‘Transforming organizations’: a series in New Indian Express.

Transformation after liberalization: Tata   

R Gopalakrishnan* 

(*The writer’s latest book title, “Pivots for Career Success—unleashing people power”, coauthored with R Srinivasan, has just been published. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever). 

Email: rgopal@themindworks.me

In the last three columns, I reviewed the immediate and the after-response of Hindustan Unilever to liberalization, as also the immediate response of Tata. Here is the after-response of Tata.

The Tata group seized the opportunities presented by the reforms and embarked on a remarkable journey that has transformed it into a vibrant and global business house. Tata executed a program of transformation after liberalization through four ‘welding’ mechanisms:

• The setting up of the Group Executive Office, GEO.
• The setting up of a common, unified brand
• An explicit code of conduct, which had been implicit all the earlier years
• A set of operating requirements for companies that used the brand

The group increased ownership in the major companies and re-established Tata Sons as the focal point of the group, an opposite action to what JRD Tata had done earlier to comply with the MRTP legislation. Where increase of shareholding was not possible, as in the case of Associated Cement Company, Tata shareholding was sold. 

Some group companies were divested from Tata. There were multiple companies in the same market space, and, over time, attempts were made to rationalize them. Public sector company CMC Ltd was acquired by TCS and later merged into Tata Consultancy. 

The serial mention of these moves does not mean that the decisions were easily accepted. Each one required a de novo debate with directors of different boards, each one was perceived at the time to be a ‘non-Tata way’ of solving a problem, and there followed a sequence of cajoling, determination, and grit while implementing. 

The external impression was that Tata was less nimble than others, more resistant to change and extremely set in its ways. Unless Tata companies were bench-marked against the brightest and the best, the probability of change was going to be low. Ratan Tata observed candidly, “We have yet to seek excellence in all that we do. We hang a picture slightly crooked and live with it for ten years; this should bother us the first time we see it and keep on bothering us until it is set right.”

The Tata group adopted the Tata Business Excellence Model (TBEM), based on the quality improvement framework developed for the Malcolm Baldrige National Quality Awards. In February 1995, the first batch of assessors met at the Tata Management Training Centre for in-depth training on the Baldrige model. They assessed twelve Tata companies, and the average score was an abysmal 215 out of a maximum score of 1,000 (now, the major Tata companies have crossed 600). The journey was to be long, painful, exhausting, but rewarding.

The first winner of the JRD Quality Values Award for performance within the TBEM framework, was Tata Steel in 2000. The company went on to win the Deming Prize in 2008, and then the coveted Grand Deming Prize in 2012. Indeed, TBEM set the tone and created the foundation for a critical transformational exercise in the group. It has also been the glue in binding the group together and enhancing the Tata brand. The opening up of the economy, the removal of unnecessary restrictions relating to investments and the relaxation in foreign exchange rules created new capabilities within Tata companies. 

Two are particularly worth mentioning. The first is the dramatic restructuring undertaken by Tata Steel during the 1990s. Within a decade Tata Steel had been transformed by downsizing the workforce to less than half of its starting size. The plan was implemented with empathy and humaneness, symbolic of how to do disagreeable things in an agreeable way. The plants were modernized with new technologies and a management mindset was instilled, one which could dream and execute big transformations. 

The second was to press ahead with a Tata Consultancy Services (TCS) IPO. This set free an aggressive TCS, then ranked beyond 30th rank among global I.T. players in 2000, to break into the top 10 globally. The company had worked with Professor Pankaj Ghemawat but, in a sense, stumbled onto this audacious goal through its internal brainstorming. The company set about its task through a huge organizational transformation to help its people think globally about customers, work processes and quality. 

Had MRTP continued, Tata could not have implemented its TBEM or the Code of Conduct. The adherence of Tata companies to both the TBEM process and the Tata Code of Conduct was permanently enshrined in the Brand Equity and Business Promotion Agreement. Each Tata company subscribed to this agreement in order to secure the right to use the Tata brand. This played an immense role in presenting to the world Tata products and services that stand for performance and trust. Beginning with Tata Tea’s acquisition of Tetley in 2000, the group made several significant overseas acquisitions.

This eventually led to the formation of the Tata Group Innovation Forum in 2007, and the celebration of the group’s pioneering instincts through annual Tata Innovista Awards. The group’s increasing number of patent applications reflected the rapid progress that the group was making. 

The unshackling of the Indian economy led to dramatic changes within the group, though its core ethos and emphasis on ethical business practices and its commitment to the communities in which it operates did not change. The journey since the reforms process began has been exciting for the Tata group, which has rejuvenated existing businesses, entered new ones, aggressively expanded in the overseas markets, and launched breakthrough products. The companies in the Tata group are now building Brand India across the globe. 

The post Transformation after liberalization: Tata    appeared first on The MindWorks.

To appear on 6-1-22

‘Transforming organizations’: a series in New Indian Express.

When the CEO really matters    

R Gopalakrishnan* 

(*The writer’s latest book title, “Pivots for Career Success—unleashing people power”, coauthored with R Srinivasan, has just been published. He was Director of Tata Sons and Vice Chairman of Hindustan Unilever). 

Email: rgopal@themindworks.me

The short answer is ‘matters a lot’, if the chosen leader is unfiltered, and ‘matters a tad less’, if the chosen leader is a product of fine filtration.

Over the last eighteen columns, I have written about vital and relevant aspects concerning organizational transformation and institution building, both of which are driven by three imperatives, one, the pace of change in the company’s industry; two, how urgent it is for the organization to respond; and three, the choice of the leader who has to implement the transformation program. 

Does the company need major organizational change? If yes, how does the board identify the ideal leader who can successfully supervise to make the transition? Does an individual leader matter at all, or is it the organizational momentum and history that determines outcomes? Do circumstances create individual leaders or do individual leaders make their own circumstances? Answers to these questions define who is an unfiltered or filtered leader.

Lately I have been reading several books on leadership talent. The Rare Find by George Anders was on talent in sports, and how exceptional talent makes a dramatic difference. The book has anecdotes on how coaches wagered successfully on a player despite contrarian indicators. The Master by Christopher Clarey is the ‘official’ biography of tennis star, Roger Federer. It describes episodes when several talent spotters decided to back Federer despite doubts on whether he was a top-class, exceptional tennis player. 

