteria. It is critical that you build a pool of recognised, well developed and prepared talent for the organisation, and that you identify and build future leadership. It is not an easy task but is critical, and most companies handle “hi potential” programmes badly. (see http://leshayman.wordpress.com/2010/07/26/congratulations-%e2%80%a6-you%e2%80%99re-a-high-potential-%e2%80%a6-here-is-your-tattoo/ ). 

I also quickly realised that the majority of HR people spent a large amount of their time on admin tasks, rather than partnering and supporting the business units, so we built a shared service centre in Prague to remove as much as possible of the admin load and reorganised the HR organisation to more closely align with the business leaders.

Was I successful In changing the culture to see HR more clearly as a strategic partner and an asset to the business?

I think that in hindsight it changed me more than I changed SAP, and the lessons I learned have helped me in the board, coaching, teaching and consulting roles that I am now involved in.

How should I have measured my success ?

After I stepped out of the role in 2005 to go part time as the ”SAP Ambassador” for a year before retiring from SAP in June 2006, another board member took responsibility for HR for 2 years before the new board decided to bring in an HR professional onto the board, who unfortunately only lasted a year. Since then the CFO has been also responsible for HR.

This does point to the fact that maybe my success was limited in that I have always believed in the idea of a lasting legacy as a key success measurement.

I did however learn some real lessons:

• Ultimately business success is not about products and/or services, it is all only about people, and people are the only true long term sustainable competitive advantage
• People join companies but leave managers so skill/capability of managers is critical to business success. Make sure that people development and growth is done well.
• Don’t try and turn HR people into business people. The young smart people I sent to MBA schools all left HR as soon as they finished. Make sure HR people do understand what the company does, why they do it, and how it is done.
•  HR must transition from polite to police to partner to player to succeed. A partner helps to implement a strategy whereas a player helps to build the strategy. Big difference (see http://leshayman.wordpress.com/2010/08/26/hr-polite-to-police-to-partner-to-player/ )
•  Give “Police” functions to F&A. They love policing functions as it is in their DNA and HR should not be seen as “getting in the way”.
• Admin side has to be perfect ….things like Payroll, onboarding, transfers, data management etc etc must work like clockwork before one can focus on being a partner or a player.
• Make managers responsible for their people … recruitment, talent and performance management, succession planning are management (not HR) issues, but HR must ensure that management have the tools, which must be easy to use, and that HR can then facilitate, advise, support.
• Disregard HR “projects du jour” … Engagement one year, succession next, performance reviews next etc., Focus specifically on what is hurting the business and disregard what the hR magazines tell you is this year’s area of focus.
• Business changes too quickly to allow projects that take more than 12 months to complete. Most should be kept under 3-6 months to show results. They can then be adjusted and enhanced as needed over time.
• One must invoke 70/20/10 rule for people development … 10% training, 20% mentoring/coaching and 70% on the job learning. Just sending everyone on 2 weeks training each year, as many companies do for example, is just a cop-out and doesn’t achieve much
• Driving behaviour through engagement, passion, culture (“the way we do things”) and values works better than through Policies and Procedures
• Driving innovation needs more than smart, well educated people, it also needs a culture that enables innovation to flourish and HR has a pivotal role to play in helping create this. (see http://leshayman.wordpress.com/2010/10/04/hr-%e2%80%a6-what%e2%80%99s-hr-got-to-do-with-innovation-isn%e2%80%99t-that-rd/ )

Les Hayman

Blog: http://leshayman.wordpress.com/

Twitter: http://twitter.com/#!/LesHayman

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Do they invest in building the business or do they invest in building the organization? 

In order to avoid any misconception, let me clarify the terms I am using:

Building the business would mean growing topline, adding capacities, growing into new markets, strengthening domestic and other established markets, growing upstream and downstream across the entire value-chain of the business, strengthening the higher bottomline generating portfolios and generating future product/service lines. This would include both organic and inorganic strategies.

Building the organization would mean investing in IT infrastructure, building a technology enabled backbone across key processes and functions, investing in talent, building the right culture, raising quality standards for manufacturing and work environment, investing in and raising the levels of HSE (Health, Safety and Environment) and investing in CSR.

To many theorists, academicians and indeed even consultants, it may not appear to be an Either/Or choice and yet for some key reasons, for the specific group of entrepreneurs described above, it is. And we could go seriously wrong in meeting their needs, if we did not understand this challenge.

The situation is very different for mature organizations. Especially the ones in the developed world. They are resigned to far lower bottomlines, most in the lower single digits. They have deep pockets. They have established organizational processes and investing in organization building is factored into their cost and budget principles. Employees have excellent facilities, policies that provide comfort, technology enablement is near 80% or more, staffing is appropriate to size of business, talent is invested in and there is significant budget for quality and HSE.

Compare this to the group I am writing about, and you will find minimal investment in people, shortcuts to HSE are rampant, CSR is a formality in most cases, put in place to please partners who insist on it, while key IT investments are made in risk management and control, all other facets of IT enablement are below par. Employees in these organizations, as a result enjoy far less work-life balance, work in a culture that is not attuned to supporting their needs in balance to the needs of the organization, have thin leadership at the top and middle and everyone is paying a price.

It is no surprise that these organizations struggle to hire and retain talent. The Employer Brand proposition, compared to a more mature organization is extremely weak. The absence of process orientation creates many inefficiencies in the system, and there is many a slip between the cup and the lip. Running these organizations at these scales has become unwieldy and there are not enough hours in the entrepreneurs day, to run them.

These entrepreneurs are not blind. They see this. They know they need to change. So why then, does this become an either/or choice for them?

Most, if not all, such entrepreneurs have plans of doubling and tripling their topline over 3 and 7 years horizons. Given their highly disruptive growth rates (most of them would have grown to such size in a period of 7-15 years), they would not have deep pockets. As a result, the key need for every one of them, is ready access to capital. 

