CFO India - October 2009 by Bhupinder Sharma

OUT OF THE BOX THINK DIFFERENTLY, HARSH GOENKA TELLS CFOS p.12

NOT JUST A RAINMAKER SUZLON CFO SAYS TOUGH TIMES WON’T LAST FOREVER p.24

CFO INDIA cfo-india.in

NERVES OF

STEEL Koushik Chatterjee of Tata Steel looks to weather storms.

p.16

PUBLIC ATION

OCTOBER 09 VOLUME 01 ISSUE 01 Rs 50

CFOSPEAK FINANCE EXECS STILL PREFER PRINT MEDIA p.42

contents

16 Koushik Chatterjee

OCTOBER 2009 VOLUME 01, ISSUE 01

cover story

16 NERVES OF STEEL

12 Harsh Goenka

Koushik Chatterjee faces his toughest challenge yet By Bennett Voyles 24 Robin Banerjee

cfo profile insight 24 NOT JUST A RAINMAKER Robin Banerjee hopes to ride out the bad times By Ullekh N.P.

view from the top 12 OUT OF THE BOX CFOs should think differently as the going gets tough By Harsh Goenka

big picture 42 CFOSPEAK Finance executives still prefer print media By Ullekh N.P.

COVER DESIGN BY ANIL T

MEXI XAVIER

in practice

38 OUTSOURCING GETTING INFRASTRUCTURE OFFSHORING RIGHT More companies are offshoring their infrastructure work, and most of them are facing problems of transition. By James M. Kaplan, Ari Libarikian and Stuart Morstead

i think 14 CUT COSTS, INVEST WISELY ISSUES THAT KEEP A CFO UP AT NIGHT There’s no such thing as free lunch By V. Balakrishnan

cfo lounge 48 GIZMOS 49 TRAVEL

28 RISK MANAGEMENT

Decline in political risk is a boon for India Inc By Ullekh N.P.

30 WORKING CAPITAL

Most companies are interested only in temporary fixes By Burzin Dubash

32 STRATEGY

Everything about your business needs to be re-thought By Donald L. Laurie and Bruce Harrel

AD INDEX

Wipro Inside Front Cover

Everest Motivation Team 29

from the editor’s desk advisory panel topline leader’s world art review books

Financial Executives 35

ISB Inside Back Cover

ICRA Back Cover

OCTOBER 2009

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from the editor’s desk ANURADHA DAS MATHUR editor@cfo-india.in

CFO INDIA cfo-india.in

MANAGING DIRECTOR: Dr. Pramath Raj Sinha

Meeting of Minds…

I AM SELDOM at a loss for words, but as I put pen to paper for the editorial of our launch issue, I seem to be. This is a special moment and I want to share with you the compelling reason for launching CFO India. But there are many more than one, and I cannot prioritise. So indulge me as I go with the flow of thoughts in my head. Exactly 10 years ago, I started my journey with India’s CFO community. At the turn of the decade, it seems fitting to make a new beginning. The commitment to engage with India’s CFOs has been overriding for us at 9.9 Media; as has been our keenness to contribute to building the next-generation of finance leaders. Since a magazine is integral to building and serving communities, in some ways CFO India was waiting to be born! The Economist Group’s CFO publications were my inspiration when I began. Today, we are seeking to fill the gap left by their closure, at least in this part of the world. And even better it. If I had attempted this in the late 1990s, I would have been apprehensive. Today, India and all of us who live in it have much greater confidence in our potential, our abilities and our dreams … much like the “tentativeness” of the CFOs of the late 1990s has given way to a newfound self-belief, an aspiration to be the best. As I think what lies at the core, I realise that it is almost always, people. I believe India’s professional finance community is abundant—both in terms of quantity and quality. And since CFO India hopes to offer a platform where all of you who represent this community will share your experiences, your learnings, your challenges and your successes, I have no doubt that it will stand testimony to our high quality benchmarks and years of collective wisdom. Finally, while we will do our best, our success will depend on how demanding and how engaged you are with us—that’s where the rubber hits the road. So please write in with your reactions, comments, ideas and contributions—and help us win! With my very best wishes and hoping to hear from you soon,

EDITORIAL CONSULTING EDITOR: Ullekh NP CONTRIBUTING EDITOR: Bennett Voyles DESIGN SENIOR CREATIVE DIRECTOR: Jayan K Narayanan ART DIRECTOR: Binesh Sreedharan ASSOCIATE ART DIRECTOR: Anil VK MANAGER DESIGN: Chander Shekhar SENIOR VISUALISERS: PC Anoop, Santosh Kushwaha SENIOR DESIGNERS: TR Prasanth & Anil T THE CFO INSTITUTE EXECUTIVE DIRECTOR: Deepak Garg NATIONAL HEAD: Bindu Krishna MANAGER: Poonam Bhargava ASSOCIATE: Priyam Mahajan SALES & MARKETING V-P SALES & MARKETING: Naveen Chand Singh NATIONAL MANAGER (SALES): Pranav Saran (+91-9312685289) NATIONAL MANAGER (EVENTS & SPECIAL PROJECTS): Mahantesh Godi (+91-9680436623) NATIONAL MANAGER (ONLINE): Nitin Walia (+91-9811772466) ASSISTANT BRAND MANAGER: Arpita Ganguli CO-ORDINATOR (AD SALES, MIS, SCHEDULING): Aatish Mohite SOUTH: Vinodh Kaliappan (+91-9740714817) NORTH: Vipul Goel (+91-9654447689) WEST: Sachin N Mhashilkar (+91-9920348755) PRODUCTION & LOGISTICS SENIOR GENERAL MANAGER (OPERATIONS): Shivshankar M Hiremath PRODUCTION EXECUTIVE: Vilas Mhatre LOGISTICS: MP Singh, Mohamed Ansari, Shashi Shekhar Singh OFFICE ADDRESS Nine Dot Nine Interactive Pvt Ltd C/o K.P.T House, Plot 41/13, Sector-30, Vashi, Navi Mumbai-400703, India PRINTED AND PUBLISHED by Kanak Ghosh for Nine Dot Nine Interactive Pvt Ltd C/o K.P.T House, Plot 41/13, Sector-30, Vashi, Navi Mumbai-400703, India EDITOR: Anuradha Das Mathur C/o K.P.T House, Plot 41/13, Sector-30, Vashi, Navi Mumbai-400703, India PRINTED AT Silverpoint Press Pvt. Ltd. D 107,TTC Industrial Area, Nerul, Navi Mumbai-400706

SUBSCRIBER SERVICES: Call +91-11-45069999 Visit CFO India’s Website

OCTOBER 2009

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advisory panel Like accidents on the road, sometimes crises happen. Fear of crises is no reason to abandon the use of valueincreasing riskmanagement practices.

It is important for the CFO to learn, network and stay updated. I think the magazine will serve those purposes. I will look forward to it each month.

Bhagwan Chowdhry

Giri Giridhar

JK Jain

CFO, Aditya Birla Retail

CFO & Senior V-P, DCM Shriram Consolidated

Professor of Finance, UCLA Anderson

For the CFO, the trick is to understand which of the two methods, financial or operational hedging, is better suited for firms. In other words, the role of the CFO is intimately tied with the role of the CEO ... and risk management in companies needs to be integrated with corporate strategy. 4

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A OU CG TO UBS ET R2 02 0 90 9

My congratulations. You are attempting a 360-degree approach in servicing the needs of India’s CFOs through discussions, monthly breakfast sessions, etc.… For the finance professional of today, it is an uncertain world and it is important for him to learn, network and stay updated.

I am very happy that 9.9 Media is launching CFO India. I feel the timing is just right, with the world coming out of a worst-case scenario.

I am sure India’s finance community will have a lot to share and a lot more to learn through exchange of experiences and new ideas for which CFO India will offer a platform. I strongly feel that finance professionals will have to devote a lot of time in updating their knowledge.

CFOs have to be better informed ... they must sharpen their focus on the global environment.

TV Mohandas Pai Director, HR, Infosys

The last decade was the decade of the recognition of the CFO. This decade will be the leadership decade for the CFO … there is an urgent need for every CFO to build a team of high achievers, who have both domain and execution capabilities, to help in the decision-making process.

I am glad that 9.9 Media is coming out with a much-needed magazine.

The CFO community has a divide of seniors and juniors … I hope that CFO India will help in mentoring those juniors with the help of the seniors.

We have to revise curriculums in our finance education to enable a continuous learning programme. CFO India’s contribution in this regard is very welcome.

CFO India will enable budding Indian CFOs to make a mark in a world looking up to India for economic leadership. I wish CFO India all the very best.

Hari Mundra

R Natarajan

Ameet Parikh

Ravi Ramu

Former Joint Director, Essar Oil

CFO and Investment Advisor, Helion Ventures

MD and Founding Partner, Axis Risk Consulting

Director, Puravankara Projects Ltd

CFOs need to focus on the “how” of the finance function as much as on the “what” of this function so that the benefits of their training can be delivered across the organisation ... it is the gap in proper management of the finance function that I hope CFO India will seek to fill.

As more and more CFOs emerge, the challenge is to distinguish their roles and train them in emerging as CFOs, as against their role as finance controllers … it is important that CFOs develop a business perspective without losing sight of controllership and compliance.

I seem to be making the same observation each year—never before has the role of the CFO been more demanding to respond to the current business challenges. The variables that a CFO needs to deal with are getting greater, more complex and have a greater impact on business.

India finds itself poised to grasp an unprecedented opportunity on earth. Nothing else in economic terms as exciting and different has come our way for over two centuries…. Indian finance officers need a constant and regular dose of news and topical financial literature.

There has always been a need for a publication that connects the finance community in India to share ideas, strategies, and best practices.

Suresh Senapaty CFO and Director, Wipro

The finance function in the country has transformed in a variety of ways over the past one decade— thanks to overseas listings, global M&As, adaptation of newer accounting standards and so on. I am sure that CFO India will provide a much-needed platform. My best wishes.

OACU TG OU BE SR T 2009

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10.09

topli K-G GAS DISPUTE

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

ANOOP PC

WARREN BUFFETT

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OCTOBER 2009

Gas is thicker than blood IF HE WERE IN RUSSIA, ANIL DHIRUBHAI AMBANI WOULD’VE INVITED BIG TROUBLE for running an ad campaign against the government. But India is a great democracy and he is no Mikhail Khodorkovsky, once Russia’s richest man, who is now languishing in a labour camp for speaking out against former president Vladimir Putin. In fact, the ad blitzkrieg helped him keep the issue--gas dispute with his estranged older brother Mukesh-alive in the run-up to the Supreme Court hearing on the case that started on 20 October. Through ads splashed across national dailies some months ago, Anil, the head of the Reliance-Anil Dhirubhai Ambani Group, had alleged that the Union ministry of petroleum headed by Murli Deora was serving the interests of Mukesh Ambani’s Reliance Industries Ltd in the Krishna-Godavari gas dispute. He had also accused the Centre of hurting the interest of state-owned NTPC Ltd in the dispute. Deora was a confidant of the late founder of the Reliance group, Dhirubhai Ambani, father of the warring brothers. R-ADAG unit RNRL wants gas to be supplied to it from RIL’s D-6 gas field in the KG basin on a prior-

ity basis at $2.34 a unit for 17 years under a 2005 family agreement; RIL wants to supply it gas at a government-mandated price of $4.2 a unit. RIL now maintains that gas is a sovereign property and that it is not the owner of the gas---and therefore it can’t fix the price. Like RNRL, NTPC is also engaged in a legal dispute with RIL for getting gas from the KG basin at a committed price. The government had kept silent for a while before refuting Anil’s arguments that the ministry’s alleged collusion with RIL will cause a loss of Rs 30,000 crore to NTPC. The government had later hit out at Anil for unleashing an ad campaign in the run-up to the Supreme Court hearing on the gas dispute case in October-end. However, the interesting fallout of the ongoing spat--and Anil’s media blitzkrieg---is that the government revised its petition filed in the Supreme Court on the price that NTPC has to pay to RIL for gas from the KG basin. It also said it no longer wants the court to strike down the Ambanis’ private family MoU entered into when the brothers parted ways in 2005. The Bombay High Court had in June ruled in favour of Anil. RIL has challenged that verdict in the apex court. The Centre maintains that the Mumbai High Court’s verdict has adversely affected its sovereign rights over gas. RIL had earlier called “ridiculous” another of RNRL’s claims that there is no demand for KG-D6 gas priced at $4.2 a unit at a time when Indian companies consume LNG at $6.9 a unit. ‘‘Under these circumstances, the statement that there is no demand for KG-D6 gas priced at $4.2/mmbtu is ridiculous,” said the letter. Meanwhile, Anil’s recent--and dramatic--appeal for rapprochement with his brother has received cold response from RIL. “Sadly, the conduct of ADAG so far makes it difficult for RIL to believe that Anil Ambani has had a real change of heart. For the last many years, he has indulged in a malicious campaign against RIL and its chairman.” The truth is that the gas dispute between the brothers continues to make headlines and spill on to the corridors of power in a country where fertiliser and power firms are grossly starved for fuel.

SWINE FLU

ZINKWORX/ AMRITA

SWINE FLU HAS SO FAR CLAIMED 415 LIVES IN THE COUNTRY AND HURT BUSINESSES

Feverish Business The swine flu panic may be slowly wearing off, but at least 415 people have died due to the dreaded flu since its outbreak in the country nearly five months ago. And it continues to hurt the tourism industry, say experts. Coming less than a year after the Mumbai terror strikes of November 2008, the panic continues to hit India’s businesses, marked largely by a fall in hotel occupancy and flight cancellations. Several people have delayed business trips to the country as well as to overseas destinations, especially China, Europe and the US, according to tour operators. Domestic passenger fares and hotel-room rates, especially in the metros and tourist destinations, have nosedived, they added. Health-care experts say the pandemic has exposed India’s lack of preparedness, even at its major cities such as Delhi and Mumbai, in tackling outbreaks of such diseases. Meanwhile, the government, which is grappling with the pandemic, has decided to allow retail sale of H1N1 drug Tamiflu, but only through 480 select outlets across the country. Until now, Oseltamivir or Tamiflu was made available only through government channels. The drug will, however, be available only after a proper prescription from a registered medical practitioner. According to reports, the decision was taken after several rounds of consultations and meetings undertaken by the Union health ministry over a few weeks. A health ministry official said the drug has been kept under the Schedule X of the Drugs and Cosmetics Act to prevent its misuse or overuse.