However, for determining leadership in a company, how can a board decide who might make an exceptional leader? Indispensable, by Prof Gautam Mukunda of HBS, is enlightening. The contents resonate with my own experiences in Unilever and Tata. What does Prof Mukunda narrate from his research?

There are companies that practice a well-honed LFS, which stands for “Leadership Filtration System”. For example, HUL has an explicit process to identify talent and groom managers for future roles of leadership. No wonder HUL churns out leaders so frequently. Its system filters out the odd ball, seemingly eccentric manager. After a fruitful service record in the organization, candidates for the top job emerge. 

Filtered leaders tend to resemble each other. Obviously, they are not identical, even though they have passed through the same filters.  Recall how in 1981, Reginald Jones, GE Chairman, selected his successor when Jack Welch was selected. Or 2002, when Jack Welch set up a process to select Jeff Immelt from internal candidates. From an external perspective, it could be argued that it really did not matter which of the internal candidates was selected because they all had the potential to be equally successful CEOs. 

In HUL, from an outsider’s perspective, Prakash Tandon was selected in preference to Kalyan Sunder Basu, or Ashok Ganguly over Susim Datta. There were obviously good reasons for the selections. But to be fair, either of the aspirers, could have done a correspondingly top-class job. In short, LFS candidates, according to Prof Mukunda, tend to be interchangeable. They represent the median of the talent pool in a company, where the median is quite rich because of the efficiency of the filtration system.

The HUL patten though is an exception in corporate India. Indeed, even in HUL, T Thomas could be considered as an unfiltered leader, because for some years in between, he had left to join his family company. At a senior level, he arguably escaped the rigorous LFS of HUL. When Thomas was recruited back by HUL, perhaps it was because he was a lateral thinker with different ideas. The condition of HUL at the time of his selection as chairman was life-threatening. A major portion of the company portfolio was under severe price controls; the government wanted to reduce foreign shareholding to 40% or less; worker unions were very militant. Such external circumstances made it imperative to identify a leader with unconventional ideas, which Thomas had in plenty. Thomas was a very successful CEO. He could be thought to be an unfiltered leader.

In the year 2005, the Unilever global board desired a dramatic change in the global organization’s unwieldy structure. For the first time, Unilever recruited an external CEO in Paul Polman, who turned out to be an unqualified success.

In Tata, talent management was within the domain of individual Tata companies. Tata Steel, Tata Consultancy and Titan have a well-developed talent filtration system; for many decades, managers advanced from among those who had passed through the internal filtration system. Long-time insiders become potential candidates for the top job, and, finally, one was selected from among very close candidates. 

This was not so when it came to the group. Group leaders changed rarely. When JRD Tata appointed his successor in 1991 after fifty-two years of his own chairmanship, Ratan Tata became the fifth chairman in 120 years. There was no rigorous system of internal talent filtration at the group level. Anyway, changes in group leadership were rare. Almost every appointment involved selection of an unfiltered leader, including the appointment of JRD himself in 1939, followed by the choice in the 1970s, of Minoo Mody from AF Ferguson as the first CEO of Tata Sons. 

I feel confident that when I was appointed in 1998 as an executive director of Tata Sons, I was perceived as an unfiltered leader in the group, though Ishaat Hussain must have been seen as a filtered executive director. Ratan Tata’s successor, Cyrus Mistry, was clearly an unfiltered leader within the Tata group. That succession did not end well. Chandra is far more a product of the intensive TCS LFS. 

In future articles, I propose to explore whether any rules can be set on the slippery subject of CEO selection. These rules can be applied and tested: in other private sector companies, in PSUs, in family businesses, and even in political institutions.

The post When the CEO really matters     appeared first on The MindWorks.

Can a professional CEO be entrepreneurial? And the converse?
By R. Gopalakrishnan*

(rgopal@themindworks.me)
(The writer is a bestselling author and corporate advisor. His latest book, “Pivots for career success: unleashing people power,” has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.)

India Inc needs many more entrepreneurial and professional CEOs. It is not a ‘this or that’ framework.

Legend has it that choosing the right CEO counts among the board’s most critical roles. Succession planning is a subject that is forever in the air—at startups, family businesses, PSUs, and at some of India’s biggest listed companies. There are those who favor ‘promoter-CEO’ appointments; equally, there are those who subscribe to ‘professional-CEO’ narratives. Both are deficient because they are slaves to a single narrative. Questions that arise are complex and intertwined:

• Who is better as a CEO, a family member or a professional?
• Are family members and professionals different?
• Should an internal candidate take the top job?
• When is it better to explore outside candidates?
• With a professional CEO at the helm, who will be in charge—majority shareholder or the CEO?
• Can the majority shareholder exercise influence and control after yielding autonomy to the CEO?

These are some of the questions that boards wrestle with. In this article, I propose to explore the nuances of a promoter CEO and a professional CEO.

Many founders and families believe that professionals lack skin in the game, and, therefore, don’t have the stomach to take long-term bets. They believe that professionals take a Q-Q view, whereas founders and families take big bets. This is partial truth.

As opposed to this narrative, many professionals believe that founders and families don’t adequately respect process and governance norms; that they are more motivated by personal gain for themselves. This is also a partial truth.

With such a mental demarcation, boards get one or the other because, in their minds, the circles representing promoter and professional CEO have no overlap. This is not a correct mental model.

I can think of promoter family members who are solidly professional in terms of their education, career, and management approach. Mukesh Ambani is both—as solidly entrepreneurial as professional. So also with Rajiv Bajaj, Rishad Premji, and Pavan Munjal. Further, there are promoters who have made explicit that their successor is either already from outside the family or will not be one necessarily in the future—for example, Anand Mahindra at M&M, Harsh Mariwala at Marico, and Uday Kotak at Kotak Mahindra Bank.

