Thursday, 27 October 2016

The Tata “Mistry” and its implications

25th October 2016 was certainly a red-letter day in corporate history when the sitting, hand-picked Chairman of the Tata group and the single largest individual shareholder was sacked ignominiously with no prior information. The fact that this was done through the press with vague reasons like “performance and ethics” causing his downfall did not convince anyone.

This article would like to present another perspective. I have had no association with the Tata group and my comments are based on my understanding of the corporate world after spending almost 4 decades in this fascinating yet dog-eat-dog and highly politicized world. I have taken the liberty of using Bhishma Pitamah as a parallel for Ratan Tata, Arjun for Cyrus Mistry and Yudhishtar for the Tata Sons board.

Various television channels, with dozens of corporate gurus, have been pontificating about the Group and the key players, the flamboyant and highly visible Ratan Tata and the underplayed and introvert Cyrus Mistry. Obviously, most of these “gurus” have taken the side of the Tata group because that is the side their “bread will be buttered” for a long time to come. They are questioning the use of the term “lame duck” and the silence of Cyrus Mistry over the past 4 years. I would like to ask these “gurus” what else could they expect from a worthy successor of Ratan Tata who had inherited major problems, especially because he was not just the unanimously elected Chairman but also a shareholder. Cyrus Mistry was caught in an unenviable position – damned if he did and damned if he did not. Had he complained about the problem, our pundit would have written his epitaph very early stating that he was not large enough for the shoes of Bhishma Pitamah, My admiration for Cyrus Mistry goes up exponentially since he decided to clean-up after his more illustrious predecessor without washing their dirty linen in public.

The doyen of corporate India, Bhishma Pitamah Tata, who will be 79 years on 28th December 2016, was responsible for the exit of most of the Tata group company leaders when he took charge as group Chairman (after a rather non-descript stint at the now defunct Nelco) built a strong brand and large global business that had its share of big successes and equally large failures. Since 1991, when took over as Chairman, he strode the corporate world like a colossus buying businesses. He promulgated the “retirement” age of the Tata group at 75 years, while most companies in corporate India still keep this age between 58 – 65 years. When he announced that he would be stepping down to bring in younger leadership, the world applauded his forward looking thinking. But like the old wise man from the Mahabharata, he assumed that he was tied to the throne as long as he was alive.

Cyrus Mistry, in his very Arjunesque manner, had his eyes only on the target of increasing the returns to shareholders and closing down failing and non-profitable businesses. He went about his work clinically, delivering results as is evident from his letter published in all the newspapers today. To quote him, “Despite all of the above, during my term, the operating cash flows of the group have grown at 31% compounded per annum. The Tata Group valuation from 2013 to 2016 increased by 14.9% per annum in rupee terms as against the BSE Sensex annual increase of 10.4% over the same period. The Tata Sons net worth has increased from approximately Rs 26,000 crores to Rs 42,000 crores, after considering the impairments. This has significantly strengthened our balance sheet, enhancing our ability to absorb further shocks from restructuring in the companies.

If this is not great performance, I fail to understand what is! Corus, Nano, Air Asia, Air Vistara, overseas hotels, and dozens of other businesses started the under the leadership of Ratan Tata were not viable and the losses of these businesses will surely have to be taken into account sooner than later because they cannot stay hidden in the vast balance sheets and myriad of companies of the group..

The Board is equally accountable and responsible for the developments in the Group. They cannot claim to be the proverbial ostriches who did not know what was going on and under the garb of seeking support, they have decided to support with a person they perceive to be the stronger of the two. Yudhishtar, in Mahabharata was asked whether the son of Guru Dronacharya, Ashwathama had been killed. Yudhishtar, who had never told a lie in his life looked at an elephant named Ashwathama who Bhim had killed and replied that “Ashwathama is dead”. Guru Dronacharya surrendered his arms and was killed. That was a changing moment in the battle. Yudhishtar, whose chariot, always moved a few inches above the earth, had knowingly colluded with an untruth and his chariot dropped to the ground.

The Tata Sons Board is no different from Yudhishtar. Not one of them had the courage to stand up to Bhishma Pitamah Ratan Tata. Losses were significant in most companies and yet these losses were being concealed in the books. Was there a threat that Cyrus Mistry would expose all in his efforts to clean-up?  Board members, who pride themselves for their impeccable track record are equally complicit since they meekly accepted the decision as a fait accompli. Was it the threat of malfeasance and being exposed which led to this change? If a fresh start is being looked, shouldn’t the entire board be changed?