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Armed action IN 2006, GLOBAL BROKING FIRM CLSA HAD warned that India’s Maoists are likely to chase away around $85 billion in investments across hundreds of districts controlled by them. Nearly 200 districts across nine states are affected by Maoist insurgency. Three years later, the Indian government is readying for a major battle plan to tackle the insurgency that started 42 years ago. Since then, it has spread far and wide. In fact, there is a Red Corridor, running from the Nepal border in the north to Andhra Pradesh and pockets of Karnataka in the south. “Private sector investment, vital to the overall development of any region, may not take place if the government cannot find a sustainable solution to what it insists is a law-and-order problem,” CLSA had said in a special report on Maoists. Several of India’s big corporations have lined up investment plans in affected states such as Chhattisgarh, Jharkhand, Orissa and Andhra Pradesh. The Manmohan Singh-led government is setting up a special forces school and a special forces unit for the purpose. The home ministry is also looking at deploying Rashtriya Rifles in affected areas, especially in Maharashtra and Chhattisgarh. However, the government has come under attack from a section of human rights activists who say it is exaggerating the threat.

ZINKWORX/ AMRITA

topline

WAR ON MAOISTS

CONSOLIDATION MOVE

Birla is cementing plans The Aditya Birla Group plans to consolidate its cement units into one entity. It will first spin off flagship Grasim’s cement operations and then merge it with UltraTech Cement Ltd, which was acquired from Larsen and Toubro, in 2005. The move will create the world’s 10th largest cement maker and India’s largest.

PAY PACKET

Govt favours trimming “vulgar” salaries CORPORATE AFFAIRS MINISTER Salman Khurshid has kicked off a debate by asking India Inc not to offer “vulgar” pay packets to chief execu-

tives as part of efforts to put a check on public expenditure. But the country’s industry chambers believe that any move to limit remuneration to top company executives will only result in flight of talent. “...when we are working on this (austerity), we can hardly say that we (will) shut our eyes on what salary the CEOs are going to take,” Khurshid told news agency PTI when asked how the KHURSHID SAYS CORPORATE HOUSES SHOULD CUT CEO REMUNERATIONS

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OCTOBER 2009

government intends to control salaries of CEOs. According to Khurshid, the salaries of CEOs should be decided by company shareholders. “I don’t think anyone in India today ... has reached the level of liberalism where vulgarity is also a fundamental right,” he said. The issue regarding remuneration of company CEOs will be debated by the Parliamentary Standing Committee, which is scrutinising the provisions of the new Companies Bill tabled in the Lok Sabha in August.

FAILED MERGER

Water, water, on the moon

Business at the altar of nationalism

THOSE WHO SQUIRMED WHEN INDIA TERMINATED ITS FIRST MOON mission– Chandrayaan-I –after scientists lost contact with the unmanned spacecraft two months ago would now regret blaming everything on “Indian incompetence”. There were also criticisms of “exorbitant costs” for the mission which Indian Space Research Organisation (ISRO) chairman Madhavan Nair had said achieved 95% of its scientific goals. However, skeptics at home were silenced late last month after NASA made a revelation that Chandrayaan-I had traced water molecules on the moon’s surface. “We want to thank ISRO for making the discovery possible. The moon till now was thought to be a very dry surface with lot of rocks,” NASA said in a press conference. “Discovery of water is a major leap in our knowledge of the moon. NASA’s instruments helped finding the water molecules in collaboration with ISRO,” NASA said. The instruments aboard three separate spacecrafts, one of them the Moon Mineralogy Mapper, a NASA instrument onboard Chandrayaan-I revealed water molecules in amounts that are greater than predicted, but still relatively small, it added. “Water ice on the moon has been something of a holy grail for lunar scientists for a very long time,” said Jim Green, director of the Planetary Science Division at NASA headquarters in Washington. “This surprising finding has come about through the ingenuity, perseverance and international cooperation between NASA and the India Space Research Organisation,” he said. ISRO, meanwhile, has said the next stage of the moon mission, Chandraayan-II, is well on track. Well, they now have a reason as clear as water to be bold.

CUSTOMER FIRST

SOURCE : SONY ERICSSON

People’s pulse FOR THE TELECOM REGULATORY Authority of India (TRAI), it seems, the customer is really king. It is planning to make per-second billing a mandatory option, a move that will reduce call charges. Most telecom companies now fix the minimum pulse rate at 60 seconds and customers end up paying for a full one minute even if their call lasts only TRAI’S MOVE WILL BRING DOWN one second. JS Sarma, chairman, CALL CHARGES TRAI, said, “We are looking at the possibility of making service providers offer to consumers per-second pulse as a mandatory option. In a month we might like to come out with a consultation paper.” People can literally count seconds to save money.

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LUNAR PHASE

SUNIL MITTAL SAYS HIS COMPANY WILL EXPLORE OTHER OVERSEAS OPPORTUNITIES

Several columnists have attributed the failed merger between India’s Bharti Airtel and South Africa’s MTN to what they call economic nationalism, which means mixing of political and business interests. While Bharti Airtel, which had the blessings of the Indian government for the proposed deal, blames the South African government for the collapse of the $24 billion planned deal, the latter is unrepentant about it: it didn’t want a flagship corporate to lose its national character. Following the failure of talks, Sunil Mittal-led Bharti said it will explore other overseas expansion opportunities “We hope the South African government will review its position in the future and allow both companies an opportunity to reengage,” the company had said. The merger to create the world’s third-largest mobile operator collapsed for the second time in just over a year on September 30. MTN said in a statement that the two groups were not able to conclude a deal within the economic, legal and regulatory framework in which both operated, according to a Reuters report. South Africa’s National Treasury said the transaction required exchange control and other approvals but added that it and India’s finance ministry were committed to working together to lay the basis to develop mechanisms for future mergers, the report added. Bharti and MTN revived talks in May, a year after the previous round of talks broke down over who would control the resulting entity.

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International topline

NOBEL FOR OBAMA

Carte blanche for peace TOO MUCH, TOO SOON. THAT WAS THE RESPONSE FROM SKEPTICS on hearing that US President Barack Obama has won this year’s Nobel prize for peace. While they say the prize shouldn’t have gone to the president who is in his first year in office, others say the Nobel committee found his promise of disarmament and diplomacy too good to ignore. Describing himself as surprised and deeply humbled, Obama has said he would accept the award as a “call to action” to confront the global challenges of the 21st century. “I do not view it as a recognition of my own accomplishments but rather an affirmation of American leadership on behalf of aspirations held by people in all nations,” he said after the Nobel committee’s announcement. The Norwegian Nobel Committee praised Obama for “his extraordinary efforts to strengthen international diplomacy and cooperation between peoples,” citing his fledgling push for nuclear disarmament and his outreach to the Muslim world. In the meantime, Obama is pushing ahead with health-care reforms that have generated a lot of controversy. He has come under attack over “socialist” policies. But the man has refuted the charges, including CHEMISTRY PRIZE the one that said the reform effort will insure illegal immigrants. “And one more misunderstanding I want to clear up — under our plan, no federal dollars will be used to fund abortions,” he said. “... the best example is the claim, made not just by radio and cable talk show hosts, but prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Such a charge would be laughable if it weren’t so cynical and irresponsible. It is a lie, plain and simple,” Obama said in a speech. “My health care proposal has also been attacked by some who oppose reform as a ‘government takeover’ of the entire health care system. As proof, critics point to a provision in our plan that allows the uninsured and small businesses to choose a publicly sponsored insurance option, TAMIL NADU-BORN RAMAKRISHNAN SHARES THE PRIZE WITH ISRAEL’S administered by the government just like Medicaid ADA YONATH AND AMERICAN THOMAS STEITZ or Medicare.” “... Without competition, the price of insurance VENKATRAMAN RAMAKRISHNAN HAS BECOME THE FIRST goes up and the quality goes down. And it makes India-born scientist to win the Nobel Prize in Chemistry, along with it easier for insurance companies to treat their custwo others. And suddenly there’s this talk that has resurfaced: Inditomers badly....” One of the plans is to get compaan scientists always have to leave the country and pursue research nies to offer insurance cover for chronic illnesses. abroad to receive such accolades. “…. I just want to hold them (insurance compaTamil Nadu-born Ramakrishnan is a senior scientist at the MRC nies) accountable. The insurance reforms that I’ve Laborartory of Molecular Biology at Cambridge. Ramakrishnan, already mentioned would do just that,” Obama said born in 1952 in Chidambaram, shares the prize with Thomas E Stein his speech. itz (US) and Ada E Yonath (Israel) for their “studies of the structure Even as the going gets tougher for Obama as and function of the ribosome”, the Nobel committee said. regards reforms at home, he also has to live up to All three recipients of this year’s prize have used a method called the great expectations of building peace elsewhere. X-ray crystallography to map the position for each and every one of After all, his troops are fighting two major wars--in the hundreds of thousands of atoms that make up the ribosome, the Iraq and Afghanistan. committee said.

Nobel’s Indian connection

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view from the top

Facts & Trivia

FATHER: RP Goenka, chairman emeritus, RPG Group EDUCATION: Graduated in economics from the St. Xavierâ&#x20AC;&#x2122;s College (India) and holds an MBA from IMD. POSITION HELD: Began his career as managing director of CEAT Ltd before taking up his current position ART FAD: An avid art collector, he is a board member of the National Gallery of Modern Art

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HARSH GOENKA

RPG ENTERPRISES CHAIRMAN explains why the role of the CFO is more important today than ever before

hey say challenging times bring out the best in competent people. And there are some roles which are by their very nature challenging ones, irrespective of the context. The role of chief financial officer is one such, where, apart from the usual responsibility of keeping a company’s finances in good health, a chief financial officer has to adapt to changing circumstances and situations, particularly in testing times. The past several months have tested the finest global corporations to the hilt. While some have wilted under the pressure of the global meltdown and its impact, the more dynamic ones have managed to innovate, seize the opportunities thrown up by the crisis, and steer themselves through the stormy waters. Crisis situations such as the intense slowdown witnessed over the past several months have shown that liquidity management is one of the key areas where a company’s top management will need to focus to stay safe in turbulent times. This apart, experts also point out that countercyclical actions are also good strategy. A competent CFO will need to play multiple roles during times of downturn. And those who can successfully and seamlessly play these roles well will be able to steer their companies forward successfully. An important role he needs to play is that of counsellor to other top executives in the company, in particular the chief executive. He has to be an able “minister” to his CEO. He has to also be a good reader of trends in the economy and the concerned industry. Competent chief financial officers must also constantly question conventional wisdom when times are challenging. He cannot rely on available facts and figures to tackle the situation in a downturn. He must not base his actions on existing assumptions. Rather, he must question, probe and come up with new innovative solutions. More importantly, he must insist on complete disclosure of all risks and contingencies by the businesses his firm handles and then go about drawing up strategic plans to tackle each. This methodical and thorough approach is what will differentiate him from the rest of the pack.

view from the top

Keeping costs in check is one of the critical deliverables of a good CFO when a downturn hits businesses. CFOs must ensure that costs across business lines are kept within tight, manageable limits, adhering to targets already drawn up. At the same time, he must ensure that the cost-reduction targets drawn up for each business is equitable, realistic and achievable. A downturn is also a good time to invest for the future. A recession will not last forever, so a good CFO has an eye on the silver lining, and is ready to commit investments now so that the benefits can accrue when the tough times recede. Recessionary times are also great opportunities for examining opportunities for growth. Acquisitions are reasonably priced. A good CFO should be able to come up with low-cost options which will fuel future growth.

Competent CFOs must constantly question conventional wisdom when times are challenging. He cannot rely on available facts and figures. As India sees what most experts are calling the beginning of an economic recovery process, most businesses which have successfully seen themselves through the rough weather will now start showing the results of prudent strategies implemented during the slowdown. Already, first-quarter results of companies are encouraging. As the corporate sector returns to a more encouraging growth path, I am happy that a magazine like CFO India is also entering the fray. The magazine segment is exciting, but competitive, and, like any other business, demands strategic foresight and agility from its participants. I hope CFO India can provide fresh insights and a strategic edge to its readers, helping them to tackle new challenges and emerge stronger in the rapidly changing global economic scenario. THE AUTHOR IS CHAIRMAN, RPG ENTERPRISES

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i think CUT COSTS, BUT MAKE RIGHT INVESTMENTS

V Balakrishnan, CFO, Infosys Technologies, talks about issues that keep him up at night

lobal slowdown: The top-of-themind concern today for the industry is the global economic slowdown and its impact on all the large markets in which we operate. The US and Europe are two large markets for us and the economic stress in those economies will impact our revenue growth. Currency volatility: Whether it is the rupee-dollar or the cross currencies, we have not seen such a high degree of volatility in the past many years. Any significant movement in currencies will have impact on our margins and reported dollar revenue growth. We are actively monitoring and hedging our exposures. But it is a big challenge. Balancing margins while investing for long-term: We run the organization in the same way both in good and bad times. But there is an enhanced focus on costs in tough times like what we see today. The biggest challenge is to focus on cost reduction aggressively but at the same time we have to make the right investments which are essential for long-term growth. It is a tough balancing act to do and proper communication with the stakeholders is the key. Maintaining liquid balance sheet: Cash is god and not king. In tough times like this one, the value of having a liquid balance sheet is extremely important and high. This helps you to derisk the business, invest for long term and it gives you confidence to take tough decisions. Maintaining high-quality growth: Balancing growth with profitability is the key to build companies in the long term. There is always a tendency to drop the guard

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V BALAKRISHNAN

and go behind volumes when things are tough. But the bottom line is that there is no free lunch. If you have to build a company for long term then you need to focus on high-quality growth. This means having superior growth with high profitability. High margins will give you more flexibility to handle tough times and will set you apart from competitors.