Conversely, there are professionals who are very entrepreneurial and take long-term bets. Think of Dr. DV Kapur at NTPC, or V Krishnamurthy at BHEL amongst PSUs as examples. Recall Darbari Seth of Tata Chemicals or Sumant Moolgaokar at Telco. Consider Anil Naik at L&T, who mounted an entrepreneurial defense of L&T when a takeover was attempted; through his Project Lakshya, Naik decoded the levers of change required to improve his company’s market value. Recall the spirited defense of Hindustan Lever, with a clear eye on the long-term, by T. Thomas and Ashok Ganguly, to retain Unilever shareholding, and diversifying into nationally desired sectors like fine chemicals, fertilizers, and exports. Consider Ajit Narayan Haksar, who as early as the 1970s, diversified ITC into hotels, paper, and agribusiness, with his eye on reducing the company’s dependence on tobacco. His successors, J.N. Sapru and K.L. Chugh, continued to develop an entrepreneurial, professional culture. Even Yogi Deveshwar began his term similarly, but, according to some, he became more promoter than professional in the later part of his term.

Thus, India Inc has experience of entrepreneurial, management professionals—not common, but known to perform well. Any of the names mentioned above belongs right there, irrespective of origins as a professional or promoter. The truth is that India Inc needs many more entrepreneurial, professional CEOs. It is not a ‘this or that’ framework.

Some commentators on India Inc seem to be obsessed with the idea of ‘control.’ Control of the affairs of the company? It is the executive management and the board that is in control. It is neither the CEO nor the majority shareholder, though, undoubtedly, they have considerable influence.

Of the 6,000 listed companies in the stock exchange, ten companies account for 90% of the profits. The top companies by market capitalization are all led by entrepreneurial, professional CEOs—Reliance, TCS, HDFC Bank, Infosys, HUL, ICICI Bank, HDFC Ltd, Bajaj Finance, SBI, Bharti Airtel, Wipro, Kotak Mahindra Bank, HCL Technologies, Asian Paints. Not one of them has a “stodgy, resistant-to-change professional” as the image of the professional is thought to be; equally, none has the “fanciful, buccaneer entrepreneur.” On the flip side, review the top NPA companies in 2020—Gitanjali Gems, Kingfisher Airlines, ABG Shipyard, Rei Agro, Winsome Diamonds—all strongly promoter-led.

In future columns, I hope to touch upon the making of the entrepreneurial professional leader—based on my experiences at Unilever and Tata, as also as an independent director of several listed companies in India and abroad.

The post Can a professional CEO be entrepreneurial? And the converse? appeared first on The MindWorks.

To appear 9-2-22 

Psychopathic founders need an ‘Asoka moment.’ 

(rgopal@themindworks.me)

(*The writer is a bestselling author and corporate advisor. His latest book, Pivots for Career Success: Unleashing People Power, has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.)

There are disturbing company reports of pathologically destructive leadership behavior—poor governance, discernible fudging, intemperate language, overweening ambition, perpetually boastful talk and so on. To my simple mind, psychopathic is like behaving in a toxic, megalomaniac or narcissistic manner.

Not every founder’s behavior is psychopathic, but as the cases keep coming, one wonders whether founder-CEOs are prone to this malaise—for example, BharatPe, PayTM, and Zee. Other examples have been Rotomac Pens, Pan Parag, RDAG, Kingfisher, Gitanjali Gems, Café Coffee Day, and Housing.com. Sometimes, the funders drive the founder into psychopathy.

During my career, I served as non-executive director of a start-up company with a founder as MD. It took the board seven long years to be convinced that the founder-CEO was a psychopath with hallucinations about who he was and what he was worth. It took the board another three years to ease him out since they desired no public controversy. I learnt a lesson about the tenure of founder-CEOs: if in doubt, pull the trigger sooner rather than too late, quite the opposite of the view of many founder-CEOs.

The drumbeats around the Indian start-up sector are loud and deafening. Every senior government official lauds the emerging ecosystem and the response through Start-up India. According to a recent NASSCOM-Zinnov report, between 2011 and 2021, India added 25,000 start-ups; 2,250 in the last year when India attracted USD 24 billion of equity investments. 6 lakhs direct and 34 lakhs indirect jobs were created by such enterprises. This array of statistics is overwhelming. 

Silicon Valley has its share of psychopaths. In 2020, Maelle Gavet, a veteran of the tech industry, wrote a riveting book, Trampled by Unicorns: big tech’s empathy problem and how to fix it. The book offers an account of the world’s tech start-up—Amazon, Google, Facebook, Twitter, WeWork, Tesla, Airbnb, Uber, not to forget Theranos. 

Big tech has progressed humanity’s most noble pursuits but has to grapple with destructive empathy deficit. Gavet says, “We need tech, but a more empathetic tech.” She quotes research by FBI that companies managed by psychopaths tend to decrease productivity and create low employee morale. Gavet argues that psychopathic leaders’ behavior trickles down and creates psychopathic companies by nurturing an “infantilized culture”, where employees become accustomed to working in “hyper-privileged bubbles in which their every whim is catered to and every need anticipated.” Her view about Steve Jobs, whom many founders try to emulate, is that his legacy has “cultivated an indelible association between being a jerk and a genius.” The 2011 Walter Isaacson biography and the 2015 Netflix movie purport to bring out the real Jobs. I asked a few Indian founders about the negative reports about Steve Jobs. Their response was, “He did not build Apple by being humble and caring about people.” 

According to the Hare Psychopathy Checklist, the universally accepted diagnostic tool used to assess this, includes traits such as “a grandiose sense of self-worth, lack of remorse or guilt, poor behavioral controls, pathological lying and a lack of empathy.” 

Thus there are two diametrically opposing narratives. Genius-like entrepreneurs who are out to change the world on the one hand, yet who are susceptible to toxic behavior on the other. There are far far more psychopathic founders than real geniuses. Further, every founder, like medicines and corporate CEOs, has a “use-by date.” The skillsets of a founder-CEO and a profitable-growth CEO are not necessarily the same. 

The psychopathy of founder CEOs is not yet at a crisis point for India. The Indian entrepreneurship flower can be nurtured. A former Verizon CEO details ‘watch-for bad habits’—not building trust and integrity, focusing on things that don’t matter, shirking being a role model, not reinforcing what is really important, trying to be popular, getting caught up with self-importance, burying one’s head-in-the-sand, and not fixing root cause of problems. 