Given their expansion plans and the level of investments required, debt is too expensive, and most of them have balance sheets that will not sustain more debt. The only two resources available to them, for capital then, are the capital markets or PE infusions. In either case, they have to show healthy bottomlines, that are attractive enough to investors over other investment choices. And this is where the Catch22 comes in. The primary need then, is to protect the 15+% bottomlines they have been able to manage over the last decade. It is this level of appreciation that encourages the market or the PE players to invest in these companies.

So if you were to look inside the minds of any of these entrepreneurs, you would find that they have a critical appreciation of the need to invest in organization building. Indeed their organizations operate at lower efficiencies without such investment. But each $ channeled into this activity will reduce the profits they are able to demonstrate in a short-term horizon of about 3-5 years, till these investments begin to bear fruit. Each $ invested internally will go towards reducing the profitability %ages that are essential for them to maintain in order to keep the capital markets and PE investors coming back to them for more.

This Catch22 is what is keeping these entrepreneurs awake. In the real world, the choice they make is simple: Grow the business. We will deal with the organization later. Garner as much funding as possible today, and we will figure out how to invest in organization building at a later stage.

So what can be done?

Investors need to balance between long-term and short-term compromises. They need to clearly chart out strategies that enable organization building that keeps pace with business growth. It is no surprise that these organizations are constantly playing a catch-up game that focuses on building the organization as a follow-up to building the business. This is unhealthy. But without the investment community realizing this, and supporting both the needs, we will lose far more than we will gain.

CEOs of today are slave to the quarterly reporting and most of their strategic decisions are designed around the next quarter. It is no wonder then that we have seen a rapid dilution of ethics, and long-term focus in the last 2 decades across the corporate world.

I believe the man who controls the purse strings and key decisions needs to stop idolizing Gordon Gekko aka “Greed is good” and needs to go back to Aesop and learn from the fable of The Goose that Laid the Golden Eggs.

Delayed gratification. Sowing for the future. Reinvigorating the soil. Are all virtues we need to rediscover. The Gordon Gekko’s of the world don’t need to think long-term, but leaders who are building businesses that will outlast them, have only the long term to think about.

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Gordon Gekko: The point is ladies and gentlemen that greed, for lack of a better word, is good.
Gordon Gekko: The point is ladies and gentlemen that greed, for lack of a better word, is good.

Reason-C++ (Photo credit: Wikipedia)

I am not a believer in the “Let’s get it right the FIRST TIME” philosophy. I find it too constricting. I believe it forces us to dumb down and not take risks. It makes us operate from too much fear and concern. And on the whole it’s a very boring way to live right. How can you get things right the first time everytime? What fun would life be if we could REALLY do that!

And yet, here I am, advocating the principle! One I hate!

There’s a reason. And, in this case, it’s vital.

As Professor Ranjan Das of IIM Calcutta, so assertively taught me, great companies are great not because they have great infrastructure or great processes or great machines. They are great because they have great people working for them!

Our usual comments are “That company had a lousy strategy so it failed.” Not true. THAT company had a leadership team which was unable to out-strategize it’s competitors. THAT’s the fact.

When a company has better products or brands than the others, its because the people who work there are better or more empowered than the ones who work for the others. THAT’s the truth!

So fundamentally, the key to market-leadership is to ensure your CEO is better than their’s. That your CMO is better than their’s. That your Manufacturing Head is better than their’s.

And that’s why, one of THE MOST IMPORTANT roles a board or CEO needs to play is to ensure they get the RIGHT PEOPLE on the bus. And this is a significant responsibility, since the potential losses of wrong selection could be huge.

Given that a senior C-level professional takes about 90 days’ notice to join, another 90-120 to fully settle down, that’s 6 months’ waiting minimum. And then if this individual were to make a mistake or influence a course deviation that was not in the interests of the organization, the potential losses would be significant. Let’s not take such a jaundiced view. Let’s say this executive is unable to settle and quits after 6 months, well you’ve just lost about 12 months’ output from the role. And in that much time, these days, a competitor can race ahead.

So how do you DERISK this concern?

Evolved companies all over the world are now ensuring that they put senior candidates through a more formal assessment than just the interviews they conduct. Let’s face it, interviews will assess experience, past success and ability. They do not provide any assessment of whether or not this individual will succeed in your unique context.

They use consulting firms that specialize in deeper assessment in order to assess cultural fit. The consultants are able to provide a deeper perspective on whether or not the candidate will succeed in the specific context of this organization, irrespective of past experience, domain knowledge and competencies. This kind of information is invaluable to an organization and can improve the percentage of successful leadership transitions. It also derisks the organization from a potential losses.

For more on this subject, read Great People Decisions: Why They Matter So Much, Why They are So Hard, and How You Can Master Them by Claudio Fernández-Aráoz

PE/VC firms are waking up to this too. They have realized that Human Capital is as important as Financial Capital. They now realize that they need to focus on the following:

1. Prepare the organizational fabric so that value contribution continues even after the founding team exit

Organization Triangle (Photo credit: Wikipedia)

2. Develop a talent pipeline below the founding team, so that there is a firm line of succession in place

3. Ensure that the powerful facets of the founding culture are retained, while at the same time introducing longer term survival facets of cost-consciousness, innovation, process orientation, and managing scale and complexity

There is however a long way to go for them, since PE/VC firms continue to be impatient, and organization building is like preparing a child for adulthood – it takes time!

How does you organization ensure that key leadership candidates are not viewed with just one lens? How does your organization ensure that you prepare Arrival Leaders i.e. leaders who are consciously developed for the future job they will inherit? How does your organization ensure that you prepare for an Arrival Culture?

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