<div>Sanjiv Misra sat in the airport lounge at La Guardia, anxiously awaiting his flight to be announced. He was making an emergency departure to Mumbai after a call from Narayanan Athreya, a director on the board of Effren India. Athreya had informed Misra that the board was setting up a disciplinary committee to question and examine Effren India’s hair and skin brand Ara’s business.<br /><br />“In the interim, both Abhay Lal, the business head, and his CFO, Gaurang Thakral, will step down for 10 days during our examination. Kartik Sharma will run the business during this period…. Yes, all this is sudden and I am sorry to call you back from your orientation….”<br /><br />Misra had joined Effren India as CFO five months ago, and was at Effren’s US office for familiarisation. While Athreya had been brief, Sanjiv’s secretary Sannidhi had called to explain that there had been some audit finding with respect to inventory and sales matching systems, and that Khusru Dubash, the partner from Bright & Thakur, had held a closed-door meeting with Jai Kalra, chairman, Byramjee (director) and Narayanan, which was followed by this board meeting.<br /> <br />Lal and Thakral were until this phone call stars of Effren. Misra, too, to an extent, gazed at them in wonder, but was often nonplussed by the results they produced.<br /><br />“There has to be a mistake! Everything will be fine,” Kalra had said over the long-distance call. <br /> <br />Misra was an immensely respected resource and his reputation for ethical financial management preceded him. Placement firms rated him highly and the board had hired him by choice.<br /><br />Kalra thought very highly of Lal. It was clear to anyone who cared to know that he was being groomed to be the next CEO. “His successes prove his leadership strengths!” Kalra had said, making Misra wince. Later, Misra told Kalra it was not right to place success before leadership. “Success is an outcome, Mr Kalra. It can never be an action. It cannot be an exertion; whereas, leadership is a conscious action of thought.<br /> <br /><strong>Kalra:</strong> You have to have proven success to be a leader! And if you are a good leader, you will be successful….<br /><br /><strong>Misra:</strong> Leadership needs a mission and a vision. A good leader will work towards both. He will define his path or process as the accomplishment of the organisation’s mission and vision. He will not define the outcome as ‘success’. In fact, I think if anyone does chase success, he might sacrifice the organisational vision and values because he has got the sequence wrong.<br /><br />Kalra was extremely annoyed, but out of a need to be polite to Misra, he laughed nervously and said, “I hope you do not have too much of an accountant mentality, ha ha ha.”<br /><br />The news about the appointment of a disciplinary committee was disturbing. What had the board come by to take such a step? What had they been told by auditors that he, Misra, had not cottoned on to? As the CFO of Effren, he had had many an unpleasant close encounter with the business heads, whose approach to business management at Effren went under the name of leadership. A leadership that had Kalra’s resounding support and praise.<br /><br />Fall needs leadership, thought Misra, as he bought himself a coffee. Corruption needs leading. Why do then a handful at the top — like Lal and Thakral — sometimes find themselves in trouble? <em>The variable pay</em>?<br /><br />It begins with an exalted idea of leadership, he thought, as he pulled his bag from the conveyor belt. Kalra had sought leadership in India from day one. “We have to seize the market, for worldwide Ara is a proven leader.” <em>You think your company should be the leader in India because it is a leader worldwide... but leadership is not an inheritance</em>! <br /> <br />Effren entered India in 2002; it came with a bang, swept the markets with a blitzkrieg of advertising and a product that had the consumers begging for more. That was when Effren was importing its products. In 2007, it began manufacturing operations in India. And in 2010, competition came in. Strangely, people at Effren were not willing to accept that with competition coming in, there was going to be an equalling out of market shares. That was also the year Lal was appointed head of Ara. With Kalra on his back, Lal had resorted to playing with the numbers and the numbers played back with him. He began to manage one quarter at a time, then the month, then the week: ‘<em>Chalo dekhte hain</em>, this month we will see, this week we will see....’ Thus, he scrounged at collecting small gains, sometimes using tact, sometimes guile.<br /><br /><img width="200" vspace="8" hspace="8" height="200" align="right" alt="" src="/image/image_gallery?uuid=18fe338f-058f-4207-8c30-f7f58563ab28&groupId=222852&t=1367577346261" />Yet, moving from month to month, Lal started getting accolades, and huge monetary bonuses. Because he was achieving all the parameters one by one. Without a doubt, his variable bonus was getting banked briskly.