Entrepreneurship associations and training institutions can help by emphasizing positive behavior as a necessary adjunct to the innovation role, like SINE at IIT Bombay and TiE do through their mentorship network and counselling. I tried to make a small contribution through a 2021 book, Wisdom for Start-ups from Grown-ups.  An empathetic Indian start-up atmosphere is desirable.

It is instructive to read the book, Myth of the Entrepreneur, by Ravi Kailas with Cathy Guo. He was a serial entrepreneur who built and scaled ventures spanning telecom, software, financial options and more. During the hustle and bustle of his journey, he got his ‘Asoka moment.’ After excelling as a traditional king or eight years, King Asoka watched with great pain his destruction of the fertile lands of Kalinga. This set Asoka, as is well-known to Indians, on a journey to express his inner revolution. 

Likewise, entrepreneur Ravi Kailas realized that the pearl jewel is formed around a grain of sand. That grain of sand catalyzes the pearl into being. Once the beautiful pearl has been formed, the grain loses its identity. The grain of sand is then significant only by its absence.  Indian founders, who created long-lasting enterprises, did exactly the same—Jamsetji Tata, Jamnalal Bajaj, Pirojsha Godrej, and Ghanshyam Das Birla. 

The post Psychopathic founders need an ‘Asoka moment.’ appeared first on The MindWorks.

(rgopal@themindworks.me)
(The writer is a bestselling author and corporate advisor. His latest book, “Pivots For Career Success: Unleashing People Power,” has just been published by Rupa. He was Director, Tata Sons and Vice Chairman, Hindustan Unilever during his career.)

Ideally, corporations should be run so that they acquire respect as well as love from stakeholders. Loving a corporation is not personal; it can be emotional, not necessarily of the physical or familial kind that we have for a family member or a pet.

For example, we connect emotionally with sportspeople. Rafael Nadal, Roger Federer, and Novak Djokovic have all won a record-breaking twenty Grand Slams in tennis, eliciting great admiration. Two of them, however, also arouse a warm emotional response from fans. When Nadal became the first-ever winner of 21 Grand Slams, Federer posted, “To my heartfelt friend and rival, hearty congratulations for being the first man to win 21 Grand Slams…. I am sure you have more achievements ahead, but for this moment, enjoy this one.”

A company earns respect and admiration by consistently delivering on the promises it makes to customers. These emotions transform into love when a company does things that tug at the heartstrings of a community, for example, through socially relevant or humanitarian acts. A wise leader creates a company that is respected, admired, and, most difficult of all, loved.

During my executive years, I asked managers to name five corporations that they respected. Spontaneous responses threw up names that were iconic and highly recognizable. Then I would ask them to name five corporations that they not only respect but also love. Love? How could you love an inanimate entity, some participants argued; a company is a money-making machine, others said. However, corporations can be personified in the minds of customers to the extent that if the corporation runs into unexpected difficulty, unfair controversy or does something heroic, people feel for that company. As the debate progressed, some participants would hesitatingly suggest a few names — Amul? Asian Paints? Bajaj? HDFC? Tata?

Interestingly, the list was short as the group broke through mental barriers. People exhibit love by exulting when something good happens or feeling bad when something bad happens to the company. I cast my mind to events that I have experienced.

After the terror attack in 2008 at the Taj Mahal Hotel, there was a flood of unsolicited letters received at both Tata and Taj. Emotional letters, for instance, about how the writer got married at the Taj, or celebrated a wedding anniversary, or some other life milestone. Some even enclosed cheques to help restore the Taj—small, yes, but touching as a significant expression of love. How much emotional attachment people had for the Taj Mahal Hotel!

Some years ago, I was being driven home by my company chauffeur. On Cuffe Parade, a policeman flagged us down. Apparently, we had jumped a red light at Wodehouse Road. To resolve the dispute, I offered to pay the fine for the alleged infraction. At that stage, the traffic policeman noticed my driver’s epaulet and asked me what work I did in Tata. A hitherto bellicose policeman softened and said, “In that case, I will not fine you.” I was mystified.

Here is the backstory: some five years earlier, the police station at Phaltan Road had not received government raincoats before Mumbai’s torrential monsoon due to a bureaucratic delay. Since the monsoon broke early that year, the cops faced a major problem. A visiting Tata Sons officer, upon learning of this issue, returned to Bombay House and secured 25 new umbrellas for the cops of Phaltan Road. This policeman was so grateful to Tata for this gesture, he said, that he now had the opportunity to express his gratitude. Later, I was able to verify this episode. I was overwhelmed at this spontaneous expression of love for Tata. Who said you cannot love a corporation? It takes just small acts of love and empathy to win hearts, isn’t it?

In 1990, I was posted to the Middle East, so I became especially interested in the region. Iraq invaded Kuwait that year. Many Indians will recall how 170,000 Indians were airlifted by Air India from Kuwait in what is recorded by Guinness Book of Records to be the world’s largest civilian evacuation in history! All this in just eight weeks between 13th August and 11th October 1990 with the stellar guidance of a Kuwait resident, Mathuny Mathews aka Toyota Sunny. People’s spontaneous love for Air India, even if short-lived, resulted in the making of a feature film, Airlift.

There will be a debate among strategists and entrepreneurs about whether Tata Sons has been wise to acquire Air India. This article is not concerned with that subject. After the acquisition by Tata, I posted an allegorical message that “an aunt, earlier young and beautiful, and now old, and who had left the family house 69 years earlier, had returned home.” The message was seen by over half a million viewers with hundreds of responses, expressing delight and best wishes.

A side story—in the late 1880s, Bombay Presidency’s largest textile mill, Dharamsi, was in trouble and put up for auction. Jamsetji won the auction; he struggled for seven years, and to the surprise and delight of many, turned into a roaring success a mill that he had renamed as Swadeshi Mills.

Now, the people of India want their Air India to be efficient and lovable again. The goodwill of 135 crore Indians is a huge intangible asset for the managers who will rejuvenate Air India. Who says that you cannot love a company or its brand?