BALANCING GROWTH WITH profitability is the key to building companies in the long term. There is always a tendency to drop the guard and go behind volumes when things are tough. But the bottom line is that there is no free lunch. If you have to build a company for long term then you need to focus on high-quality growth. This means having superior growth with high profitability. High margins will give you more flexibility to handle tough times and will set you apart from competitors….The biggest challenge is to focus on cost reduction aggressively but at the same time we have to make the right investments which are essential for long-term growth. It is a tough balancing act to do and proper communication with the stakeholders is the key….Managing the scalability in terms of hiring, training, deploying and retaining the employees is the biggest challenge. Add to that we have to build the system and processes to support the growth and also maintain the culture…. In the long term, our ability to maintain high-quality growth depends on our ability to increase revenue productivity on a sustainable basis.

Managing the growth: This has always been a great challenge for us. Even this year we will be hiring close to 18,000 employees. Managing the scalability in terms of hiring, training, deploying and retaining the employees is the biggest challenge. Add to that we

have to build the system and processes to support the growth and also maintain the culture. Availability of talent: Hiring the right talent is the key to success in the service industry. Creating an environment to attract the best people and hiring

the right talent is important to sustain our growth. We need to hire more local talent in all our global operations and strengthen the front end. Changing the business mix: In the long term, our ability to maintain high-quality growth depends on our

“Hiring the right talent is the key to success in the service industry.” ability to increase revenue productivity on a sustainable basis. The challenge is to change the business mix to increase the contribution of revenues from IP’s, platforms, products, solutions, etc. We need to make the right investments and should build the right system to commercialise those opportunities.

HALF PAGE ADVT

OCTOBER 2009

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i think

There’s no free lunch

MEXI XAVIER

COVER STORY

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OCTOBER 2009

GOING BY

Book... THE

Beyond AND

As Tata Steel goes global, CFO Koushik Chatterjee faces his toughest challenge yet BENNETTT VOYLES

BINESH SREEDHARAN

JUNE 26. USUALLY, when Koushik Chatterjee is home in Mumbai, he drops his son off at school on his way to work. Even this morning, with an important analysts’ meeting on the agenda, he still takes the time to stop at the school. It’s an important part of their routine, at least for the 10 or so working days of the month he’s in town — a chance for a 15- to 25-minute conversation they wouldn’t get otherwise. But this time, it’s starting to look like a mistake. A heavy rain has begun to fall. There is so much water that, in fact, it has flooded the entrance to his seven-year-old’s school. Since he is in his suit, and the water is so deep, he can’t get down from his car. He and his driver stop and think about how to get him inside. Finally, Chatterjee decides to take the wheel. The driver will carry the boy in.

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COVER STORY | GOING BY THE BOOK & BEYOND

Ironically, part of what they will discuss at this meeting – if he ever gets there — is one of Tata Steel’s latest programmes, Weathering the Storm, a plan to try to stem the damage another unexpected storm — the economic crisis — has wrought on the company. The thought is that by converting more fixed costs to variable, the company will have an easier time rolling with the changes in the economic weather. Two years before, the young CFO had engineered one of the biggest coups in Indian business history: Tata Steel’s $12.9 billion leveraged buyout of Corus, the Anglo-Dutch steel giant. The deal, at the time, the largest-ever out of the subcontinent, catapulted Tata Steel from the 55th largest steel producer in the world to sixth – and made Chatterjee one of the best-known finance executives in the country. It was an enormous achievement on several fronts. In just 15 years, Tata Steel had transformed itself from a sleepy domestic steel company to a global giant. Over the same period, Chatterjee, then 38, had transformed himself too, rising from a post as an accountant working for Tata’s outside audit team to the top of one of the most profitable steel companies in the world. Nor was the deal only a milestone for Chatterjee and Tata Steel: many executives and pundits saw mergers such as the Corus deal and Tata Motors’ Jaguar/ Land Rover deal as a sign that Indian business was now a global player. Corus was supposed to give Tata Steel entrée to a wider world of mature markets and advanced metallurgy. But now, it wasn’t looking like such a smart idea after all. At the moment, the deal seemed to have succeeded only in sailing Tata Steel straight into the West’s perfect economic storm. Even Ratan Tata, the group chairman, seemed worried. Two months before, he had told a London newspaper that he thought Tata had gone “too far, too fast”.

The boy from Burnpur

If Chatterjee were another kind of character, it would be tempting to see the reversal of fortune as a financial buccaneer’s just desserts. But the soft-spoken executive doesn’t fit the profile. He doesn’t even seem to like the term “acquisition”. “We don’t acquire in the typical M&A sense,” he insists. “We want to work with partners.” Chatterjee’s feeling for business more as a cooperative struggle than a predatory one is perhaps natural for someone who spent much of his childhood and part of his adult life in company towns. The only son of an electrical engineer who worked for a state steel company, Chatterjee grew up in the lush company town of Burnpur, West Bengal. He attended St. Patrick’s, a Christian Brothers school now over a century old, on a large campus of brick buildings nestled within broad playing fields and parklands. At the time, Chatterjee had no long-term ambitions. He liked school, but he loved playing sports in the fields and hiking in the 18

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“KOUSHIK HAS THIS UNIQUE COMBINATION OF SOUND FINANCIAL ACUMEN AND A GOOD KNOWLEDGE OF BUSINESS FUNDAMENTALS. HE IS A STRATEGIST.... HE THINKS IN ADVANCE. HE IS UNFLUSTERED BY BIG CHALLENGES (AND) ALWAYS COMES UP WITH SOLUTIONS AND NOT JUST WITH PROBLEMS.” >> B MUTHURAMAN, FORMER TATA STEEL MD, ON CHATTERJEE

woods beyond even more. “I was just living and having fun in the present,” he says. After high school, his parents sent him to Calcutta University, where he studied commerce and accounting. His father arranged for him to live in a Salvation Army hostel across the street from Mother Teresa’s home. “I had the option of staying with a few of my relatives in Calcutta and he actually insisted that I stay in a hostel and find out about life by myself,” he says. It wasn’t only a student hostel, he says, “but a place for working men, students, all sorts of people”, and his father saw it as an important part of his education. Before his father left him to start his studies, he offered some tough advice. “You’re grown-up now,” he told him. “You can go to one extreme and do something constructive and do something in your career. Or you can just waste your time.” “Those words used to haunt me for a long time,” Chatterjee says. But he thinks now that they also helped steel him for the work ahead. Chatterjee did well at school, and eventually graduated with honors, but life at the hostel was hard at first. The hostel was

GOING BY THE BOOK & BEYOND | COVER STORY

Off to Jamshedpur

Far from a hardship post, Jamshedpur turned out to be a pleasant town that seemed to him like a larger, more organised version of Burnpur. A tidy company city of one million named after the Tata Group’s founder — and still managed by Tata Steel — Jamshedpur is reputed to have one of the highest per-capita incomes in the country, and unusually good infrastructure. In fact, Chatterjee says that with its many recreational facilities and high level of organisation, Jamshedpur, now in Jharkhand, may be the best place to live in India. For the next two years he worked for Billimoria, which audited Tata Steel. Then in 1995, he moved to the other side of the table. Ishaat Hussain, the CFO at the time, recalls the interview–at least a little. “I don’t think I’m that hot at spotting talent that I said ‘this is the guy for me’,” says the Mumbai-based executive. “But when we interviewed him he was competent, he had a good exam record. I spoke to my colleagues he used to interact with when he was doing the audit and they gave good reports about him,” he says. Chatterjee kept busy during those years, and not just at work. As much he might like the idea of golfing and other outdoor recreation available in Jamshedpur, he didn’t actually spend much time at it. Every night after work for several years

The secrets of his success REACHING THE TOP finance job of a global giant in your 50s

is hard enough. What does it take to get there by 36? A look at the career of Koushik Chatterjee at Tata Steel offers some surprising answers. READ MORE. One of the qualities that attracted the attention of Chatterjee’s boss, Ishaat Hussain, was that he read a lot. Of course, he was good with

numbers, but he also understood the world beyond the spreadsheet. MOONLIGHT. TEACHING finance at night might sound like a complete distraction for a focused junior executive, but it didn’t work out that way for Chatterjee. In fact, the years he spent in the 90s as an evening instructor at the Xavier Labor Relations Institute in Jamshedpur seems to have had a profound impact on his career. “It used to certainly supplement my knowledge, but I would also say that it gave me a whole different perspective,” he says. One important element: facing 50-70 people every night. DON’T WAIT FOR THE BOSS’S OKAY. One of the most valuable

elements of being Hussain’s protégé, Chatterjee says, was that he didn’t tell him how to do everything. “He would not ever tell me what to do or what not to do,” he says. Not being prescriptive forced him to take responsibility for the projects he took on. GO HOME EARLY. Chatterjee has a long day, but not an impossible one. Although he travels about half the month, when he’s in town, he says, he is often home by 7:30. “Traveling always is not very constructive,” he says. “You need to settle down, apply your mind and work — meet your colleagues and talk with them.” During the week, he turns down most dinner invitations. Weekends he spends with family and friends.

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BY ANIL T

a clean, pleasant place, but he wasn’t used to sharing space with people from all walks of life. “I was the only son, so I’d had a fairly protected and isolated life for myself,” he explains. Over time, however, the hostel became a new home. “I made many friends.... I still have them,” he says. Not just accounting students, but students preparing for other professions as well. The Calcutta chapter of Chatterjee’s life lasted all through his undergraduate course, then the other studies and the trainee post that led to his certification as a chartered accountant. But in December 1992, that period suddenly ended. His hostel was near the heart of the devastating HinduMuslim riots. For several days he and his fellow residents were without food. “It was very, very dangerous ... going without food is not so dangerous, that’s the easy part,” he says. When the riots ended, Chatterjee wanted out. “I said that I have had to live a very different kind of life for the past sixand-a-half years, but this is may be going too far,” he recalls. Soon after, Chatterjee interviewed with S B Billimoria & Co., an auditing firm that had an opening in Jamshedpur, which was then part of Bihar. The firm was having trouble finding someone to go to the quiet company town. But Chatterjee accepted, sight unseen. How can you be so confident? the partner asked. “I’m not confident, I just want to go,” he remembers saying. But the partner persuaded him to visit one weekend, first, to see if he liked it. And he did.

COVER STORY | GOING BY THE BOOK & BEYOND

during this period, he taught finance to classes of 50-75 MBA students at Xavier Labor Relations Institute, a highly ranked business school. He taught part-time at first, he says, then finally every weeknight. A colleague at XLRI, H.K. Pradhan, a professor of finance and economics, recalls him as “a very good teacher, a very lucid teacher”. He was popular too — at least with the students. But as much as Chatterjee liked living in Jamshedpur and teaching at XLRI, when Hussain asked him in 1998 to move to Mumbai to work as one of his assistants, he went. “One needs to keep the learning cycle going,” he explains. At first, Chatterjee seemed to Hussain like many of his other assistants — hard-working, friendly, good with figures, but nothing exceptional. Later, after working with him “24 by 7,” Hussain began to see something else, something special. “I realised that he was quite different than the others. He had a broader vision.... He read a lot, and he was not really the bookkeeping accounting type, but he was much more versatile than that.... I then saw that he had great potential,” Hussain said. Hussain kept giving him larger and more complex projects. “My own style is I give people a long rope and either they sink or they swim, and he swam very well,” he says. Chatterjee, he saw, had a trait that he recognised in himself, the single-most important trait a successful finance officer must have: “He learns very fast,” Hussain says. “If I were to single out a single attribute which distinguishes him it’s that he’s a very very quick learner. He’s learnt more than I have now.”

Tata Sons & the Sons of Tata Steel

In 1999, Hussain was promoted as a director of Tata Sons, the holding company that holds the Tata family’s interests in the independently run Tata Group companies. When Hussain’s promotion came through, he took Chatterjee along as an assistant. Looking after the Tata family’s interests in the group brought Chatterjee an even greater variety of assignments–including some valuable experience on mergers and acquisitions. Chatterjee says Hussain was a great mentor. “Mr Hussain is an extremely high-quality coach. He let people do what needed to be done. He is not interfering, he gives them space and yet holds people accountable to decisions,” Chatterjee says. The fact that he wasn’t at all prescriptive allowed him to develop his own style and take more responsibility for his own work. Hussain had only one injunction, Chatterjee recalls. “When you negotiate,” he always said, “don’t be stupid, but do the deal.” As Hussain’s right-hand man, Chatterjee began meeting a lot of people around the company, especially after 2001, when Hussain became the finance director of Tata Sons. Eventually, Chatterjee caught the eye of B. Muthuraman, the managing director of his old company. One day in 2003, Muthuraman raised the possibility of making Chatterjee the next chief financial officer of Tata Steel with Hussain. Hussain gave the appointment his blessings. First, because he didn’t think it’s good for someone to stay as someone else’s assistant for too long. And second, because he thought Chatterjee was ready. In the beginning, Chatterjee didn’t want to leave. Then Muthuraman finally persuaded him to make the move, “MR HUSSAIN IS AN EXTREMELY HIGH-QUALITY COACH. and Hussain let him go. Although he HE LET PEOPLE DO WHAT NEEDED TO BE DONE. HE IS NOT was in the midst of the Tata Consulting INTERFERING, HE GIVES THEM SPACE AND YET HOLDS Services’ IPO, he re-joined Tata Steel PEOPLE ACCOUNTABLE TO DECISIONS.” in August 2003 and took over as vice>> CHATTERJEE ON FORMER MENTOR ISHAAT HUSSAIN president for finance in August 2004. Five years later, Muthuraman is still enthusiastic about Chatterjee. “Koushik was an easy and automatic choice for Tata Steel’s CFO,” says Muthuraman. “Koushik has this unique combination of sound financial acumen with a good knowledge of business fundamentals. He is a strategist. He thinks in advance, is unflustered by big challenges, always comes with solutions and not with only problems.” Others note how calm he is, even in the tensest situations. No matter how bad the news, “there’s never panic, there’s never anger, there’s never a violent reaction. It’s always an incredible

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GOING BY THE BOOK & BEYOND | COVER STORY

Two years before, the young CFO had engineered one of the biggest coups in Indian business history—Tata Steel’s $12.9 billion leveraged buyout of Corus. The historic deal catapulted

Tata Steel from the 55th largest steel producer in the world to sixth –and made Chatterjee one of India’s bestknown finance executives. calming kind of approach”, says Pramit Jhaveri, vice-chairman of Asia Investment Banking for Citibank in India.