<br /><br />Misra had looked at the trends over the past three years and wondered how Lal met his numbers; but Kalra would not discuss, laughing off Lal’s aggression with wonder. Now, as he waited for his flight, Misra’s mind threw up a question: did Kalra know something? Was Lal using a borderline method? This is where it got tricky for Misra to hazard a guess. T<em>he top management knows or it is completely ignorant </em>… he mused. Both scenarios presented crazy situations.<br /><br />So let’s say Kalra and his top management (without the CFO) wanted to remain No. 1 come hell or high water. They may have given Lal a carte blanche — do whatever you want to keep the brand in the No. 1 position, but stay ethical.<br /> <br /><strong>Also Read:<br /><a href="http://www.businessworld.in/en/storypage/-/bw/analysis%E2%80%98performance%E2%80%99-dilemma/882739.37535/page/0">Analysis: ‘Performance’ Dilemma</a><br /><a href="http://www.businessworld.in/en/storypage/-/bw/analysisthe-success-dharma/883161.37535/page/0">Analysis:The Success Dharma</a></strong><br /> </div><div>break-page-break</div><div><br />Or, they would have looked at the unethical actions and looked the other way. Here, Misra grew distinctly uncomfortable. Kalra was human too. Remember, he said to himself, the top management is also tied to a variable compensation that is linked to Effren remaining the leader.<br /><br />The cascading effect of all this finally fell into the lap of the chairman or the CEO, who were employees or hires of the shareholders. Around the time he had joined, he had picked up a smattering of conversations — some were opened out for him, some remained passing dialogues. Misra recalled that the Asia regional top team’s bonus was linked to topping in certain markets. Misra had attended the regional business team meet and then the India business team annual plans meet… and he had attended the business plans meeting of Lal’s team as well. It was unique to watch how each level passed the stress of their target achievements to the level below. Why was Asia Regional Head Eduart De Vries looking for wins in Malaysia, India (South) and Vietnam? Because competition was leading there and bonuses depended on leadership there. Which was okay, thought Misra, but the methodology? Who had designed that? What was it that Lal had done that Bright & Thakur had picked up? Was Kalra aware, did he suspect, or did he know? Did he choose to look the other way? It is possible that several distributors wrote to them and asked, ‘<em>Kya ho raha hai, itna dump kiya hai maal</em>... what’s the story.’<br /><br />Misra was fully aware of the dumping strategy and knew how it worked. But he was not prepared to imagine that Lal, and hence Effren, were desperate winners. Truth was that many companies indulged in dumping, except they called it by a different name. Come year-end, many companies fear loss of face on the charts and plead with distributors to offtake more. At any given time, every distributor is still selling last year’s over-purchases and he will have to deal with this year’s pressures when the next year-end comes. For most, graduating to a new Plan B does not arise — whatever the Plan B is; usually it is more of the same Plan A, but more intense. And the genesis? <em>A pot of gold at the end of the rainbow</em>. <br /> </div><div>break-page-break</div><div><br />The past two years had been very tough for Ara, owing to recessionary trends in the US. This is why Misra had been flummoxed. India, too, had faced a dip in consumption. Lal had been through some stressful times, but uniquely, it had to be granted, he had exceeded targets remarkably. Or had he? Misra had been around five months; he had one cynical thought after another….<br /><br />Kalra, for his part, had confided to Misra that Ara may not be in the reckoning this year (2012-13). “Build some cost buffers, reject some capex, overall, play safe but do not let it be known that we fear losing leadership, because panic has a mind of its own.”<br /><br />But panic had gripped Kalra. He feared slipping down the leadership ladder and losing the ‘successful company’ label. And he passed on the ripple to the business heads: he sent out goals and targets for everybody at the top. “You will get me sales of X per cent over the last year.” Misra had said that it would be good to meet the team and review, discuss inter-market variations, the economic reasons versus performance reasons. But Kalra sent out a mail demanding growth... and offering Rs 50 lakh as bonus, from his candy shop.<br /><br />Lal and other business heads at Effren wore many tags: high-flyer, achiever, fast track, relevant, cool. They were designer humans; they wore their bonuses visibly and well. Meeting tough targets was the stuff of their lives. Growth was the drug on which Lal thrived. A workaholic, he travelled relentlessly, walked the markets, visited focus groups, chased user groups, demanded endorsements, forced sales on distributors. He told them that Ara was hugely successful, and that they had better buy.