The post What it takes to love a corporation. appeared first on The MindWorks.

To appear on 21-4-22

‘Transforming organizations’: a series in New Indian Express.

The role of luck in organizational transformation

By R Gopalakrishnan

(The writer is an author and business commentator. His articles and videos can be accessed on his website www.themindworks.me and his email ID is rgopal@themindworks.me)

How important is luck to achieve transformation goals? Luck is controversial. Some believe that reliance on luck makes people easy going. Others believe that luck is an indisputable reality. But change agents should not rely on luck to deliver results. The reality is that we must do our very best, come what may. Luck may play a negative or positive role in the result. 

Kent Evans and Bill Gates were very close at school and were buddy computer geeks. Kent Evans died prematurely in a mountaineering expedition, while Bill Gates went on to found Microsoft. Bad luck for Evans, but surely not good luck for Gates. In the film, A Streetcar Named Desire, Stanley Kowalski (Marlon Brando), said,” You know what luck is? Luck is believing that you are lucky, that’s all…to hold a front position in this race, you’ve got to believe that you are lucky.” Was he right?

Psychologists have identified four moods produced by luck. If we have bad luck, we feel that we had no control over that event.  If we have good luck, we believe that our actions had a lot to do with the result. If someone else has good luck, we feel jealous. If another person has bad luck, we may feel a mean sense of joy, what the Germans call schadenfreude. The absence of causality in matters concerning luck is clear to the discerning.

Every month since August 2020, I have written on organizational transformation. The greatest challenge that leaders face—whether companies, hospitals, clubs, or governments—is how to adapt to a rapidly changing environment.  Leaders were required to possess intelligence (IQ) before the 1980s; then came the era of empathy (EQ), but, of late, there seems to be a tendency towards adaptability (AQ). For leaders of tomorrow to possess high IQ, EQ, as well as AQ is surely the future challenge of leadership. In this series, I have touched upon pitfalls to be avoided, people strengths that should be leveraged and illustrated the principles through the examples of how Hindustan Unilever and Tata responded to challenges posed by liberalization.

Did Lever, Tata, or any other organization succeed in the transformation purely because of their strategies? Largely, yes. If someone else followed the same actions, can success be assured? Not assuredly. Transformation programs do not follow the laws of physics, so there is no cause-and-effect relationship between inputs and outcomes. To quote Sir Isaac Newton, “I can calculate the movement of the stars but not the madness of men.” 

In great companies, continuous adaptations over decades have produced the dramatic and compounded effect of adaptability. We should not underestimate the benefits of compounding over a long period of time.  Warren Buffet created wealth by investing cleverly over a long period of time–most of his wealth accumulated from the time factor, not the cleverness factor. That is not plain luck!

Independent India has successfully executed multiple transformation programs. With the hindsight of time, India has been reasonably successful with these programs, a privilege not applicable to its South Asian neighbors, who sought immediate pleasure in the arms of China. Some examples of India’s success are a constitutional democratic framework, five-year planning schemes, population control programs, green revolution for food grains, white revolution for milk, and so on. All imperfect but bearing positive signs of sustainable success. Debates will, of course, be ongoing. 

Recently launched public transformation programs are doubling farmer incomes by 2022, achieving GDP of USD 5 trillion by 2025, improving ease-of-doing business on the ground, and more effective cooperative federalism between the union and the states, just to name a few. Not enough time has elapsed and, anyway, there has been the bad luck of covid, lockdowns, and Ukraine. 

It is useful to contemplate the role of luck in transformations. One published study in 2018 examined the impact of luck versus talent. The study showed that sometimes the most talented individuals are not the most successful. Individuals with a ‘median’ level of talent, but who enjoyed luck, experienced higher success. A paper by Cornell University suggested that while western culture places a high value on effort, talent, and risk taking, a large proportion of success can also be attributed to luck and random chance. (Boyer Law Firm Blog, 11th March 2021). 

In another article titled Are Great Companies Just Lucky? (HBR, April 2009), the authors asserted that the high-performing companies owe their success to luck, not smart practices. The analytically oriented consulting firm, McKinsey, however, argued that there are indeed seven principles for achieving transformational growth (McKinsey Insights, 22nd April 2021). 

These are bewildering array of conclusions and hypotheses. That is the reason why managers should reflect on what luck is, is there a difference between ‘earned’ luck and ‘unearned’ luck, does luck play a role, and how should a change agent think about luck? These are worth exploring in the next few articles, and I propose to do so.

In my book titled, Six Lenses, published in 2016, I had devoted a whole chapter to the subject of luck. A reader from Goa criticized me for doing so, considering that I bear credentials of being an educated and enlightened student of physics, engineering, and management. Why not devote a couple of my monthly columns to the subject?

The post The role of luck in organizational transformation appeared first on The MindWorks.

To appear on 18-5-22

Narcissus in the board room

By R. Gopalakrishnan*

(*The writer is an author and a business commentator. His articles and videos can be accessed at his website www.themindworks.me and his email ID is rgopal@themindworks.me)

Media encomiums and the feeling of self-importance are shimmering mirages in the desert of self-delusion.

Every person’s perspective is partial because the experiences of that person fashions perspectives, though the experiences of that person accounts for a miniscule part of what really happened, One of my bosses used to say, “Beware of winning an award or appearing on a magazine cover; it may be the kiss of death, signalling the future decline of a successful career.” He was mortified of fame and public glare, which tend to consume even balanced leaders. A chief executive officer, indeed, all prominent leaders, must learn to survive the seductive spotlight of public attention, a major job hazard even though it may be only a temporary spotlight. 

Our Rigveda mentions the word, Charaiveti, a Sanskrit sandhi of chara eva iti, which means ‘always keep moving.’ You become humble by practicing charaiveti, conscious that every high or low will pass. John D Rockefeller was thought to be reclusive, silent, and withdrawn. He was reportedly fond of reciting the poem, “A wise old owl lived in an oak, the more he saw, the less he spoke, the less he spoke, the more he heard, why are we not all like that wise old owl?” I am reminded of the dilemmas of the retired Warren Schmidt in the film, About Schmidt, and acted so brilliantly by Tom Hanks.