The Tata Trusts which control a majority stake in Tata Sons have much to answer for as well. The stake holders in the Trusts are not only the trustees but the very large number of beneficiaries. What would happen to all the philanthropic work being down by these trust if Tata Sons has to take a write down of over US$ 19 billion?

The battle has just begun. The skeletons will start to tumble out of various closets and all the dirty linen is being collected for being washed in the public domain. The domino effect is only just beginning. The stock market has already wiped out Rs 23,000 crores of the Tata market value in 2 days.

The Tata group will now come under intense scrutiny. Its accounts will be looked at, its auditors will be questioned and its people will have to answer questions. They have given themselves four months to find a permanent successor to Cyrus Mistry, an uphill task but then the Board does not need to worry – they have the 79 year old Bhishma Pitamah to run the empire for as long as it takes.

Sometimes, the moral of the story is to “let sleeping dogs lie”!

The author is the founder Chairman of Guardian Pharmacies and the author of the best-selling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for an Eye and The Buck Stops Here - Learnings of a #Startup Entrepreneur. 

Twitter: @gargashutosh
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Integrity, Ethics, Principles, Value and Honesty in a Startup

Laying the foundation of an honest organization built with strong integrity and ethics is important to set the culture, direction, principles and priorities for any new company.

The lead has to be taken by the founder, the leader of the young startup, by setting the right example and setting the right standards at every step of the way. Values and principles established in the beginning will stand the tests of time. Shortcuts and unethical business practices will get enshrined in a young company at the start and will be very difficult to change at a later date.

The oft heard line “this is how it happens here” will be repeated by all future managers of the young company.

There is no Grey in Honesty – Only Black or White

To me, honesty is a simple black and white subject. There neither is grey in honesty nor is there any shade of white and black as I have heard many people say. Either you are honest or dishonest. I tell my young colleagues that before they leave home morning when they are alone shaving and look in the mirror, can they look at themselves directly in the eye and tell themselves

“I did no wrong yesterday and I did not knowingly harm anyone yesterday and I was honest to myself”

This I believe is the only explanation they would ever need to give to themselves. What anyone else thinks of them or their actions is of no relevance and does not matter. My advice to my young colleagues is

“If someone asks you to compromise your own ethical standards or asks you to do something you don’t think is correct, hear them out. You don’t have to implement their decision if you disagree. Go with your conscience. What you think is right is what the organization expects from you. You can’t please every manager or everyone in the company”.

Threshold of Conscience

As I progressed through my early working life, I began to understand that honesty had shades of grey and each person had his own threshold of conscience.

I have often argued with colleagues and friends whether using a company car to drop children to school or to take your wife shopping or charging a personal expense as official entertainment or converting a business class ticket into two economy tickets when travelling overseas on company work (so that your partner can fly free) is right or wrong. Most times the answer I got was that there was nothing wrong in this and these were “perquisites” of the job|

These are examples of when we change our own threshold of conscience to suit our own needs. We accept a position that we would normally not accept for our subordinates. We would also not accept this as correct if we hear someone else has done something similar. Then how can we rationalize this for ourselves?

On the other hand, I have recognized that very often in order to get work done, I have to accept what is the normal pattern of working in our country and I have learned not to question why most times, favors need to be done to get what is yours by right and not because you are asking for something to be done that is incorrect or out of turn.

A senior bureaucrat in a South East Asian country once told me that there was no corruption in his country. They believed in the philosophy of Cooperation, not Corruption.

“If you are going to do business in my country and make a profit, you need to cooperate and share a part of this profit with us”, he said. Quite an interesting perspective though not necessarily something to be emulated anywhere.

Gifting is another area where can always interpret several shades of grey. In our country, it is almost a culture to give gifts at Diwali every year and if a gift is not accepted, it is seen as an affront by the person giving the gift. Yet, if the person who the gift is for makes it abundantly clear that gifts are not welcome, then the practice of giving gifts comes to a stop. I had set in place a system whereby all Diwali gits received were handed over to the head of Human Resources and these were then given away to staff members at a Diwali party through a raffle. Senior managers were not permitted to participate in the raffle.