<br /><br />Dhanush Bros, a distributor, had dropped by to make some payments and adjust some returns… Karthik, the younger brother, greeted Misra and mentioned that he was taking far more than he could sell… “Nor do I have the warehouse space to hold so much inventory. But your’s is a good company, so I agreed to Lal sir…”<br /><br />Misra did not ignore this. Lal told him that Dhanush Bros were in the habit of griping: “Trust me, that man can sell all that we produce! Chill!”<br /><br />That was what Misra experienced. A sick chill gripped his heart.<br /><br />Three months ago, Lal’s wife went on an indeterminate ‘holiday’ to her brother in California. He had said to Kalra, “<em>Chalo</em>, now I can focus!” The market adrenalin was coursing through his veins. What was in it for Lal? Remuneration, a big part of which was pegged to performance.<br /><br />Misra drove home from the airport, had a shower, ate lunch at 3 am, as he was obeying his body clock, and checked his mail. Mahadevan from factory had replied. Misra had written to him from the airport 22 hours ago. “Nothing untoward Mr Misra. But significant inventory has been shipped to the following in the last weeks of October, November and December 2012…. No shipments have been made in Jan and Feb 2013; returns from Korpesh, Dharangadhra and Intus are nearly 100%....”<br /><br />When Misra met Kalra and Arvind Deoras (marketing head) at the Taj Coffee Shop. Deoras shook his head in denial. “Don’t call it ‘dumping’, Sanjiv. It is a little old fashioned… these are acts in the course of business… And why would Abhay (Lal) and Gaurang (Thakral) use an old-fashioned method like dumping to score sales?”<br /><br /><em>To achieve variable pay, to stay relevant, to be on a high</em>. “It is a drug,” suggested Misra. <em>You need a system first; then the system becomes the hook for the crook.<br /></em><br /><strong>Kalra:</strong> You are focussing on law, appropriateness, ethics… hanh, yeh sab hota hai, but we are not a set of crooks! You are seeing ghosts, my good man! Because you have taken your eyes off the goal — success! <br /><br /><strong>Misra:</strong> With due respect, my eyes are on the goal. Except that our respective goals are different! Incidentally, it is the business heads who are seeing frightful things! It would be nice if they hung on to the organisation’s vision. But their eyes are trained on achievement. Sadly, that goal is not holding out during a recession!<br /><br />[Where was that great leadership that Kalra talked about? Wasn’t leadership a quality that in times of crisis neither challenges nor shakes the leader, or his values or the people who depend on him? Of what use was it to call someone a man ‘of great leadership qualities’ when it was good only during the good times?]<br /><br /><strong>Deoras</strong> (speaking to Kalra): I will manage Athreya, leave him to me. Getting the true and fair stamp will be done, I am assuring you. I will talk to Khushru, on the golf course...Sanjiv (Misra), you stay in the background. You are new; what we have here is a continuity from last year. Khushru gets restive with new people… <br /><br />Misra found the unfolding drama disturbing. What he was hearing was suggesting something but he was still unsure…. He did not want to judge Kalra and team so early. Maybe there was some merit to all this?<br /><strong><br />Kalra</strong>: Just get them to sign the accounts. A lot hinges on that… true <em>kya</em>, fair <em>kya</em>?<br /><strong><br />Deoras:</strong> Oh! We do need the ‘true and the fair’, Kalra! If that T&F stamp does not appear on your accounts, you have no hope in hell. You need that steady growth picture. There is not a single human, including all the analysts who run Wall Street, who will accept a yo-yo. Everyone wants a gradient — a nice, sweet steady growth for five years. If you do 10 per cent growth, drop 2 per cent, do 10 per cent again, then drop 2 per cent, people will say, naah, company not steady. Nobody has the time or the attitude to understand market compunctions, to listen to your challenges to understand what competition does to organic growth. Everybody wants artificial growth. <br /><br /><em>Artificial leadership….</em><br /><br /><strong>Kalra: </strong>Of course, I do value that T&F, trust me. As head of this organisation, I too am expected to deliver steady growth year over year. (<em>Then including Misra</em>) Any year with growth collapses or negative trends, <em>khuda bakshein</em>, people forget that in the previous years he must have done wonders. People look at steadiness. Tough job, I say! <br /><br /><strong>To be continued</strong><br /><br />casestudymeera(at)gmail(dot)com <br /><em>Read Businessworld case studies on Facebook </em><br /><br />(This story was published in BW | Businessworld Issue Dated 20-05-2013)</div>