Media encomiums and the feeling of self-importance are shimmering mirages in the desert of self-delusion. The authors of the Black-Scholes model were celebrated for reportedly converting investment and finance into a science. They were even awarded the Nobel Prize. Their company LTCM (Long Term Capital Management) collapsed. Author, Morgen Housel, makes a startling point, “Success is equated with making money. Making money has little to do with how smart you are. It has a lot to do with how you behave. Behavior is tough to teach, particularly to smart people,” Good outcomes are dressed up as strategic strokes of genius, while catastrophes are attributed to bad luck. 

From my careers in Unilever and Tata, both long-surviving practitioners of corporate ikigai, I know that sustained success is born in a womb nourished by six enzymes—conservative finance, innovation, continuous improvement, relentless adaptation, and paranoic corporate governance. Such companies reap the benefits of the long-term compounding effect of their good karmas. These practices of the grownups are golden wisdom for startups.  

Venture capital as an industry did not exist forty years ago.  In April, VC firm, Sequoia India, published a blog titled Corporate Governance: the cornerstone of an enduring company. Such a theme, coming from a venture capital leader, is significant. The blog was also consistent with the previously reported statements of Sequoia’s global CEO, Michael Moritz, in a Charlie Rose show. Unlike most short-lived venture capital firms, Sequoia has survived for several decades because “we are scared of going out of business…we assume that tomorrow won’t be like yesterday…we can’t be complacent…” 

The blog carries a plea for more players in the Indian startup ecosystem to join Sequoia’s pledge for greater governance. In the early part of the blog, the company affirms that they do as much due diligence as is possible, though there are limitations in the early stages. Sequoia also undertakes governance training for founders and senior management.  Sequoia states that the company is “willing to do whatever it takes to encourage good behavior.” 

To me, the message is that there are two vectors to good governance—oversight governance and behavioral governance. Multiple regulations improve oversight governance, but there is a lacuna in behavioral governance. Most boards are hesitant to interpret or act on significant behavioral aberrations. They wait for proof. 

What is behavioral corporate governance? It is a behavioral code of what constitutes good board and leadership behavior before the rot of narcissism takes its toll. There are countless articles and books on the elusive subject of leadership narcissism.

In the Financial Times of 25th April, Michael Skapinker has written an interesting piece titled How to handle a narcissist in the workplace. The article concerns media baron Robert Maxwell, whose body was found at sea thirty years ago. The trial of his daughter, Ghislaine Maxwell, in the Jeffrey Epstein case has been in the news. Skapinker quotes several experts to assert that (i) many narcissists lack a secure base of love (ii) some have a genetic predisposition to narcissism (iii) many are clever, capable, and work prodigiously hard (iv) narcissists require excessive admiration (v) they lack empathy for others (vi) they operate with a sense of entitlement.

I have written in this series for over four years on behavioral governance under The Wise Leader. I have long been curious about behavioral corporate governance. I even prepared a director’s checklist to interpret early warning signals.  (https://www.business-standard.com/article/opinion/prodrome-of-a-governance-crisis-behaviour-120112000045_1.html). 

The checklist may be used for established corporates as much as for startups. India’s startup ecosystem is in a nascent stage of promise. We need to minimize aberrations like Housing.com, BharatPe, Zilingo, and Trell. The Sequoia blog may awaken players in the corporate governance space and startup ecosystem to address the subject with increasing urgency and seriousness. 

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To appear on 19-5-22

‘Transforming organizations’: a series in New Indian Express.

The excruciating pain of transformations

By R Gopalakrishnan

(The writer is an author and business commentator. His articles and videos can be accessed on his website www.themindworks.me and his email ID is rgopal@themindworks.me)

Organizational transformations are gut wrenching, and painful. There is no shortcut. Do not believe the many books advocating how to achieve a transformational change without pain. In fact, the leadership team must voluntarily seek out the pain to drive their transformation. Several years ago, while writing my first book, I was in search of a metaphor for organizational transformation. I found a metaphor from Nature. Butterflies are good ecological indicators. I learned a lot from my periodic visits to the Nilgiris.  

In 1986, a scientist and conservationist called Larsen Torben conducted a butterfly survey of the Nilgiris. His study bears his name. He detected the existence of 301 varieties of butterflies in the Nilgiris. In 2018, the Tamil Nādu Forest Department conducted the next survey and added three new varieties. Scientific American (10th August 2012) explained graphically what happens to a hungry caterpillar, which has gorged itself with nutrients—a bit like a startup—when it begins to morph into a butterfly. 

First, the voraciously over fed caterpillar digests its own body into a soup, rich with enzymes. Second, while this gut-wrenching digestion process leaves behind what looks like an amorphous mess, though it is not entirely so. Certain groups of cells survive because they contain the genetic code to grow back the body parts required for a mature life later. These cells are called imaginal discs. Third, these imaginal discs help the animal to reconstruct wings and muscles to break through the cocoon and emerge as the breath-takingly beautiful butterfly.

Apply these lessons from Nature to companies. The equivalent of imaginal discs is the embedded organizational culture—the unique characteristics of mindset, behaviors, and actions that define the very being of the company and must be preserved. How many startups think about the imaginal discs that they must embed in their startup? How many voluntarily subject themselves to a self-digestion process after they have gorged themselves with growth for a long period? Very few, I reckon, and that is why the survival rate among startups is so low. 

Think of grownup companies for whom such ‘creative destruction’ is essential to survive and prosper in the long-term. The dramatic transformations of The Gap (records to apparel), Netflix (DVD rentals to streaming), Tiffany (stationery to jewelry) are worth reading. IBM subjected itself to a gut-wrenching transformation process in 1990s. It is so well described in Lou Gerstner’s book, ‘Who says elephants can’t dance.’ IBM survived and prospered. So did Apple in 1997. However, Kodak, Enron, and Lehman Brothers did not. These are a part of the archives in museums.