In the C-Suite

When he took the job, Chatterjee says, Hussain advised him to move quickly to try to win over his department, particularly since many of his reports were older and more experienced than the 36-year-old executive. Chatterjee tried to be frank about the awkwardness of that situation, and told them he valued their support. “It perhaps took time but many or most of them had a reasonable kind of understanding,” he says. Part of what helped, perhaps, was Chatterjee’s decision to take a page out of Hussain’s book. “What I learned from Mr. Hussain is to give people space and to give them the responsibility,” he says. Around the same time, he also began another daunting task: building a family. Here too, he sounds a humble note, talking about how much help his wife and son have been to his career, particularly in their patience with the frequent trips that take him out of Mumbai for eight or ten days of every month, “They support me much more than I support them,” he explains. Now in his fifth year at the helm, Chatterjee’s ideas of what it means to be a CFO have evolved. Chatterjee has described the CFO as “the conscience of the corporation”— the one executive there to ensure that all the stakeholders, from workers to investors to customers — are treated fairly. His view has evolved now, and sees the CFO role as more complex than that. “I think the CFO has a multiple role. He is a conscience keeper, he is a trustee of the stakeholder, he is the copilot of the CEO,” he says.

Weathering the storm

In the morning of June 26, however, the co-pilot is far from the cockpit, and Muthuraman decides he must kick off the meeting without him. He begins his remarks by saying, “As I can see monsoons have arrived in Bombay, so that’s a positive note for everybody.” Everybody, that is, but Koushik Chatterjee. When Chatterjee walks in to the meeting a few minutes later, Muthuraman is still giving his report. He has started off by talking about India, where the news is still mostly good,

and then moves on to Europe in 2008, which was a disaster. The year had two halves, really, he says. The first half of the year was an “absolute boom” and the second “an absolute bust”, with business 50% what it was before.

OFF TO JAMSHEDPUR FAR FROM A HARDSHIP POST, JAMSHEDPUR TURNED OUT TO BE A PLEASANT TOWN THAT SEEMED TO HIM LIKE A LARGER, MORE ORGANIZED VERSION OF BURNPUR.

“This is a change in the size of the marketplace that no steel company has ever dealt with ever in history, particularly within a 12-month period. So adjusting one’s operations, one’s cost structure and one’s capacity to produce and deliver to the market by a factor of 50%, or even 30%, in a period of 12 months is a massive task, as you can imagine,” he explains. Soon Muthuraman hands the meeting over to Chatterjee, who makes his apologies, and then says, “When you walk out of this room you will find a large part of the city under water, I can assure you.” And a large part of the global steel industry, too — Chatterjee now goes over the numbers, dwelling particularly on the fact that worldwide steel consumption is down 15-20% and the performance of each division. The upshot of the meeting: although Tata Steel has cut costs quickly in its European unit, by almost $1 billion, there is a lot more restructuring still to be done. The highly profitable Tata Steel side of the company – where demand is strong and costs are low–continues to outperform the Corus side–where demand is weak and costs are high.

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COVER STORY | GOING BY THE BOOK & BEYOND

Now in his fifth year at the helm, Chatterjee’s ideas of what it means

to be a CFO have evolved. Chatterjee has described the CFO as

“the conscience of the corporation”. On reflection, how-

When the meeting ends, one important question goes unasked: how could such a smart company make what looks in retrospect like such a bad move? One reason is competition. “They had to become a global player, they had to grow, and the only asset that was clearly in sight was Corus,” explains A.S. Firoz, a Delhi-based independent steel analyst and former chief economist of India’s Ministry of Steel. The other was an over-optimistic view of the steel market. “Corus was as good as long as steel prices were good. Steel prices crashed so Corus is bad,” explains Firoz. When global steel prices fell by 55%, Tata, as a low-cost producer, didn’t

IN BOMBAY HOUSE WHEN HUSSAIN ASKED CHATTERJEE IN 1998 TO MOVE TO MUMBAI TO WORK AS ONE OF HIS ASSISTANTS, HE WENT. “ONE NEEDS TO KEEP THE LEARNING CYCLE GOING,” HE EXPLAINS.

suffer from the collapse too much, particularly since demand was just down 5% in India. But Corus faced a much harder time, as it coped with the new low prices and huge fixed costs.

Charting the course

“If one is to be a global company with global operations, one is exposed to global risk and operating conditions, based on the external environment,” Chatterjee says. Right or wrong, Chatterjee moved quickly this year to cope with the downturn, winning more favourable terms from the 50-plus Corus acquisition lenders and closing down unprofitable plants 22

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in the UK. He argues that the company is in good shape now–and will be in better shape down the road. “I’m sitting today on a total liquidity pot of around $3.5 billion and I do not have any refinancing or repayments over the next 18 months,” he says. Nor has he neglected the future. Chatterjee’s latest act: a $500 million GDR, issued in London. Why London, when a qualified placement might have been faster and easier? The idea, according to Chatterjee, is to further diversify the investor base. The company says the money will be used to finance new coking coal and iron ore mines in Africa and Canada, big bets that won’t pay off for years. Firoz is skeptical about this latest strategy too. “If you have a mining asset in Africa and are trying to feed Corus, all that you are taking advantage of is that you would have a sure source,” he says. Selling those raw materials on the open market at the prevailing price would earn the company the same profit as it would get by manufacturing the finished product. Chatterjee defends the offshore asset purchases, particularly the “fantastic” coal reserve in Mozambique. Integrated firms may be out of fashion in some places, but not at Tata Steel. “That’s why our margins in India are so high,” he explains. At the moment, investors seem to share his optimism. After hitting a low of Rs 150 in October 2008, the Tata Steel stock is back up now to Rs 454.10 –not nearly as high as its most optimistic point of Rs 907.57 in May 2008 but much better than the low of Rs 150 it hit in October 2008 –and virtually where it stood in December 2008: Rs 457.72. On balance, the market may be right to be optimistic about Tata Steel’s long-term prospects. In the past, it certainly hasn’t paid to underestimate Tata Steel — or its CFO. Between 1995 and 2005, the company reduced its employment from 75,000 to 34,000, and yet handled the process so well that today even the workers’ unions have described the shift as painless. At the same time, output doubled, from 2.5 million to 5 million tons. Production also grew much more efficient: in 2008, Tata Steel even won a Deming Award, an important Japanese award for excellence in lean production. Tata may make a mistake now and then, but like its CFO, over the years it has also proven to be a very quick study. And in the short run, the clouds themselves have their own silver lining, at least for Chatterjee: a chance to learn something new. “I would say this experience of the financial crisis is a great learning opportunity. Adapting to the new environment — and hopefully doing the right thing — is a big challenge,” he says.

JITEN GANDHI

ever, he now sees the CFO’s role as more complex than that.

CFO PROFILE

ROBIN BANERJEE, CFO, SUZLON ENERGY

Battling Fierce

Winds Robin Banerjee played soccer as a teenager. Now he will need artistry of a different kind to put Suzlon on track.

TEN YEARS AGO, WHEN ROBIN BANERJEE LEFT INDIA FOR GERMANY, HE HAD

a dream job. Two years later, as Chief Financial Officer of cash-rich Mittal Steel’s German unit, he helped seal one of the biggest buys until then for the company headed by the global steel sector’s rising star, Lakshmi Nivas Mittal, now the chief of the world’s largest steel maker ArcelorMittal. And later, in 2006, at the height of the M&A mania in India, he structured the mega deal for the Ruias-led Essar Group—where he was the CFO—to gobble up Canada’s Algoma Steel Inc for $1.5 billion.

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ZODIAC SIGN: Leo (Born on 20 August) PAST EMPLOYERS: Hindustan Lever, Mittal Steel, Thomas Cook, Essar Steel LAST BOOK READ: Seven Habits of Highly Effective People by Steven Covey FAVOURITE HOLIDAY DESTINATION: Australia FAVOURITE SPORTSPERSON: Sania Nehwal FAVOURITE BUSINESS LEADERS: LN Mittal, SM Datta, Debu Bhattacharya NEWSPAPERS HE READS REGULARLY: Times of India, Economic Times FAVOURITE RESTAURANTS: Trishna, Oh Calcutta TIE/BELT/PEN: Mont Blanc MUSIC SYSTEM: Bose Lifestyle 48 OCTOBER 2009

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MEXI XAVIER

Facts & Trivia

CFO Profile

For his part, the 50-year-old CFO, who joined the company in As seen in these two cases, Banerjee dreams big, in line with the ambitious expansion plans of the companies he works with. March, will do what it takes to live up to that great expectation. But today, more than his beautiful dreams, his nightmares are common knowledge: he has to manage the finances of a company that, after a series of big buys abroad, is looking to steer clear of the TEACHER BY INSTINCT huge debt it accumulated to make those acquisitions. What strikes you first about Banerjee is that he talks the As the new CFO of Pune-based Suzlon Energy, Baner- way only people who are born teachers talk. And he cares to jee wants to do everything he can to put the world’s third- explain everything in detail. He doesn’t want to assume that largest wind turbine maker on track. But that’s no easy task people know about him either. “Before we start, shall I give because the hurdles are many. Suzlon is beset by mounting you in a few minutes my profile, background … just to help problems—from a steep fall in demand for its products to you in asking questions?” he asks. loss incurred over replacing faulty turbines to a net debt of He then proceeds to give a trimmed-to-the-bones introduction. Rs 10,000 crore. “By qualification, I am a chartered accountant, cost On the debt of the company, which is in the process of accountant, and a company secretary,” says Banerjee. “I acquiring a 100% stake in German wind turbine maker began my career at Hindustan Lever in 1980 and when REpower, he says pithily that “it was a right strategy to make I left (after 19 years) I was General Manager for mergers acquisitions when the demand was high”. The company, led and acquisitions.” by Chairman and Managing Director Tulsi Tanti, will address The same year he left HLL, he joined Mittal Steel where he its debt through options such as encashing of its assets and worked for the next five years. “I negotiated with the governequity dilution, Banerjee reveals. “Once we acquire a 100% ment of Romania for six months (to clinch the Sidex deal for stake in REpower, we will start to dominate the wind power Mittal Steel),” he recalls proudly. market.” Suzlon currently owns 91% of REpower. For sure, work has taken Banerjee to several continents, The name of the game has changed in these times of eco- and he loves to travel. “Australia is one of my favourite desnomic downturn that has hammered businesses across seg- tinations, I love some of its cities, but if you ask me whether ments, he admits. But he is hopeful that Suzlon, although I want to settle there, I would say no. I will settle in India.” cash-starved right now, will ride He loves to return home, and out the bad times. “After all, he has proved it. In 2004, he in the long run, the world will returned from Germany thanks have to largely harness wind for to his daughter’s decision to power,” he says. pursue medical studies and But why, in the first place, did joined Thomas Cook in Mumhe join a company like Suzlon bai. “My daughter had language that is going through very diffiproblems, and she had to move cult times? out of Germany,” says Baner“Suzlon is the most diverse jee. “Studies was always very Indian multinational compaimportant for him,” remembers ny,” he says, adding jokingly Banerjee’s college friend Samir that “to manage the time zone Saha, now a Kolkata-based char(and organize meetings of tered accountant. finance officials)—from AusAccording to Saha, Banerjee tralia to the US—is a nightnever wanted to work as a chartered mare for me”. accountant. Instead, “he wanted to Banerjee says he expects join the corporate world”. President Barack Obama’s And with that wont to move stimulus package for renewon, while he was at Thomas able energy sources in the US Cook, Banerjee thought the era to help reverse the fortunes of of people approaching a travel wind-power companies such agent—when they could book as Suzlon. But he is upset that tickets online—was over. “The other major wind-power compabusiness model was changing nies are out to malign Suzlon, rapidly.” And so it was time for the company that probably sees him to leave, he realised. It was ROBIN BANERJEE, CFO, SUZLON ENERGY him as a rainmaker. a quick decision.

“Once we acquire a 100% stake in REpower, we will start to dominate the wind power market.”

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GETTING INSPIRED Banerjee, who works 14-16 hours a day for more than five days a week, says he has always been under the spell of colleagues who have tremendous energy and capacity for hard work. In fact, it is not easy for him not to work hard, he says. “More than spiritual leaders or great individuals such as Mahatma Gandhi and Buddha, it is people who I had worked with I draw inspiration from,” Banerjee says. “It is that inspiration that helps me take everything in my stride”. One of them, Debu Bhattacharya, his one-time mentor at Hindustan Lever who is now the Managing Director of Hindalco, used to work for 16 hours for 365 days a year. “He never took a day off. Such people stir me to do hard work.” Others he sees as role models are SM Datta, former chairman, HLL, and former boss LN Mittal, whom he calls a “great motivator”.

He is a foodie, no doubt. “Whichever country I visit (and I tour a lot), I always try the local cuisine … if I visit France or Germany or Holland or Hong Kong, I will not look for an Indian restaurant. I would look for a place which serves good local food.” And, he has some tips to offer on finding good food abroad. “See whether the locals are crowding there (at an eatery) to have food. If the locals throng, then the place must be good. I have never gone wrong in this analysis.” “Being a non-vegetarian, I have an advantage, and mentally, I don’t mind trying anything,” says Banerjee, who is married to visual artist Ananya.

FITNESS FAD, MUSIC THERAPY Banerjee looks fit because he hits the gym regularly – which for him is twice in a week -- for a stimulating workout to destress himself. Though he was never a star athlete, he used to play soccer as a teenager. Now he plays badminton and table tennis whenever he gets time. After sport comes music. To “recharge batteries”, he listens to music though he has no special preference for any genre. “I

Banerjee, who works 14 hours a day for more than five days a week, says he has always been under the spell of colleagues who have tremendous energy and capacity for hard work.

