Corporate Conflict: Founder Vs. Professional CEO

Less than two weeks ago, a former Infosys employee, visited me at the office for some work. It was the first time we met and after our work-related discussions, he mentioned that his earlier job was with Infosys where he had spent close to 15 years. And then, he began ranting about the current state of Infosys and how Vishal Sikka (in pic) was a poor leader and why Nandan Nilekani should be brought back to lead Infosys. It took me a little probing for him to let me know that the Infosys “culture” had changed under Sikka. It had become more demanding and employees were unhappy and insecure. As he was fairly senior in his new organisation on whose behalf he visited me and I was in no state of mind to let him have my opinion, I smiled and let him vent a little more without stating my perspective.

I have to make an observation here. What he and a lot of others miss when they speak of a changing culture wherein an organisation has become more demanding of its employees, is the fact that no organisation wants to change its culture out of choice — at least, not organisations that employ a few hundred thousand people. It is a changing market that forces organisations to run its course. And organisations such as Infosys whose output and delivery is entirely dependent on people, need to shift culture if the old timers cannot deliver to the market expectations. Should the management remain soft and endanger an entire organisation as its employees aren’t able to adapt and deliver to the new demands of the market?

Taking Charge
When Sikka took charge, Infosys seemed like this large ship that seemed to have lost direction. And deliver, yes, of course, he did. The business lines that he launched have grown 50 per cent during his tenure as compared to the traditional business lines that grew just about 4 per cent. This may seem an unfair comparison and it is likely that, in simple numbers, the volume of growth of the traditional businesses was larger than the lines he ventured into.

Moreover, it could be that the comparison is being made at an unfair base as the value of traditional businesses run in to billion of dollars. However, the fact remains that the direction he took worked. Other numbers that vindicate this are that he grew the revenue and margins of the business in the range of 35 per cent and, that too, during a time that the entire outsourcing industry has been facing severe headwinds, thanks to a change in demand due to automation and a rapidly declining labour arbitrage model.

Distrust Or Uncertainty
So, what happened? The Panaya deal? Or Sikka’s ‘CTO’ orientation? Or the use of the jet? Or compensation? Or...?

The Panaya Deal: There have been no governance issues found with this one. It is said that the buy price was higher than it should have been. But who is to decide on the purchase price of such a transaction. It is practically impossible to determine the precise price of an organisation. How do you value a company? By its assets? Its real estate? Its manpower? Its order book? Its historic data? How?

Well, it is never easy to value organisations. Did any of us believe that WhatsApp was a good buy at the price it was acquired or it is yet worth the price that Mark Zuckerberg paid? What Sikka and his team saw and envisaged while fixing the price for Panaya may not be visible to the founder/s who disagreed. And it may well be a legitimate price for what Sikka thought he would do with the Panaya business. That vision may simply not exist with the people objecting to its valuation.

The jet: I recently read that there was an instance where Sikka flew a European customer to a Gulf country in his private jet and billed the fuel on Infosys. So what? That’s his style of working and doing business. How can anyone at that level or any other level be expected to deliver but be asked to work with a different style.

He was “CTO” material: Is this a positive or otherwise? Infosys, from what we understand, is a technology business. Being labelled as a CTO is, in fact, a great accolade. Look at it from the customer’s side. If they hold the same view, it is absolutely a great achievement.

In this age of digital disruption, if the client thinks that the service provider’s CEO is a great technologist, what more can you ask for? N.R. Narayana Murthy should have complimented Sikka on this. Moreover wasn’t this the same CTO that was selected by the founder who seems to have led to the exit.

The truth is, the answer lies elsewhere.  India may have completed 70 years of Independence but we are still the first generation moving to the second in terms of business succession in most organisations. Several companies have gone through the succession issues in the past where founders/ owners haven’t been able to let go to an outsider. However, what sticks to memory are two recent cases, one involving  one of India’s largest corporate houses and the other, Infosys. As a nation, large corporates are just about handing over the reins to a non-family / non-relative member. And as things stand, these organisations are faring badly when letting go the reins.

Times have changed and adapting to the constantly shifting market demands is the only way these organisations can survive and grow. Owners / founders must either continue to retain total control or let go and focus only on results.

Somehow this unsuccessful transition and a few others remind me of the Lee Iacocca and the Ford case.