Jamseji Tata began his enterprise as a trading and textile company. For growth, he grew into steelmaking and hydro power generation. For culture, he embedded the mindset and behavior of social responsibility (imaginal discs) by, inter alia, endowing the Indian Institute of Science. His statement is eponymous, “In a free enterprise, the community is not just another stakeholder in the business, but, in fact, the very purpose of its existence.”

His successor, Dorabji, brought to fruition the unfulfilled ambitions of his father in steel and hydro power generation before he diversified the enterprise into cement, construction, banking, insurance, and allied areas. The imaginal discs of corporate philanthropy were strengthened by investments, among others, in cancer research and a hospital. 

Future successors, notably JRD Tata, grew the enterprise into aviation, chemicals, truck-making, and thermal power. All through the century, textiles got deemphasized, shifted from trading to manufacturing. Entry into the financial services businesses were overtaken by regulatory events. The imaginal discs of social commitment were strengthened through long-term modification of the companies’ articles of association, and the establishment of TIFR, TISS, and the NCPA.  

In the most recent years, the group exited textiles, cement, soaps, and a few others. The enterprise globalized the business and entered futuristic businesses like information technology, communications, and passenger cars. The enterprise imaginal discs were strengthened through increased funds for the social agenda of Tata Trusts, promoting a national chain of cancer hospitals, and the impactful deployment of company CSR funds. 

While these developments may read like a list of accomplishments, they are mere dots of history. I can state from experience that the process was slow and painful. The inevitable reduction of the portfolio was indeed gut-wrenching, and the new portfolio grew out of the entrepreneurial moves. All through the century and more, the imaginal discs helped to promote enterprise, strengthening its distinctive culture of community orientation. 

No transformation can happen without pain.

The post The excruciating pain of transformations appeared first on The MindWorks.

(The writer is an author and a business commentator. His articles and videos can be accessed at his website www.themindworks.me and his email ID is rgopal@themindworks.me)

Leadership without values is rudderless. However, all leaders are human, and suffer from aberrations like narcissism. In fact, this affects all human beings to some degree. Unlike personal narcissism, leadership narcissism damages many due to the footprint of leaders. In writing on this subject, I am influenced, not only by published literature, but also by my experiential learnings.

Much can be achieved by getting rid of illusory superiority and by embracing knowledge. Illusory superiority is everywhere. See the recent surge of nationalism all over the world. For example, Winston Churchill is presented as a valiant upholder of democracy and liberty, though his behavior was as though democracy both began and ended at the English Channel. Vladimir Putin thinks he is the reincarnation of Peter the Great. Fake history, the lifeblood of exceptionalism and political populism, thrives on the illusion of supposed superiority or a deep yearning for the good old days! Societies, companies, and individuals, all suffer from this malaise.

On a recent visit to Paris, I revisited the Eiffel Tower. I learned of a 1900s story about a benefactor in Paris offering a large reward to anyone who could land safely after a jump from the top using a parachute. The offer was made in the context of a series of parachute mortalities and failures.

Franz Reichelt, an Austrian-Czech tailor in France, had been working on a parachute design based on his tailoring skills, rather than knowledge of wind velocity and aerodynamics. Despite his earlier parachutes having failed to protect test mannequins, he was sure that his “practical design” was superior to the “engineered design”. By contrast, the Wright brothers observed how birds bend their bodies to meet oncoming winds and replicated the design for airplanes.

Franz Reichelt convinced the authorities to permit a trial from the top of Eiffel Tower. They gave permission for a trial with a dummy. At 8.22 am on February 4, 1912, contravening the granted permission, Franz Reichelt jumped down himself. Three seconds later, he was dead at the foot of the Eiffel Tower. Photographs were splashed across the Le Petit Journal. A silent film shows Reichelt standing at Eiffel Tower, speaking to two onlookers, perhaps affirming his great confidence about success in the ensuing demonstration.

Reichelt was a victim of the Dunning-Kruger effect, enunciated in 1999 by two social psychologists, David Dunning and Justin Kruger. Their paper suggested that a cognitive bias occurs when “people of limited knowledge, competence, or ability wrongly imagine themselves to be highly proficient.” I quote three examples of cognitive bias.

At Tata Management Training Centre, I used to ask attending managers to rate their professional competence versus their peers. An overwhelming majority of respondents rated themselves as superior to their peers. In a 1977 study in America, 97 percent of university professors rated themselves as superior to their peers. In a 1983 study, 96 percent of Americans and 69 percent of Swedes rated their driving skills to be in the top half. All three are statistical impossibilities. Dunning-Kruger effect applies not to patently stupid people, but to people like us. Watch the video.

Dunning-Kruger is more obvious with others’ flaws and with hindsight. Through his six-volume magnum opus, The Second World War, Churchill placed himself at the center of the Second World War. He delayed and prevaricated on decisions, for example, during the invasion of Normandy. However, his books bent the narrative to overstate his glory in the Normandy victory.

During his tenure as CEO of GE from 1981 till 2001, Jack Welch was lauded as the genius who did everything right. He became the personification of alpha capitalism through ruthless downsizing, persistent deal-making, and the new art of financialization. (Recall Enron’s financialization debacle). Welch was honored as “Manager of the Century.” Then he retired. And then, with hindsight, a different perspective started to emerge, telling a different story. The latest book by David Gelles about the man who supposedly broke capitalism, states, “Welch’s strategies ultimately destroyed what he loved so dearly.”

We can see this played out in the Indian IPO market, where startups raise capital with the “kahin pe nigahen kahin pe nishana” syndrome. They grow up with a laser-sharp focus on funding and valuation. The highly adored and widely reported ones build up huge losses and demonstrate gravity-defying pyrotechnics that are contrary to the well-established principles of business management. After the successful IPO, some plots unravel, as could well happen to some edtech companies. This is despite capital markets cognoscenti knowing that IPOs are sensitive public matters.

S Ramadorai, former vice chairman of Tata Consultancy Services, has devoted a whole chapter in his fascinating book, The TCS Story. He explained how it was meticulously detailed and time-consuming for the TCS management to prepare for an IPO in 2004. Former Infosys chairman, Narayana Murthy, recently referred to how careful his leadership team was with their IPO in the 1990s.