VORACIOUS READER AND FOODIE Banerjee falls back on books to get motivated, too. He just finished reading an old book: Seven Habits of Highly Effective People by Stephen Covey. He is on to the next, Eat, Pray and Love by Elizabeth Gilbert, and he calls it a “spiritual travelogue”. “I don’t get enough time to read, not even magazines that I really want to read to stay informed,” he says. But over the years he has learnt to manage time well to read and even to eat out with family once in a while, either at “Oh Calcutta” or “Trishna” in Mumbai where he currently lives. “At Oh Calcutta, the recipe is very close to my mother’s. It reminds me of my childhood.”

don’t choose between Indian, classical, western, etc. Anything good to hear is good music for me. It can be from any part of the world. Whichever country I visit, I always buy a few CDs from a local shop (or mostly from the airport).… I have got a very good music system – Bose Lifestyle 48. “It makes any music beautiful.” Banerjee is in love, famously, with at least one more brand: Mont Blanc. “Wherever I go I carry a Mont Blanc pen. I always wear a Mont Blanc tie and a Mont Blanc belt,” he says with a special fondness in his voice. Then suddenly, as if by force of habit, Banerjee hops back to business talk, effortlessly. He goes on to explain the different parts of a wind mill, turning into the teaching mode again--it is obvious that you can’t take the teacher out of this top financial executive. “He was always fond of teaching. He has helped a lot of people learn things, especially the juniors. He was very bright and good to people,” remembers Saha. For Suzlon, which is trying hard to wriggle out of an unprecedented crisis, the low-profile Banerjee’s highly rated skills at teaching and managing people —and of course money— could prove to be a godsend. — ULLEKH N P

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CFO Profile

Then in 2006 Banerjee joined Essar Steel Holdings, but he quit that company a few months ago to join Suzlon because “in steel, technology changes once in 30-40 years, but in renewable energy, perfect technology hasn’t yet been established … there’s this excitement of being in a sunrise industry”. Analysts say it was his stint at Essar where he displayed amazing skills at restructuring debts and raising fresh financing that has made him one of the much-sought-after CFOs in the country. He says leaving Essar was painful, having worked closely with the Ruia brothers, Shashi and Ravi, who started the Essar Group. “I am still very close to Prashant Ruia (eldest son of Shashi), and we continue to be in touch. It was very painful to leave them, but that’s history.”

inpractice

risk management DECLINE IN POLITICAL RISK A BOON

Experts also say the economic downturn offers companies the opportunity to check inefficiencies and that’s a blessing in disguise

ANOOP P C

few weeks before last November’s terror strikes in Mumbai, a Hong Kong-based consultancy firm had ranked India on top among Asia-Pacific countries in terms of political risk. The main reasons it had cited were internal instability, vulnerability to political change and threats posed by social activism. In the months that followed — in the run-up to a bitterly fought general election — the slanging match between the ruling coalition and the opposition over how the country dealt with the unprecedented terror attack only helped paint a worse-case scenario. But post elections, held in April-May, in which the Congress party-led ruling formation returned to power, there has been a sudden and palpable change, according to finance professionals. Political risks to running businesses in India, they say, have fallen to very low levels now, and the country can very well count this as one of the blessings amid the economic downturn, which has made everyone risk-averse. “Political environment in the country, in general, is fairly stable,” said Adesh Gupta, chief financial officer, Aditya Birla Group, “though there are pockets of instability.” Rajesh Magow, CFO, Makemytrip, and his counterpart at Rediff.com, Joy Basu, also agree that the political scenario in the country has changed for the better following the national election.

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BY ULLEKH N P

RISK AVERSION IS NO SOLUTION So while it is good to have a favourable political climate, finance executives say it is high time that businesses explore what needs to be done internally to tide over other risks for growth and expansion — credit, market, liquidity, operational, technology, settlement and so on. As regards risks, it’s time to learn things anew, notes Gupta. “Risk aversion is not the answer…. The downturn has led to an evaluation of different aspects of risk assessment resulting in a strengthening of the systems and processes.” According to him, it is the right time to prune excesses, build flexibility and create a resource base to grab future

In fact, says Magow, “the downturn brings in opportunities in terms of checking inefficiencies that creep into the system, especially for high-growth companies”.

Gupta agrees with that view. “The main objective should not be to control things that you cannot control but to enable oneself to be relatively better at delivering good results over time,

Political risks have fallen to very low levels now, and the country can count this as one of the blessings amid the economic downturn “Tightening the operations intelligently can help mitigate the impact on bottom line due to lower demand. Also lower valuations can bring in attractive M&A opportunities to the table and with smart structuring of the deal using relative valuations you can do all stock or stock cum cash deals to solve for capital requirements,” he says.

irrespective of the broader conditions,” Gupta explains. According to him, even the muchawaited recovery from the current global financial slowdown will come with its own set of inherent risks. “The response lies not in changing what we do but the way we do,” he puts it crisply.

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opportunities. “In fact, the biggest opportunity this downturn presents is to be able to go back to the drawing board and we as an organization have done this through a number of initiatives to reduce working capital, strengthen suppliers’ and customers’ relationships and cut down wasteful expenditures.” Adds Gupta: ”Finance functions have to move from a mere quarterly earnings focus to a balanced approach of managing short-term profits while focusing on long-term sustainability and profitability.” Basu, on his part, admits that though companies are more cautious these days about committing funds for growth and expansion, it, claims he, “has less to do with risk aversion and more to do with uncertainty about future demand growth”. He denies that the downturn has affected his company’s ability to take advantage of opportunities.

inpractice

working capital REVENUE IS VANITY, PROFIT IS SANITY, BUT CASH IS KING Some companies are focusing on temporary fixes in dealing with the current economic downturn

BY ANIL T

orking capital management is crucial for any business’s survival and sustainability. Yet, there has been too much focus in recent times on managing debt rather than focus on how to manage working capital. Raising capital has become the primary focus of many financial executives. Rising borrowing costs, coupled with tightened credit markets, have made the quest for cash a modern-day crusade for most finance teams. However, there are several companies that have realised how to exploit the one source of cash which is well within their grasp, working capital---the process of optimising net current assets relative to business volumes. According to a recent survey by Booz & Co at the end of fiscal year 2008, the 80 companies it studied had about Rs 330,000 crore blocked in inventory and receivables and about Rs 150,000 crore in net working capital. The survey noted that working capital had grown out of proportion in the boom years (2005–08) – inventory and receivables increased by about 30% per year beginning 2005, while sales rose only by about 21%. This working capital performance should not come as a surprise. For the past several years, access to cash has

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BY BURZIN DUBASH

been relatively easy. As a result, the working capital-related processes have not received the focus it ought to have. Deficiencies in inventory management, demand forecasting, customer credit checks, collections, managing costs of accounts payable, etc have largely been tolerated, helping obscure working capital’s vast potential. So, can a renewed focus on working capital techniques help in freeing up cash? In a single word–yes. My experience indicates that a comprehensive approach to working capital management can reduce funds tied up in inventory, receivables and payables by 20% to 40%, releasing

Plan & Forecast

Make

Logistics

ORDER TO CASH Sell

Invoice

Collect

PROCURE TO PAY Source

Buy

Supply Chain strategy

Contract Management

Vendor Master set-up

Product management

Best Channel Order Entry

Optimize Oedering

Forcasting

Effective Invoicing

Purchasing strategy

Production planning

Collections

Spend analytics

Warehousing

Cash Application

Invoice receipt

Logistics Optimization

Disputes

Invoice resolution

Replenishment

Deductions

Payments

cash that strengthens the company’s competitive positioning. However, some companies have tended to focus on temporary fixes in dealing with the current economic downturn–cut production, delay vendor payment and so on--without exploring some of the underlying drivers of better working capital management. If you are looking to free up cash through working capital improvements, here are things to keep in mind:

UNDERSTAND THE UNDERLYING DRIVERS Having a good understanding of days sales outstanding (DSO), days payable outstanding (DPO) and inventory turnover is very important; but this is the basic stuff. The critical piece is in understanding what makes these working capital drivers go up or down. In many cases, we have seen that businesses just don’t understand these drivers deep

Pay

enough. Technology is critical in helping understand these drivers. To better understand why DSO went up, sifting through data generated by the CRM systems is key. Through that one can find out which sales teams are providing higher credit periods to customers, or determine which class of customers normally pays up late, or whether customers in a particular geography have a different payment pattern as compared to other customers. However, there are countless other drivers–ones that may be considered as insignificant or those that go unnoticed.

THREE KEY PROCESSES There can be three business processes that can be optimised in almost every enterprise to release that precious working capital. The remainder of this article focuses on Inventory Management. I will deal with Order to Cash (O2C) and Procure to Pay (P2P) in future articles.

Tips for better stock control. CONTINUOUSLY REVIEW the financial positions of your key vendors REVIEW DELIVERY periods from suppliers STRENGTHEN OVERALL controls within the inventory cycle PERFORM A physical count at periodic intervals depending on your industry PERIODICALLY REVIEW slow moving and damaged items and dispose them – storing them for longer costs you money CONSIDER OUTSOURCING your inventory management (or parts thereof) to third-party specialists REVIEW SECURITY procedures to make sure no stock is stolen/misappropriated ENSURE THE stock is stored in accordance with the product norms with regard to stacking, temperature, etc.

The most important thing when it comes to inventory in the context of working-capital management is simply to know what’s selling and what’s not. Here are a few techniques on how businesses can optimise inventory levels. Detailed analysis: Some companies still use “rule of the thumb” to guide inventory decisions, when they should be using targets based on their supply chain capabilities.

FOCUS ON WORK-IN-PROGRESS DSO, DPO and inventory turns matter– but one should not lose focus on workin-progress. One of the big things that happens in service companies is that so many things get put into work-inprogress–labour time, expenses, thirdparty costs and materials consumed. And guess what? You can’t invoice it, because the customer hasn’t agreed to it. In today’s climate you risk ending up with a massive amount of work done/ costs incurred that could be un-billable.

COMPLIANCE, COMPLIANCE, COMPLIANCE. Focusing on compliance to your current re-order levels, minimum order quantities, physical stock controls and other policies and processes are good ways to sustain working capital improvement opportunities.

SUSTAIN THE GAIN One-time gains don’t deliver the benefits most companies want. If you’re finding it hard to improve working capital without hurting customers and vendors, it may be time to rethink your approach. Contrary to conventional wisdom, this is not a zero-sum game. It’s possible to drive big improvements without sacrificing important relationships. THE AUTHOR IS EXECUTIVE DIRECTOR, AXIS RISK CONSULTING.

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working capital

INVENTORY MANAGEMENT

inpractice

strategy NEW MINDSET FOR GROWTH DURING CRISIS

Everything about your business needs to be re-thought: customers, sources of supply – everything. BY DONALD L. LAURIE AND BRUCE HARREL

he current economic uncertainty has introduced organisational fear worldwide and inspired deep evaluation of short-term financing. Many chief executive officers and chief financial officers are focusing on paring expenses, eliminating discretionary programmes and planning head-count reductions — actions that are necessary, but inadequate for responding to the global crisis. Indeed, last year’s credit-market freeze caused a radical stock-market decline, cutting the net worth of investors by 30 to 50% and triggering the loss of 5 million jobs in the United States alone. During an earlier crisis, management guru Peter Drucker advised: “In turbulent times, an enterprise has to be managed to withstand sudden blows and avail itself of sudden opportunities.” Survival is necessary but not sufficient. It is only the first task. The larger, more important task is preparing the organisation to seize the new opportunities that every crisis reveals. Finding and exploiting these opportunities — more than cost cutting — will separate tomorrow’s winners from the losers. Difficult times require a “curious” chief financial officer — one who looks beyond the obvious for the subtleties others miss. To successfully navigate these turbulent waters, financial executives must simultaneously cut costs aggressively and invest adroitly for the future. Many executives are, for the first time in their careers, experiencing the uncertainties and challenges involved

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in identifying and building new businesses. They must apply their well-honed operational skills and capabilities to a new set of questions. Dean Scarbough, the chief executive officer of Avery Dennison Corporation, captured many of these sentiments, saying of his firm: “We have always been good at squeezing out costs from our mature businesses — but that won’t create shareholder value; only profitable growth will do that.” To assist in the journey, chief executive officers and

PRASANTH T R

LOOKING INTO THE FUTURE Most tough-minded managers spend little time analysing future trends and scenarios and relating them to business opportunities. They view this as academic, theoretical, impractical and irrelevant to their immediate problem-solving and decisionmaking responsibilities. Today’s leaders have grown up in a world of continual, steady expansion. Experience and intuition have been good predictors of the future. But that world is gone forever. Three-to-five years from now, will the total profits in your industry be greater or less than now? If less, what are the drivers of this conclusion? What are the implications for your business? How interesting will it be to chase a declining revenue and earnings pool in the years ahead? Will you be a consolida-tor or be consolidated? Will your business shrink faster than the pack or find opportunities and “unstoppable” trends you can ride into the future and grow? Consider health care. Everyone has been a patient at some time, and everyone knows transforming this industry will remain a priority in years to come — along with substantial costs for taxpayers. Where do you expect the locus of health care’s power will be? With large governments in monopolistic or oligopolistic settings or individual patients in a market-driven setting? Which should a company develop? Individual products, for example, glucose-monitoring devices for diabetics, or solutions to diseases such as diabetes? What trends or multiple trends would you bet on as you develop your business strategy. What sensors would you use? The curious CFO and the executive team see the interdependencies of deci-

sions to cut costs on their ability to grow and compete. There’s often a need for a better sense of proportion in weighing decisions at these intersections. Tackling the unknowable with confidence about the future requires standing in the future and looking back. Executives must venture forward to develop a sense of potential outcomes and determine how to influence and shape that world. They will need clues about what to look for, recognising and monitoring trends that are important and relevant to their businesses. They will need to view change and understand the implications for the core business and emerging opportunities. Given these dynamics, which companies in your industry will become “toast?” Which will survive and thrive? And which companies will exploit the opportunities you missed? Hello, Broadpoint Securities Group Inc. and Moelis & Co. Goodbye, The Bear Stearns Cos. Inc and Lehman Brothers Holding Inc. Hello, Apple Inc. Goodbye, Motorola Inc. and Sun Microsystems Inc. Everything about your business needs to be re-thought: customers, sources

Do you have a view of future trends and scenarios and the threats and opportunities they imply for your business? Will trade barriers rise and reverse the trend toward globalization? After years of expansion abroad, will the opportunities be local? Companies in the United States have exported their products to China and India. Will smart and developing companies there and in other developing countries reconceive their businesses and look at the U.S. market as ripe for products invented for their markets while offering greater value at lower cost for both our served and underserved customers? What key vectors represent tension and change in your industry? What signals from the future should you be monitoring? What sensors will give early clues to the turmoil we’ll encounter? The current financial crisis will impose fundamental change on industry after industry. The United States’ federal stimulus package will expose large-scale opportunities in infrastructure, energy and health care. The Barack Obama administration has already

Most tough-minded managers spend little time analysing future trends and scenarios and relating them to business opportunities. of supply, economics of the business, social patterns, new and converging technologies, regulation, business models, education, venture capital investments, early-stage strategies, potential for new forms of strategic partnerships — everything! More fundamentally, the world of incremental, one-step-at-a-time change is past; every industry has just experienced a stepfunction change. The curious chief financial officer will improve the quality of the dialogue about the future by including structure, discipline and analytics.

caused a restructuring in the automotive and financial-services industries: consider General Motors Corp., American International Group Inc., Citigroup Inc. or Lehman Brothers. Do you have a sense of how the boundaries in your industry will change and how that will threaten your current business model, impact your organisation and its mission and ready your firm for opportunities that need to be discovered? To be sure, every industry will be different in the future. Customers will be

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strategy

chief financial officers committed to exploiting opportunities that will emerge from the crisis need to consider a few questions.

strategy

more interested in saving their money than in spending it on products they couldn’t do without yesterday. Customers’ needs, preferences, and buying behaviour will change. What trends are you betting on in your business, in your industry, in the coming years?

