27th february 2019 BUSINESS STANDARD
(*The writer is a corporate advisor and Distinguished Professor of IIT Kharagpur. His new book titled “CRASH: lessons from the rise and exit of CEOs”, has just been published by Penguin Random House.
The narratives of super ego and toxic behavior among CEOs of large companies are disturbing and increasingly prominent. They have a pattern. After ascent, the CEO is powerful, power damages the brain, and the CEO’s behavior changes visibly. What people see is loss of empathy, arrogance, poor treatment of people, and inability to listen. I refer to these as de-railers in my book, CRASH: lessons from the rise and exit of CEOs, published by Penguin. The de-railers become the sword on which several CEOs fall. The CEO’s downfall become ‘breaking-news’ for the media, for example, Thomas Middelhof in Germany, Martin Sorrell in Britain, Carlos Ghosn in Japan, and many in India.
It should not be assumed that power-induced brain damage applies only to CEOs of large companies. Founders and funders of startups are equally prone to this fatal affliction. Startups argue that they don’t have the resources to monitor their adherence to numerous regulations and observing the codes of conduct. Obnoxious leadership behavior and absence of work culture need to be extinguished with the same dispatch as in large companies.
Just two years ago, we witnessed the behavioral volatility of the key founder of Housing.com. He became abusive with the funders of his venture; he played a pampered kid, who had gone berserk; the board had to dismiss him into anonymity. Paytm is portrayed as a successful startup because the company has ratcheted up well over 100 million customers in a short time. Many could argue that, with losses of several thousand crores each year, it can hardly qualify yet as a successful company. From a purely behavioral point of view, watch the rousing, but foul, celebratory speech of the founder to the 4,500 employees at a company party in 2017, after demonetization (https://www.youtube.com/watch?v=0NvxdNodWDg). Judging by this evidence—admittedly a bit unfair–the soundness of the company leadership may well be an accident waiting to happen.
Startup Land is thought to provide the cool, better-behaved digital corporation of the future compared to the greedy, larger-than-life robber baron company of yester year. Such a new company is thought to have a culture of being open, creative, having engaged employees and solving the major consumer problems. The evidence for this perception is variable.
The older Silicon Valley ventures like Google and Facebook did attract great adulation during their runup to maturity; quite unexpectedly, they now attract social criticism and opprobrium. Jessica Powell’s satirical novel, The Big Disruption, says a lot. The behaviors of founders of companies like Juicero, Zenefits and Theranos have managed to shake up non-expert observers, who have been bewildered about how reputed VCs and family offices bought into ill-conceived or even fraudulent ideas, resulting in billions of dollars evaporating right under their nose. Reid Hoffman, LinkedIn co-founder, has said that rapidly scaling companies need ‘responsible blitzscaling’ in the book he has co-authored with Chris Yeh, Blitzscaling.
In India, some commentators think that Startup Land holds the key to the national issue of unemployment. The background and skills of those who need jobs contrasts with the atmosphere of startups like the ecommerce ones. The most admired e-commerce startups have modelled themselves on the rambo ‘spend now, profits will follow’ model. The jury is out about likelihood of success, but that is entrepreneurship, isn’t it? World Wide Web founder, Tim Berners-Lee, had warned, “Humanity connected by technology is functioning in a dystopian way…online abuse, prejudice, bias….”
Entrepreneurs have no choice but to shake a leg on the entrepreneurial dance floor, hoping that the music and their dance steps will match at some point. Bill Gross, startup entrepreneur and venture capitalist, analyzed all the investments of his funds to determine the hierarchy of success factors. He found that timing is the most important success factor, not the idea, the team or the founder (https://youtu.be/bNpx7gpSqbY).
While startup founders are tapping their feet on the dance floor, waiting for the right music, they should remember that good leadership behavior and company culture in startups are just as important as in grownup companies. Indian founders are a younger and more immature bunch compared to USA. With a fulsome media fawning on startup leaders, Indian founders are exposed to a dangerous combination of de-railers.