The word is substantiveness. That's the difference between a trader who deals in any goods that are in demand and a manufacturer who invests in the product and the market. A trader can also garner substantiveness by investing in a class of goods and in a locality. That's how the retail chains have built their brand identities. In IT industry, if you are doing software development projects, how do you create substantiveness? There is the personal level at which the leader needs to hold substantiveness and also the organizational level.
You have the Fortune 500/1000 companies that are being targeted by all IT majors. You have all got PCMM level 5 certifications. You have the organization structures almost dictated by the clients. So there is hardly anything to distinguish, except the speed with which you move into the markets, rates you quote and the kind of practice (experience) that you build up. The quality-reliability-delivery standards built up by each IT major in India came out of their peculiar organizational capabilities. This capability is the result of the value each major attached to people, processes, systems and results.
Satyam stood out from the others in the emphasis it placed on people and results, while projecting its commitment to processes and systems. This is the peculiar mindset of the construction industry in India, which is yet to start on the professional path. Raju transferred this mindset from his construction industry background. The results were electrifying. His chosen business leaders enjoyed tremendous freedom and moved quickly to take advantage. Business grew, numbers flew and the Board kept the markets happy. Only when the Maytas deal happened, the shareholders rose in protest. When the things came out in the open, the professors beat a hasty retreat.
The question then is: can the stakeholders escape their share of moral responsibility in the Satyam case?
Wednesday, October 28, 2009
Thursday, October 22, 2009
The Twisted Tale of Satyam
I have been trying to unravel The Satyam tale in my mind at the level of the protagonist's dilemma. There are of course many angles to the sordid drama: corporate governance, ethics, siphoning of funds and so on. I have been interested in figuring out the existential dilemmas faced by Ramalinga Raju. For this purpose, I found it useful to compare him with three others, viz, Ratan Tata, Narayan Murthy and Azim Premji.
Ratan Tata and Premji have been scions of business families and the name Tata enjoys unparalleled prestige in India. Obviously both are secure in their own ways, but not a little on account of the shareholding the former commands without owning and the latter owns and commands. I have seen men in high positions become insecure both materially and psychologically. Material insecurities can be provided for and insured against. One way to deal with psychological insecurity is to create a circle around oneself consisting of trusted, reliable and respectable supporters. It's important that these people are supporters.
Neither Tata nor Premji seem to have gathered such supporters around them. Instead they chose professionals for their competence and commitment. In case of Narayan Murthy, he had the co-founders - all professionals - with him and from the beginning he was the first among the equals. This had a lasting impact on the evolution and growth of Infosys. Consensus building, value sharing and transparency were thus written into the genes of the organization. Infosys truly inaugurated the era of the New Age Ethical Business in India.
Contrast the three with Raju, the only MBA in the leaders of IT majors in India. (Premji left the programme half-way for personal reasons) He started with construction business and without heritage or business pedigree, went on to create Satyam riding the wave of IT emergence in India. In spite of the growth, Raju was never certain of his place among the majors. He tried to mirror Satyam on GE by adopting their practices and mantras. What did Satyam represent that was different, valuable and loveable? It was entrepreneurial, fine. But the term 'entrepreneurial' has many unsavoury connotations as well. What else? Raju felt empty inside. He refused to accept that success had happened to him and he had little to claim for it. You know it, but you refuse to accept it. You are in denial.
So he surrounded himself with "success" - awards for corporate governance, awards for corporate social responsibility and whatever else. He surrounded himself with "supporters" - note that many of the independent board members were Telugu speaking persons. In the end, he tried to surround himself with real estate. He tried to create a make-believe world around him and spun the fiction of numbers to keep that world intact.
But the hard world dashed against the make-believe world and it came crashing down. The success of Satyam owes itself to the entrepreneurship of Raju, the hard work of Satyamites and a favourable market environment. The twist in the tale came from Raju's refusal to accept that his role was limited and not larger-than-life.
Ratan Tata and Premji have been scions of business families and the name Tata enjoys unparalleled prestige in India. Obviously both are secure in their own ways, but not a little on account of the shareholding the former commands without owning and the latter owns and commands. I have seen men in high positions become insecure both materially and psychologically. Material insecurities can be provided for and insured against. One way to deal with psychological insecurity is to create a circle around oneself consisting of trusted, reliable and respectable supporters. It's important that these people are supporters.
Neither Tata nor Premji seem to have gathered such supporters around them. Instead they chose professionals for their competence and commitment. In case of Narayan Murthy, he had the co-founders - all professionals - with him and from the beginning he was the first among the equals. This had a lasting impact on the evolution and growth of Infosys. Consensus building, value sharing and transparency were thus written into the genes of the organization. Infosys truly inaugurated the era of the New Age Ethical Business in India.
Contrast the three with Raju, the only MBA in the leaders of IT majors in India. (Premji left the programme half-way for personal reasons) He started with construction business and without heritage or business pedigree, went on to create Satyam riding the wave of IT emergence in India. In spite of the growth, Raju was never certain of his place among the majors. He tried to mirror Satyam on GE by adopting their practices and mantras. What did Satyam represent that was different, valuable and loveable? It was entrepreneurial, fine. But the term 'entrepreneurial' has many unsavoury connotations as well. What else? Raju felt empty inside. He refused to accept that success had happened to him and he had little to claim for it. You know it, but you refuse to accept it. You are in denial.
So he surrounded himself with "success" - awards for corporate governance, awards for corporate social responsibility and whatever else. He surrounded himself with "supporters" - note that many of the independent board members were Telugu speaking persons. In the end, he tried to surround himself with real estate. He tried to create a make-believe world around him and spun the fiction of numbers to keep that world intact.
But the hard world dashed against the make-believe world and it came crashing down. The success of Satyam owes itself to the entrepreneurship of Raju, the hard work of Satyamites and a favourable market environment. The twist in the tale came from Raju's refusal to accept that his role was limited and not larger-than-life.
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