EXPENSE TRIMMING: A KEY STRATEGIC WEAPON? Most finance departments across companies comprise highly skilled professionals overseeing processes and capabilities designed to ensure control and reduce risk. They understand which numbers need monitoring to achieve corporate commitments to shareholders and the financial community. Unwittingly, the strong arm of finance — committed to tight controls and delivering “the numbers”— occasionally squeezes out growth and critical initiatives, compartmentalising decisions and focusing on financial ratios and controls. A large international corporation, whose core business had matured, was delivering net income. Earnings were the priorities. Responding to the current economic crisis, the financial team cut the firm’s growth initiatives the CEO and senior team had authorized only a month earlier. What message did postponing growth initiatives for a savings of $1 million send to the employees who had been mobilised to achieve rapid growth? The growth initiative represented the company’s largest revenue-potential opportunity in its fastest-growing, emerging market. Did the CEO or CFO speak with any of those from the disbanded team? If so, how did they explain their decision? Is it likely that members of that initiative will sign on for a future business-building assignment? Subsequently, the CEO and CFO wondered whether they had acted too hastily. “We wanted everyone to be part of our cost-cutting exercise. Was this a serious mistake? Earlier we had set aside $10 million for new-business development. We said we would be will34

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Surviving tough times

CFOs need to be decisive in moments of crisis, but they also need to be careful not to cut costs that need to be protected. Strategic expense cutting is critical — not just for protecting important growth initiatives. Curious CFOs understand that key capabilities that provide competitive advantage in core businesses also require protection. They need to know which capabilities provide competitive advantage and must be preserved — and then act on this knowledge. Curious financial executives recognise the value they can add to building new businesses and contribute to their CEO’s strategic agenda. Intuitively, they understand that, if the company is going to grow, they must be involved and immersed in the key expense and investment decisions. The less curious CFOs see their role as functional, technical — purely operational and controloriented. ing to ‘ring fence’ this level of expense and declare it off limits for cost cutting. “In essence, we had approximately $9 billion in expenses, all of which was focused on the core business and delivering net income. The $10 million set aside for new growth was less than a quarter of 1 percent of total expenses. Perhaps, by trying to make everyone part of the expense-trimming exercise, we taught our organisation the wrong lesson.” Their second thoughts raise important questions: did the $1 million saved make much of a difference in the corporation’s overall expense-trimming effort? Might there have been a way the company could have achieved its expense-reduction targets, while simultaneously investing for the future? Should CFOs agree that certain areas are off limits as they marshal the argument for eliminating “discretion-

ary income” that is “actionable” now? Should the finance team be obliged to engage in robust dialogue about the consequences of proposed decisions? The curious chief financial officer and the executive team see the interdependencies of decisions to cut costs on their ability to grow and compete. Often there is need for a better sense of proportion in weighing decisions that are at these intersections. How was the quality of the dialogue around these issues? Did they understand the consequences of limiting or eliminating growth investments to deliver this quarter’s results? They should understand the impact of their actions on growth and growth’s impact on market capitalisation. Curious financial executives realize a onesize-fits-all approach will not work in mature companies committed to growth — especially in these turbulent times. Chief financial officers need to be decisive in moments of crisis, but they also need to be careful not to cut costs that need to be protected. Strategic expense cutting is critical — not just for protecting important growth initiatives. Curious CFOs understand that key capabilities that provide competitive advantage in core businesses also require protection. They need to know which capabilities provide competitive advantage and must be preserved — and then act on this knowledge. Curious financial executives recognise the significant value they can add to building new businesses and contribute to their chief executive officer’s strategic agenda for the company. Intuitively, they understand that, if the company is going to grow, they must be involved and immersed in the key expense and investment decisions. The less curious see their role as functional, technical — purely operational and control-oriented.

SEEKING GROWTH OPPORTUNITIES Bill George, former CEO of medicaltechnology company Medtronic Inc.,

WHERE DO YOU SPEND YOUR TIME? Many executives say they are committed to growth, but they actually spend 70-80%

Home Centered Services Patients searching for solutions — customized subscriptions Global IP regime Global standardization and access to medical records —Portable medical records —On-line coordination Niches emerge as intermediaries —Wound care, stroke centers and other special services in hospitals —Specialized practice groups - but interdisciplinary and tech-enabled DNA mapping and customized solutions Wellnesses and prevention are as important as treatment

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Strong economy in a stable world Cheaper, easier commerce across more transparent borders Global IP regime Global standardization of medical records Oligopoly rules: — Less innovation — Less investment — Medical establishment squeezed Costs matter Increased focus on prevention Large governments/organizations, in a monopolistic or oligopsonistic setting

Individual patients in a market-like setting

Patient is King

The Big Squeeze; Survival of the Cheapest

Strong, booming economy

Global Market... of huge payers

On-line lifestyle(s)

US economy troubled; globe is loaded with hot spots

Fluid global market

Costs are key concern

Lots of innovation around devices and designer drugs Consumers in control and shopping on-line Politicians have embraced technology; FDA “helpful” Fragmented Payer landscape Small, innovative competitors will have the best opportunities Marketing matters!

More standardization and less innovation Competitors will have a difficult time making profit and finding innovation Device industry consolidates; new potential drugs are underfunded Technology spreads... from India and China Gray market explodes; piracy is an issue

The locus of market power and character of demand will determine future scenarios SOURCE: HEMINGE & CONDELL AND OYSTER INTERNATIONAL

day a week to shaping their company’s future and searching for and executing growth opportunities. By contrast, successful CEOs — Medtronic’s former CEO Bill George, A.G. Lafley (The Procter & Gamble Co.), Mike Eskew (former CEO of United Parcel Service Inc.), Ron Zwanziger (Inverness Medical Innovations Inc.), Lou Gerstner (former International Business Machines Corp. chief), Dean

The curious CFO sees the interdependencies of decisions to cut costs on their ability to grow and compete. of their time in operations and only 5-lO% on strategy and growth activities. Part of this can be explained by intense pressures to produce shortterm results, but that can merely be an excuse, and it highlights a serious deficiency in many organizations. For instance, too many of today’s CEOs operate as de facto chief operating officers, devoting less than half a

Big Brother is in Charge

Products

once told his CFO: “I know you understand finance. I need you to understand patients, caregivers, hospital labs and the people who buy our products.” Stressing the importance of this, he rescheduled full-day management meetings (to review performance and variances from plan) as two-hour meetings. For the rest of the day, he, the CFO and the management team visited hospitals to observe procedures using Medtronic’s and its competitors’ products. They learned from doctors and laboratories about patient problems that were difficult to solve or unsolvable with the available technology. Are you talking to your customers and suppliers? What stresses are they experiencing? What opportunities do they see? How do they have to change to survive and grow? During crises, there is a tendency to focus internally. However, it’s the perfect time to look outside your organization to understand the changing requirements of your customers, deepen your insights into the challenges your suppliers face and garner the insights from key thought leaders.

Solutions

strategy

EXHIBIT 1: FUTURE TRENDS AND SCENARIOS

Scarborough (Avery Dennison) — spend (or spent) 30 to 60 % of their time on understanding the future, listening to customers, shaping the strategy of the organization, and immersing themselves in the work of growth. This is the work the organisation needs them to do — work no one else can do. Fortunately, many executives, when they realise how little time

they spend on the future, strategy and growth, readily understand the consequences of their behaviour and adapt. A suggested approach for making this behavior change: just devote every Tuesday, one day a week or 20% of your time. Typically, as the increased time inevitably produces results, executives expand their time commitment to strategy and growth to 30-40% or more. These same principles apply to CFOs. Curious CFOs allocate a significant portion of their own and their teams’ time to understanding, addressing and executing the important items on the company’s strategic and growth agenda. In addition, they understand that their actions send important signals.

‘QUICK-’ OR ‘SLOW-KILL?’ George F. Doriot, an early pioneer in venture capital funding, said, “I never met a big company executive who couldn’t analyse an emerging business opportunity out of existence.” Organisations that never kill activities tend to erect very high barriers for initiating new activities. They inspect “the hell”

EXHIBIT 3: TIME AND THE LEADER’S PRIORITIES

—% External (Including enablers, trends, emerging/ changing customer needs, etc)

—%

—% Internal (Planning, Review and Control)

Explore customer problems and potential solutions Identify “unstoppable” trends

—%

Assess capabilities Project capabilities into market opportunities

—%

Identify and invest in growth opportunities

—%

Mobile capabilities for execution and resource allocation

Task for the CEO and CFO 1. Distribute 100% of where you spent your time during the past 6 months in the small center boxes 2. Determine where you should spend your time in the future. How would you allocate 100% of your time? What activities do you need to perform in this quadrant?

SOURCE: OYSTER INTERNATIONAL LLC

out of any idea because they know they will have to live with it for a long time once it is established. This mindset is especially debilitating for internal start-ups and forces start-up teams to answer questions prematurely and develop financial plans long before they have sufficient insight. By contrast, curious financial teams make it easy to quickly initiate inmarket experiments and quickly kill off underperforming initiatives. Such financial managers are very inquisitive about the business-building process and immerse themselves in the work,

“quick-kill” initiative as part of earlystage evaluation. Showing a willingness to “clean house” on a regular basis softened the high and rigid barriers that existed for getting things started. He was the acting chief financial officer for each of the growth initiatives, providing early-stage initiatives with good financial information on “burn rates” and investments related to milestones. This also provided leadership with a clearer perspective on future funding requirements and timing for the overall growth portfolio.

Success is fragile, and every CEO and CFO must carefully preserve the capabilities for getting the organisation to a more hopeful future. exhibit more business-builder-friendly behaviors, encourage trust, and use the tools of control as tools of growth. One curious financial executive exhibited the following leadership behaviors to grease the skids for investing in new businesses: Working with the chief growth officer, he initiated a “quick-start” and

He told his financial colleagues who wanted detailed plans before any early-stage activities were initiated that such plans were useless and written only to get funding. Instead, he helped the finance team learn that in the early days of a startup, the critical issues are getting the right leader in place, building the capabilities

of the team, identifying the first customer willing to buy the new offering, and measuring whether the offering meets the value proposed. He helped the finance team understand that early activities did not require substantial upfront investments. Finance people are notoriously distrustful of people spending money; so, too, was this executive. He knew that large organisations tend to allocate money for one thing and spend it for another. He used his financial expertise to create controls, ensuring that money was spent against agreed-upon activities. He helped move the company from a conventional budgeting-and-variance system to a process of investment and milestone management. He “birddogged” the money in a way that controlled spending and supported the business-building team. Success is fragile, and every chief executive officer and chief financial officer must carefully preserve the capabilities for getting the organisation to a more hopeful and growth-oriented future. The skills, behaviors, and attitudes of financial managers can shut down growth initiatives or enliven them and make them thrive. Get out of the office; learn from your customers. Lead activities that will move the business in a direction that improves the firm’s competitive position and lays the foundation for growth as the nation moves through the crisis toward a more hopeful future. “I take this stuff personally,” said Avery Dennison’s Scarborough: “I don’t want to be remembered as the steward of multiple low growth businesses or a ‘maintainer’ of the status quo. I want my legacy to be that I transformed a mature business into a growth engine.” Are you curious enough to take growth personally?. DONALD L. LAURIE IS A BOSTONBASED BUSINESS-BUILDER. J. BRUCE HARRELD IS A MEMBER OF THE FACULTY AT HARVARD BUSINESS SCHOOL

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strategy

Growth will require leaders to understand the future and think more strategically about the future, the future of their business(es) and new growth opportunities.

insight GETTING INFRASTRUCTURE OFFSHORING RIGHT

As more companies offshore their infrastructure work, more are experiencing the problems of the onshore-to-offshore transition.

