<div>The group CFO, who is known for his ethical practices, is facing a very commonplace dilemma in business operations. A group CFO does not run day-to-day business and is only responsible for the overall results as part of the management team. The CEO, however, is responsible for both topline and bottomline, and in this case, relies on individual business heads who are responsible for ensuring growth in respective businesses within the corporation.<br /><br />Strong growth in any business in a tough environment and competition is difficult though not impossible, and the case seems to suggest there is more to normal excessive year-end/quarter-end sales. No despatches for the first two months, coupled with strong despatches in the last week of each of the three previous months, combined with nearly 100 per cent stock returns from three places seem to clearly show it is not business as usual, but there is something unusual and possibly unethical here.<br /><br />It is also evident that the auditors might have looked at these aspects and declined to certify the accounts since the sales and revenue figures shown are not the real numbers, and are over-reported. Correspondingly, profits will also be over-reported.<br /><br />That the main brand ‘Ara’ is critical for setting targets for everyone — from the business head to the chairman, and from the CEO to the Asia-pacific regional heads — makes it a cosy relationship in the hierarchy.<br /><br />In such a situation, Sanjiv Misra, the group CFO, doesn’t have many options. His key issues remain:<br />1. He is still a part of the top management team. He needs to work alongside the CEO and his team to deliver overall results, and is responsible for the company’s image with shareholders and lenders. Any critical action may affect both the relationship and company performance and image;<br /><br />2. He is new but he needs to determine all the facts fully and not try to crucify anyone without proper investigation. For this he would require everyone’s support;<br /><br />3. He has to report the facts to the board as also tackle what the auditors have picked up. The results may need to be revised before a T&F certification is possible to obtain;<br /><br />4. In case the facts point towards unethical conduct, he would need to recommend specific actions for the businesses, but also determine at what level the buck stops. This may even be at the highest level or more;<br /><br />5. Any action may make him unpopular, besides affecting the company, and may even affect his continuation.<br /><br />The leadership style in this case seems to be completely focused on short-term performance. The process for target-setting does not seem inclusive and bottom-up, and there seems to be no focus on processes and long-term planning. It seems to be more of milking the cash cow now and taking the easy way out, without realising the long-term implications, which would include worsening of financial health and alienation of distributors. <br /><br />Misra and the board would, therefore, need to:<br />1. Determine the facts and practices across all businesses;<br /><br />2. Take specific steps to get the correct facts considered for business performance and for accounts, and agree on the steps with the auditors;<br /><br />3. Establish processes focusing on long-term solutions and sustainability of performance for the organisation and its partners; <br /><br />4. Encourage the businesses to avoid taking short-cuts and focus on sustainability while fighting the competition legitimately; <br /><br />5. Ensure that monitoring systems are robust enough to throw up unusual happenings and incidents at an early stage.<br /><br />Finally, Misra will have to take the bull by the horns, and report the facts while dealing with its implications sensitively, and setting better processes for the future business leadership. In the final analysis, he and the board will need to show honesty of purpose, firmness of conviction and genuineness of action to salvage the situation and establish credibility. <br /><br /><em>The author is vice-president of corporate affairs at Tata Services. An IIM- Ahmedabad alumnus, he previously worked with Hindustan Unilever</em><br /><br />(This story was published in BW | Businessworld Issue Dated 20-05-2013)</div>