In conclusion, the leader sets the standards for integrity and honesty in any organization or indeed in any family. If the leader willingly compromises his ethical standards it is impossible to expect people down the line or other members of the family to comply with a dual standard.

As long as your own conscience is clear and as long as you know that what you are doing is right, keep moving forward.

The author is the founder Chairman of Guardian Pharmacies and the author of the best-selling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for an Eye and The Buck Stops Here - Learnings of a #Startup Entrepreneur. 

Twitter: @gargashutosh
Instagram: ashutoshgarg56
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Integrity, Ethics, Principles, Value and Honesty in a Startup

Thursday, 20 October 2016

Who is a Startup Entrepreneur?

The Oxford dictionary defines the word “entrepreneur” as “a person who sets up a business or businesses, taking on financial risks in the hope of profit”

So, just who is a startup entrepreneur?

In a broad overall sense an entrepreneur is a person who,

1.    Organizes a business venture and assumes the complete risk for the venture at times giving his personal guarantee and taking personal liabilities.

2.    Has looked at a problem and seen it as an opportunity. He would then develop on this opportunity to start something new with the intention of generating surpluses for himself or his investors.

3.    Has fire in his belly to do something and feels that his ambition is being held in check by corporate red tape. Though it takes more than just cleverness and frustration with the status quo to get an entrepreneurial venture off the ground.

4. Is someone who assumes the financial risk of the initiation, operation and management of the business

Most entrepreneurs are driven not by the need to make money, but by the need to make their dreams a reality. They are driven by their passion to implement their ideas and see these ideas succeed. The higher energy of the entrepreneur, driven by passion, is what is needed to provide the leadership to a team of people and to make the opportunity work in a challenging environment. More often than not, money is a byproduct of an entrepreneur's motivation rather than the motivation itself.

Entrepreneurs are participants, not observers; players, not fans. And to be an entrepreneur is to be an optimist, to believe that with the right amount of time and money, you can achieve anything. When an entrepreneur reaches an obstacle they turn it into an opportunity. Every entrepreneur does not have to be the initiator of an idea – he or she is the person who helps in implementation of the idea and build it into a successful commercial enterprise.

Failure is essential for any new entrepreneur to succeed. We cannot let any adversity pull us back. We have to learn from our mistakes and our adversities, accept the knock our profit and loss account will take and keep moving ahead. Every entrepreneur has to plan for the best but prepare for the worst.

I have seldom come across a “eureka” moment in the life of an entrepreneur. What these people build is based on grit, determination, hard work and a lot of personal and professional sacrifice. An entrepreneur’s “gut feeling” is often the subject of a lot of discussion and my own learning here has been that “gut feel” is the really the extract of one’s own experience and one’s ability for risk taking rather than some vision that an entrepreneur purportedly has had.

Contrary to popular belief, entrepreneurs aren't generally high-risk takers when they can't affect the outcome of the situation. They tend to set realistic and achievable goals, and when they do take risks, they're usually calculated ones based on facts and experience, rather than instincts.

If one is convinced about an idea, there is no better time than now to start one’s journey as an entrepreneur. The choice is yours and yours alone. Refuse to throw in the towel. Go that extra mile that failures refuse to travel. It is far better to be exhausted from success than to be rested from failure

Building a new company is very hard work. The hardest part of building a new company is not coming up with a new idea but to stay committed to your dream when you are dead tired or when you have to tell your spouse that you cannot go for a party because your work needs you more. If a person is not willing to give up on things really important to you or if you are likely to be put down because of a rejection, it will be very difficult to stick to and implement your idea.

The proverbial “Buck Stops” at the desk of the Entrepreneur. He is the person who has to find the money at the end of each month to pay for salaries and other operating costs, most often sacrificing his own comforts and drawing no salary, till the company starts to make an operating surplus or a profit.

As someone said "A child today can expect to change jobs at least seven times over the course of their lives; and five of those jobs don't exist yet." You never know if your dream enterprise will be one of the many new job creators in the World.

There has never been a better time to build your own enterprise. Every country and every government is encouraging Startups and Entrepreneurship. Take the plunge and start your planning process now. There is no day as good as today to make a beginning if you genuinely believe in your dream.

The author is the founder Chairman of Guardian Pharmacies and the author of the best-selling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for an Eye and The Buck Stops Here - Learnings of a #Startup Entrepreneur. 

Twitter: @gargashutosh
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