BY JAMES M. KAPLAN, ARI LIBARIKIAN, AND STUART MORSTEAD

Anil T

ompanies have long embraced a range of IT application-development offshoring programs while keeping work on the IT infrastructure — data center and network management, end-user desktop services, security, and other core IT functions — firmly planted onshore. Then, over the past few years, increasing confidence in remote management, and the spread of low-cost bandwidth and the wider availability of high-speed networks, spurred the expansion of offshoring in India (and other parts of Asia) and in Europe. Buoyed by these advances, the offshoring of IT infrastructure work has grown at a compound annual rate of 80% since 2005. One global financial-services institution achieved labor cost savings of more than 20% just halfway through a 36-month program. Organizations in industries such as pharmaceuticals and investment banking have moved 40% of their infrastructure labor to low-cost locations, reducing overall infrastructure costs by about 10%. Yet as the shift intensified, problems associated with the transition to offshoring began to appear. Our most recent experiences1 helped us identify the common problems and ascertain the steps companies can take to deal with them and to raise the overall value of offshoring programs. The more difficult issues include a tendency to ignore the needs of offshoring infrastructure work, inadequate rigor in handling process flows and service hand-offs with partners, and a lack of clarity about the end-state operating

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model — what the operation will look like in 36 months. When plans stumble along these lines, implementation is delayed, service problems proliferate, and savings are deferred or minimal. One large media company learned all this the hard way when a piecemeal approach to an infrastructure-offshoring program forced its reimplementation from the ground up. This company is not alone. Our experience working with clients across a broad range of offshoring programs suggests that to reduce

STRATEGY. In a difficult economic climate where cash is king and cost cutting reigns, short-term fixes may supplant longerterm considerations. A patchwork approach to offshoring can result from the pressure to resolve resource constraints and simultaneously address a range of end-user support, networkmanagement, and other infrastructure challenges. In the absence of a clear perspective on the end-state infrastructure model, the employees responsible for executing the offshoring program may lack the compass needed to guide which functions and roles to include in it. That can complicate the deployment process significantly and limit the savings potential. The first step in an integrated approach is to assess which functions must remain physically close to assets (the physical provisioning of servers, deskside end-user support), to the applications-development and maintenance staff (business analysis, high-end systems administration), or to vendors (vendor management). Also, some functions, such as those with access to client data, have to remain within the home country for regulatory reasons. All others can be performed remotely.

ALTERNATIVES. To simplify the decision-making, bestpractice companies examine both the types of offshoring arrangements

available and the staffing and service incentive to continue to improve effiprovisions that make the most sense ciency, something of a benefit in the for them. short term (in a captive situation) and For starters, a company must deter- at the point of contract renewal (in an mine whether its business objectives outsource situation). call for a captive model, in which it owns the offshore entity, or a thirdparty model, in which it partners with NEW DESTINATIONS. one or more entities. Our experience Despite the increase in the level of offhas shown that all but the largest com- shoring, many companies still go to the panies should call on the services of an standard locations, particularly India. external vendor or a group of vendors. This narrow footprint can be risky; as Unless a company is very big and has the volatile economic climate of the significant reasons for wanting a pres- past couple of years has shown, sharp ence under its own name in the chosen swings in currency and wage rates can destination, recent experience demonstrates that it is very difficult for Companies can offshore substantial portions of IT infrastructure. the economics of captive operations IT infrastructure Percentage of functions to work, given category that can be offshored India’s rising salaServers 50–70 ries and tight labor Network 50–80 m a r k e t f o r c e rMainframes 30–50 tain high-demand End-user devices (PCs, laptops) 50–80 skills. In fact, many Help desk 50–80 Cross-technology* Varies companies that *(Strategy, architecture, policies and procedures, project had successful capmanagement) tive operations for noninfrastructure functions have sought to get cash from wreak havoc on business planning. One these investments by selling them to organization, intent on using India as outsourcers building scale. its offshore base, had a hard time draftFor each of the sourcing choices, a ing the business case—in the span of company has two options. It can either eight months, wage and currency rates augment its own staff by subcontracting each moved up by double digits. The the work to an offshore partner while company maintained its plans for India retaining overall project management — but had to reopen negotiations with without any formally guaranteed service its vendor and revise its rate-of-return levels — or it can negotiate a service- assumptions. level agreement with its vendors. Under Meanwhile, promising new locations the latter arrangement, which has the for offshoring have become available. advantage of shifting some or all of the Unlike India, whose talent pool for delivery risk, the vendor must meet mainframes is limited, Brazil has strong agreed-upon performance milestones or capabilities in this area, and a number of face penalties. Adding offshore capacity global vendors run mainframe centers through the staff augmentation model of excellence there. Pan-European comis the easiest way to move infrastructure panies that require French- or Germanoffshore. But our experience indicates speaking support staff should consider that guaranteed service levels make for their sourcing options in Africa and Eastgreater satisfaction and savings in the ern Europe, which may have deeper pools medium and long term. They drive the of talent to meet these specialized needs.

insight

infrastructure labor costs, companies must take an integrated approach to the global infrastructure delivery model. In a recessionary environment in which offshore programs could be politically sensitive, it’s more important than ever to proceed deliberately. Through our work and our interviews with CIOs, vice-presidents of infrastructure, senior finance executives, and others, we have formulated six principles for implementing successful infrastructure-offshoring programs.

Defining the opportunity

OCTOBER 2009

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insight

When a company chooses its vendor, it’s important to match needs with capabilities; the critical nature of many IT infrastructure functions raises both the performance bar and the risk. As some companies have learned to their cost, a vendor that is suitable for applications development may not be for infrastructure support. Special care must be taken to assess not only a vendor’s technical competencies but also its overall business model, since it would be running highly visible assets that might well have an impact on end customers.

REDESIGN ROLES. Not all functions or roles are suitable for offshoring. Some activities, such as trade floor support, require physical proximity to end users. In other cases, specialized forms of knowledge, such as architectural skills for platforms outside the mainstream, may not be sufficiently available in the desired offshoring location. Despite such problems, our research shows that some large organizations now locate 50% or more of their IT infrastructure workforce offshore. They achieve these rates by separating roles that are sufficiently stable and mature to be offshored without modification from those whose regulatory, security, or technical constraints make them hard or impossible to offshore. Then they isolate and unbundle the nonoffshorable functions. For instance, the highest level of technical support, a Level-3 team, might be viewed as impossible to offshore because engineers occasionally need access to confidential information and may therefore be subject to regulatory constraints. To get around these limitations, a financial-services company split its L3 team into two groups: one focused on customer support, which stayed onshore; the other focused on >>For more articles on this topic, see www.cfo-india.in

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engineering, which could then be offshored.

SIZE AND NEEDS.

Quick Points Takeaways

z Take a strategic rather than short-term For global enterprises with approach. operations running 24 hours z The offshoring of IT infrastructure work is a day, the “follow the sun” growing rapidly. model (with regional handz Significant cost improvements are posoffs at shift changes) offers sible, but poor implementation can erase the attractions of real-time, them. anytime availability, as well as lower costs. Few companies, though, have the scale or budget for such a solution. z Take a strategic rather than short-term Most find that the center-ofapproach. excellence model (with staffz Carefully consider your service and sourcing pools concentrated in ing models. centralized hubs) offers the z Choose the locale that best fits your infrastructure requirements. It may not be advantages of global reach one of your favored sites for applications and concentrated expertise, development. making it possible to leverage staffing, standardize processes, and develop deeper competen- way it is measured, and what happens cies in key skills. One European bank when it isn’t met. with a number of infrastructure sites, When leading companies address the for example, decided to centralize these offshoring of Information technology operations at one location in India. This infrastructure, they craft a enterpriseconsolidated structure, which helped the wide strategy for it by blending topcompany serve the same customer base down decision making with bottom-up with fewer resources, yielded cost savings guidance and analysis. Clarifying the even before the benefits of labor arbitrage key cost, performance, and location were factored into the business case. drivers at the outset helps these companies reduce the risk of offshoring and improve their sourcing choices. The old adage “spend time to save time” still RESPONSIBILITY. The decision about how fast to off- holds true. Companies that plan careshore infrastructure work depends fully put themselves in the best posion a company’s need for cost savings tion to maximize the return on their and its appetite for risk. Two issues offshoring investment. should be considered nonnegotiable. First, there must be a clear delinea- ABOUT THE AUTHORS James Kaplan and Ari Libarikian are prinicipals in McKtion of each party’s responsibilities. If insey’s New York office; Stuart Morstead is an associate in the Houston office. a company uses a number of vendors, principal The authors wish to acknowledge the contributions of Allen Weinberg to the development of this article. it must have a single point of contact. This would, in the event of an outage, NOTES ensure responsibility for coordina1 See Kishore Kanakamedala, James M. Kaplan, and Gary L. tion and escalation of issues that may Moe, “Moving IT infrastructure labor offshore,” mckinseyquarterly.com, June 2006. fall in a gray area of infrastructure or This article was first published in McKinsey on Business application management. Second, in Technology Number 16, Summer 2009 and is also availon the McKinsey Quarterly either an outside-vendor or a captive able Website, www.mckinseyquarterly.com. Copyright © 2009 McKinsey & Company. All rights environment, there must be accord on reserved. Reprinted by permission.” the level of performance expected, the

Key actions

Print media

Choicest choice still the

Most finance professionals surveyed preferred magazines for views and opinions, more than TV and dailies. ULLEKH N P

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OCTOBER 2009

SANTOSH KUSHWAHA

big picture

Reasons for accessing different media platforms Percentage of respondents who chose the following options

100

The newspaper is overwhelmingly important for news and information

Peers and friends for opinion and analysis

83 78

80 But not popular for product information and opinion Magazines critical for opinions and analysis

60 53 48

40 29 19

Newspaper

Magazine

Opinions and Analysis

Internet

E-newsletters

Products and Information

FOR MOST PEOPLE, READING NEWSPAPERS WITH pleasurable laziness has become part of their childhood memory—watching their Dads heading for the balcony with a bunch of dailies after the mother set out the morning tea. Waking up in the morning also doesn’t look that lazy and pleasurable any more, especially for the busy ones. A day in the life of a financial executive, a part of one of the busiest classes, starts usually with a treadmill workout. At least, we all want to assume it is so. He then takes a quick bath, a bite, and perhaps gets distracted by sound bites on TV. By then he is already running late. So does he read newspapers at all? The answer is, he does. And he values newspapers much more than any other media, including TV and Internet, for news and information. Maybe he reads the dailies while walking on the treadmill or at breakfast or in the car or in between meetings. After all, he can’t afford not to know whether any tragedy visited the corporate world while he was sleeping. The CFO Institute’s recent survey of finance heads across 18 industries in the country proves just that. Most respondents of the survey—96%—said they rely primarily on newspapers for news and informa-

13 3

Seminars and Conferences

Peers and friends

News and Information

tion, much more than TV (72%) and Internet (48%). That should make cheerleaders of the print media happy— the newspaper reader is alive and kicking, even among finance managers, despite breaking news on TV, despite the Internet invasion. For them, there’s more to cheer. A large chunk of those who responded to the study said they fall back more on magazines for views and opinions, and very few on newspapers or TV for that purpose. While 60% respondents read magazines for critical analyses of news events and policy decisions, barely 4% read newspapers and 6% watched TV for opinions. Of those who participated in the survey, 48% browsed the Net for news and 24% for views. For views and opinions, however, those surveyed looked up more to friends and peers than the media. They also thought attending seminars and conferences helped them get far more indepth views than the media. As many as 50 finance professionals across India responded to the survey. Broadly, the respondents included CFOs, CEOs, Managing Directors, Executive Vice-Presidents, Vice Presidents, Deputy CFOs and General Managers. A majority of them were from sectors such as IT (14%), electronics (12%), BFSI (9%) and chemicals (9%).

OCTOBER 2009

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big picture

Convenience

Product purchases

Internet rated as most convenient Seminars and conferences are somewhat inconvenient Rating on a scale of 1 to 5 (1 = low and 5 = high)

Industry-specific e-newsletters are the most effective in finalising purchases Internet and Research reports and peer advice are equally effective

Highly Convenient

(Rating on a scale of 1 to 7; 1 = least effective, 4 = average and 7 = most effective)

Internet Newspaper

Industry/Function specific e-newsletters

Peers and friends TV

Internet and e-mail

Magazine E-newsletters Seminars and Conferences 0

Research reports 1

5 Peer advice, word of mouth

Interactivity

Custom media

Events are considered to be highly interactive, making up for its shortcomings in other attributes Print is extremely low in interactivity

Industry specific trade shows/conferences

Highly Interactive

Rating on a scale of 1 to 5 (1 = low and 5 = high) Events (Seminars & conferences)

Industry/Function specific magazines General Business magazines Newspapers

Online (Internet & E-newsletter)

Print (Newspaper & magazine) 0

Seminars, peers and friends are most preferred for opinions and analyses Internet seems to offer a little bit of both

Authenticity and trust

Internet rated as most convenient Seminars and conferences are somewhat inconvenient...

Rating on a scale of 1 to 5 (1 = low and 5 = high) Seminars

Highly Authentic

Rating on a scale of 1 to 5 (1 = low and 5 = high)

66%

Magazine

59%

E-newsletters

Events (Seminars & conferences)

26%

Internet

21% 15%

Online (Internet & E-newsletter)

Newspaper 0

The survey participants spent 40-45 hours each week across various media. They said they choose different media for different reasons: one for news and information and others, separately, for product information opinion and analysis.

RELIABILITY On a scale of 1 to 5, Internet and newspapers scored high for reliability in disseminating information at 3.7

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69%

Peers and friends

Print (Newspaper & magazine)

Opinions and analyses

OCTOBER 2009

points while magazines and TV came second at 3.5. Peers, friends and seminars and conferences scored 3.4 out of 5 and e-newsletters, 3.2.

INTERACTIVITY The respondents found the lack interactivity in print media a huge shortcoming. However, they rate events such as seminars and conferences to be extremely interactive.

big picture

Online media for search and research Convenience and reliability are key factors for the online media’s popularity How often do you use search engines to obtain product information?

26%

Media Platform used for finance related products’ search and research (Percentage of respondents who chose from multiple options) 71%

IT Vendor websites IT Research reports

67%

Business community websites

37%

58% 58%

IT Events/Conferences

56%

IT Print publications

Always Often Sometimes

37%

48%

E-newsletters IT White papers

Use of multi-media results in lasting impressions

85% of our respondents say that cross-media representation makes for higher recall! Lasting impressions are made with depth and breadth across time and media On what makes for greater impact and higher recall, multi-media representation or a focused single media presence. Most responses are favour of multimedia

21%

IT Webcast/podcast

13%

General interest blogs

13%

IT related blogs

6% 2%

RSS Feeds 0

Medium and the brand message How different media platforms impact recall of brands Deep Impact

(Rating on a scale of 1 to 7; 1 = least impact, 4 = average and 7 = most impact)

2% Events Online

13% Yes No Don’t know

Search engines Print Ads 85%

TRUSTWORTHINESS Interactivity, however, is not a measure of trustworthiness and our survey proved that print media—newspapers and magazines—cannot be excelled on that count. Internet lags behind seminars when it comes to trustworthiness.