Despite the awareness and knowledge that IPOs are not just another method to raise funding, fund-seekers come to the markets. Stranger still, there are enthusiastic subscribers for the share offering. Desperate institutions, who were flush with low-cost funding, inadvertently inspired retail investors to invest. Later foreign institutions fled, but poor retail investors were left to bear the brunt, acting “like shock absorbers” to quote our finance minister.

Everybody quotes the examples of Amazon or Google. Their exceptionalism is what it is. Such a philosophy regarding IPOs is a bit like my emulating Rafael Nadal’s tennis strokes at my weekend club. Regrettably, the IPO adventure is infinitely more harmful to many more than my tennis!

We don’t know what we don’t know. Even worse, we don’t always know what we think we know.

The post Are we really smarter than our peers? appeared first on The MindWorks.

To appear on 16-6-22

‘Transforming organizations’: a series in New Indian Express.

The role of a collective legend in transformations

By R Gopalakrishnan

(The writer is an author and business commentator. His articles and videos can be accessed on his website www.themindworks.me and his email ID is rgopal@themindworks.me)

(An intellectual nomad is a leader who approaches the transformation challenge with empathy–an open mind, a determination to listen, and a will to relearn old truths.)  

In my native Tamil language, a single alphabet like Pa represents four alphabets of Sanskrit pa, pha, ba, bha. The pronunciation in a word is determined by the alphabets that precede and follow. Papa and Baba have the same spelling. What precedes and follows an alphabet determines the word’s meaning and pronunciation. I quote this linguistic as a metaphor for inclusiveness in society—what is adjacent, what  precedes and what follows is important to appreciate a person. 

Transformations are necessarily painful as I pointed out in this column last month. An important reason for pain is the lack of a collective legend about the future. A collective legend is a distinctive story about the future that has been developed by people on an inclusive basis. The key words in the preceding sentence have been italicized. They are not explained here for want of space and, anyway, they mean exactly what they imply.  

A collective legend is an intense and painful democratic process, full of compromises and adjustments. Think about how the Constituent Assembly developed our constitution or how the Nehru-Mahalonobis combination explained planning to the people of India.  Inclusiveness means that what is around the person is as important as the person. 

Democracy and authoritarianism are not natural companions. In long-surviving organizations, there is likely to be a collective and valuable memory about the past; but as we move from the present to the future, there are likely to be divergent views. We see this in companies, societies, and nations.

At a nation and society level, the divergent views about the present and the future manifest as ethnic or religious narcissism. Leaders hark back to a glorious past and seek to revive the mythical good old days. That is why Putin sees himself as a modern Peter the Great or Boris Johnson sees himself as a new-age Churchill. One religion or ethnic group is proclaimed to be original, and others are portrayed as ‘others’, for example, the fate suffered by the Romani in Hungary. 

Integrating a diverse nation or company is not easy. I had two experiences during the 1990s: one in Jeddah, integrating eleven joint ventures in the Middle East into a cohesive Unilever Arabia, and again, in India, integrating eight companies, which were merged to form Brooke Bond Lipton India Limited.  Although this column is about corporate experiences, I shall describe the lessons that I learnt in a future article. 

Rather I offer an important lesson with a hindsight perspective of the challenges in developing a collective legend. The elephant in the room is that the old is dying, but the new has not yet been born. Transformation represents the interregnum when the individual’s sense of vulnerability increases and when multiple emotions—anxiety, anger, disillusionment—may coalesce into an unhealthy apathy. 

In this maelstrom of emotions and vulnerability, you need leaders who are intellectual nomads; without whom, the pain of transformation increases. An intellectual nomad is a leader who approaches the transformation challenge with empathy–an open mind, a determination to listen, and a will to relearn old truths.  

In the transition between the old and the new, a planned or inadvertent othering develops between the ‘real’ and the ‘pretenders.’ Every individual wants to be heard, that is a basic human want. Leaders must invest in formal and informal ways to listen; above all, they must be seen to be listening, otherwise, disillusion grows and trust declines among the people. This is understandable because in losing our voice, something in us dies. This can be minimized when leaders reach out and listen, not just widely, but to the weakest members of the ecosystem. 

In the 1990s, South Africa was transforming from an apartheid-ridden society to a rainbow society. Nelson Mandela wanted to show support for South Africa in the World Cup Rugby finals at Johannesburg in 1995. Because the Springboks team was historically white, his advisors dissuaded Mandela from attending. Mandela adopted the opposite of their advice by wearing the Springboks jersey and cheering the national team. He demonstrated that othering retards transformation.

When Gandhiji wished to emotionally connect with the common Indian, he shed western attire for the loin cloth, travelled third class, and adopted the spinning wheel. Through his empathy, he managed to touch millions of Indians with his idea of ahimsa. He lived his advice to others, “Be the change you want to see.”

Dr BR Ambedkar passionately believed that India will not reap the real fruits of educational and economic reform if simultaneously, there is no social reform. Possibly he desired national communication and reform efforts on the scale of the subsequent Family Planning and Swachh Bharat efforts. He advocated harmonized social integration efforts, including inter-caste marriages. Instead, over 75 years, India resorted to caste reservations, which perhaps has produced the opposite effect.

When MG Ramachandran proposed the mid-day meal scheme for Tamilnadu schools in the late 1970s–revolutionary for those times—he faced bureaucratic resistance on account of budgets. It is reported that he asked his officers in an emotional tone, “Pasi na ennendu ungallukku theriyuma?  Nan thaanga midiyada pasi therinjirken.”  This means, have you experienced real hunger? I have experienced unbearable hunger. That did it. Tamilnadu introduced the scheme to great advantages in the 50 years that have followed.

When evaluating the implementation of the Amul model, Lal Bahadur Shastri spent time, including one night incognito, with dairy farmers to personally understand the implications of the Amul experiment started by Dr V Kurien. Indeed, Dr Kurien prided himself to be an employee of the farmers despite his ‘foreignness’ as a Kerala Christian and a foreign-trained engineer.

Companies in our nation, indeed the nation, seek rapid and sustainable growth to alleviate poverty and obscurantism. Our leaders must do more to develop a collective legend and demonstrate empathy for the needs of the people.  

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