PROMPTING TO BUY When quizzed about the effectiveness of the media in influencing a company’s purchase decisions, the respondents put newspapers at the bottom on a scale of 1 to 7, at 3.69. Industry-specific newsletters were ranked best. Internet came in the second position which was followed by research reports, word of mouth, etc.

ONLINE MEDIA A big chunk of the respondents—37%—said they invariably use Internet search engines to obtain information

Printed collateral 0

about products they need. Another 37% of the respondents said they often rely on the Internet to gather product details. A closer look shows that 71% of those who participated in the survey browse vendor websites for searching for finance-related products and also to research on such products.

CONCLUSION The fact that many of India’s finance professionals bank on print media for news and opinions offers rays of hope for that segment—at a time when most global newspaper barons are increasingly focusing on the Internet to offset losses incurred in their print business. In the midst of half-baked assertions from a section of media pundits— both at home and abroad—that “the magazine is dead”, it comes as a surprise that finance professionals overwhelmingly read magazines for views and opinions. And a pleasant one at that.

OCTOBER 2009

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LEADER’S WORLD WINNING MINDSE T S

Leading in

Risky Environments

Studies explain why some people see climbing mountains as self-actualisation experiences while others see in it nothing but fear of hurt

ABOUT THE AUTHOR David Lim is founder, Everest Motivation Team, a company that helps build teams and grow leaders.

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OCTOBER 2009

SO THERE YOU ARE, STANDING ON THE EDGE of a precipice of ice. A gaping, bottomless slash extends from beneath the tip of your ice-crusted boots to the nearest flat block of ice, two metres, and too many heartbeats away. The little voices in your head start talking. What’s the matter? You want to live forever? After a moment of googling your brain to assess answers to the situation, you half crouch, and then spring forward, hands wrapped around the handles of your twin ice axes, like talons, ready to claw the oppo-

Optimism: While “hope” is more general, optimism suggest a more situationspecific application of the expectation of success. This expectation is based on factors such as time-frames, resources, and self-belief. Action Plan: Asking “what’s the worse that could happen, and what is the likelihood of it happening?” is one of many “power questions” that can help sort out the muddle-headedness we experience when too fearful. Practical Criticism: The flip side of optimism is practical criticism. In short, it’s the voice you have that tends to hold you back for very good reasons. Action Plan: When stimulating this skill, constantly ask the right people for views and opinions, however brutal, of your next “great idea”. The Alpinist’s Pack: Having had to often carry my home, food, fuel , water and clothing for a week on my back, I have a very personal system of what goes into my pack. What goes into yours? What do you carry – your emotional, cultural and physical baggage – that helps or hinders you? The leadership challenge in many corporate organisations is that leaders hang on to “baggage” that worked well for them in the past, but fail to flex to changing external factors, and fail to embrace new concepts, ideas and beliefs for the future. Action Plan: Packing for your next step up the investment ladder? Look at what baggage you are carrying that needs to be changed or dumped to meet new success. The good news about leading in risky environments is that your personal risk quotient can be changed, and can be measured by validated tools available in the marketplace. The separate components of the leadership risk equation are also worthy in development themselves. In the hundreds of team development programmes we’ve conducted, no one has died of an overdose of clarity of goals, motivational energy or resilience; especially in groups working together. Sadly, in many cases, we have to begin with a sore deficit in many of these areas. Understanding the five components of personal risk thresholds will help organisations immensely in making informed decisions and staying effective in the face of fast changing environments..

“The good news is your personal risk quotient can be changed, and can be measured by validated tools available in the marketplace.”

FOR MORE INFORMATION AND FREE ARTICLES ON LEADERSHIP,VISIT: www.everestmotivation.com

OCTOBER 2009

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leader’s world

site side. You land with a dull thud and a tinkle of spraying ice chips, as your axes strike home, securing your position. You look to your left, and the Tasman Sea, 3000 m below you shimmers and glows. Your rope partner issues a few expletives; repeats your move, and you take in the slack in the thread of a rope joining both of you. After a few devilish grins, both of you make off, ready for the next challenge. We face choices daily, and whether we like it or not, all are governed by a number of preferences – fear of pain, or love of opportunities – and so on. We live with our own mental programming created by desire to reach goals, our fear of failure, and our level of hope for success in anything we do. While the adventure described above involved the first and only SE-Asian ascent of the complex Syme Ridge on Mount Tasman in 1996, whether we see any situation as an opportunity or an obstacle will depend on the key factors described above. Having spent two decades strad—David Lim dling both the corporate and extreme adventure worlds, I’ve had ample opportunity to study firsthand the concept of risk-taking. Risk-taking studies explain why some people will see climbing mountains as wonderful self-actualisation experiences, and emotionally powerful goals that drive them. Others see nothing but discomfort, fear of hurt and humiliation. The skill of leading in high-risk environments is influenced by five key mental attributes and skills. The first of the five key factors that make up your personal risk profile is- Motivational Energy: this determines the clarity of life goals, commitment to these goals, and often determined by how aligned these goals are with the person’s higher purpose. People with high motivational energy tend to be people motivated by goals and opportunities. Action Plan: Skills that help “up” this energy are clear goals, aligned with your highest purpose, and internalised every day. Resilience: Your ability to bounce back from setbacks and overcome obstacles. These could be a combination of knowhow in skill-specific challenges. Action Plan: How do we increase this factor? First, by tolerating smart failures, as well as toughening our minds through simulations; working up to the big goal.

cfo lounge

NEW LAUNCHES GADGETS TO BOOST your productivity. Have a look. Here’s a smart phone, a wireless pointing device and a hard drive.

Nokia N97

GIZMOS

Klipsch Heritage These speakers are to die for, say users. They create sound that will rock your world.

The N97 has a dream set of specifications - a large touchscreen 5 MP camera, 32 GB of inbuilt storage space, and a full QWERTY keypad. We have to say you get quite a lot out of the phone in terms of hardware. Price: Rs. 36,166

Apacer AB611

IT’S 2009 AND Klipsch has launched their Heritage speakers for the second time. The first time was back in 1946. The top of the line model in the series is the Klipschorn, which is priced at Rs. 4,75,000. A 15-inch woofer is at the heart of the system. You will need to spend a little more on people to help take the speakers up to your apartment. This is after all, an 80 KG set that stands more than a metre tall. PRICE: Rs. 4,75,000

THE APACER AB611 is a wireless pointing remote, meant to be used as a presentation tool. With a tool like this, there isn’t a need for a separate individual to operate the slides for you. Price: Rs. 2,499

WD My Book Studio Edition II 4 TB

THE E-P1 HAS been designed to give SLR like performance from a compact camera. For those who like their lens kits a lot, you will be happy to know that you can change lenses on this point and shoot. PRICE: Rs. 27,444-45,000 48

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OCTOBER 2009

THE WD MY Book Studio Edition II Exter-

nal 4 TB Hard Drive is a huge drive. - it weights around 2.63 kg, so it may not be ideal to carry around. Price: Rs. 39,000

SOURCE: DIGIT

Olympus E-P1

Soul Curry in Fort Kochi V Sunil does both—gorges on grilled fish and gets passionate about art.

A VIEW FROM THE SWIMMING POOL OF HOTEL BRUNTON BOATYARD, WHICH IS LOCATED NEXT TO THE KOCHI BOAT JETTY

I AM SURE Vasco da Gama like me experienced the same breathtaking feeling when I discovered Fort Kochi for the first time: utter delight. The only difference is that the Portuguese traveller-trader-conqueror took in this beautiful spot some centuries earlier. He was on a voyage. I did it on a photo shoot for the Incredible India ad campaign in July. What’s amazing here is that history sleeps—and you can see it sleep! They say, till 1341 AD, Kochi was a land-locked region; a giant flood that year transformed it overnight into one of the finest natural harbours in the world. The area that would later be known as Fort Kochi was gifted to the Portuguese in 1503 by the then Raja of Kochi, who also gave them permission to build a fort (Fort Emmanuelle) near the waterfront to protect their commercial interests. The rest, as the cliché goes, is history. Fort Kochi came under Portuguese rule for the next 160 years. There’s more history, if you are interested. In 1683, the Dutch captured the area and Fort Kochi came under Dutch rule for the next 112 years. In 1795 British forces took control of Fort Kochi after defeating the Dutch. In fact, foreign control over Fort Kochi ended only with India’s freedom on 15 August 1947. As luck would have it, these conquests for over centuries have left an enduring mark here in this heritage town in

south-central Kerala—a blend of colonial and traditional architecture. Let me tell you, Fort Kochi just breathes colonial history, and there’s also the warmth of being at home. You will love it. As I wandered aimlessly through its narrow lanes, I stumbled upon spice markets, a synagogue, a Portuguese palace, a church built in the 16th century (where Vasco da Gama is believed to have been buried) and some Dutch homes. But then most people who go to Fort Kochi expect to see all these. What I did not expect to see within one of these 200-year-old Dutch homes is a New Age, part gallery part cafe that had some cool art installations on display while I was there. At Kashi Art Cafe they serve food as delicious as the art on display. I’d give it five thumbs-ups, if you ask me. Here, what was earlier a boulevard outside fine colonial houses is now a boutique hotelier’s paradise. Malabar House (Fort Kochi’s first heritage boutique hotel), Koder House, Old Harbor Hotel are all classic examples of the blend of colonial and traditional architecture. Among them, the Brunton Boatyard was a big surprise. Like the name suggests, this charming hotel is situated right next to the Kochi boat jetty, overlooking the busy shipping channel. Rooms are really good. They are spacious and very clean. The History Restaurant was my personal highlight here. It gives a Titanic feel since it is built on the upper deck of a make-believe boat. The food there—especially fish delicacies—is superb. The final word is, it’s not Miami, but Fort Kochi. As told before, here history sleeps and heritage beckons.

cfo lounge

TRAVEL

“What I didn’t expect to see in Kochi is a part gallery part cafe that had some cool art installations on display.”

V SUNIL, The author is executive creative director, Wieden+Kennedy India

OCTOBER 2009

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art review

EXHIBITION

Mumbai Art gets Global Touch Gallery BMB makes a good start with a show featuring artists from five continents By Ullekh N P IN A YEAR of crashing markets, falling art prices and vague signs of economic recovery, most people would think twice before they start an art gallery. But the founders of Gallery BMB in Mumbai hope to beat the slowdown blues and reverse a trend—they want to bring global art to India. That’s exactly what they---Bose Krishnamachari, Yash and Avanti Birla, Devaunshi and Dia Mehta---tried to do with their inaugural art show that started in Mumbai on 21 September. This exhibition features artists from five continents and includes big names such as Jake and Dinos Chapman from the UK and Jon Kessler from the US. Others are Riyas Komu from India, Tunga from Brazil,

RIYAS KOMU’S INSTALLATION AT THE SHOW; YASH BIRLA AND BOSE KRISHNAMACHARI (TOP, RIGHT)

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OCTOBER 2009

“In this space, we want to make global art more accessible to artists and art lovers here.” — BOSE KRISHNAMACHARI George Osodi from Nigeria and Wang Qingsong from China. The title of the show, The Dark Science of Five Continents, is, however, deceptive with Tunga’s bright work “Amber Foliation” flaunting sort of bright butterfly wings. But the fact that butterflies have a short life and that all that brightness is ephemeral could be one reason why curator Shaheen Merali thought the work gels well with those of others, in theme if not in look. Komu’s installation—a Fiat car engine mounted on a wooden table and supported by metal-pipe legs—is dark indeed. “The Fiat car, in fact, a cab, symbolises, the life of this city, Mumbai, that continues to drag on,” says Komu. Art critic Manoj Nair describes two works by Chapman brothers--one which looks like a see-saw and the other in which a pipe connected to a fuel can is shown slowly morphing into a male sexual organ---as “colourful yet grim”. Their third work, “This is the Chicken”, one of the most brilliant works in the show, doesn’t attract much attention. The reason: people have to look upwards to see the work hung from the ceiling and many visitors on the first day didn’t see it. Osodi’s photographs speak volumes about the wars for oil in his native Nigeria. While Kessler astonishes viewers with his untitled photographic work—of smashed faces of celebrities such as Angelina Jolie—Qingsong simply enthralls viewers with overt anti-communist views in his video art. The turnout on the first day of the first show was huge, and at least a few people in the crowd said jokingly that they missed the sixth continent—Australia. Artist-curator-gallerist Krishnamachari cracked up and said, “I will take note of that complaint, but the show must go on.” (The show is on till 7 November at Gallery BMB, Queens Mansion, Prescott Road, Mumbai)

books

NEW RELEASE

Light comes from the east

PICK OF THE MONTH

When success fails How The Mighty Fall talks about the decline and fall of companies through five stages. JIM COLLINS’ LATEST book focuses on how companies fail, but it also offers rays of hope for companies that are looking to rise after a fall. He introduces a five-stage model to explain how companies fail. While the first two stages talk about the roots of corporate decline, the rest three dwell on management response to internal troubles. How the Mighty Fall differs from his earlier works Good to Great and Built to Last in that it focuses on companies that fail—his previous two books were about the ascent of companies. The author examines 11 companies that moved through the five stages. He also contrasts the failure at these companies with the successes of their rivals, to arrive at a conclusion indicated earlier in the book, quoting Leo Tolstoy: “All happy families are alike; each unhappy family is unhappy in its own way.” Companies, Collins says, are like families. The book provides a good read, but at least a few readers may ask why some authors sound like prophets when what they do is write about growth in good times and about decline in bad times. Maybe Collins has an answer. —BY ULLEKH N P

Publisher: Random House Business Business Books 2009 Price: Rs 690 (approx.)

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OCTOBER 2009

PUJAN ROKA IS a fine blend of spiritual guru and management scholar. His book starts with the story of a highly paid executive of a company, David Hoffner, who quits his job after 20 years. The reason: he can’t get along with his boss and his decisions. The boss pleads, offers to make amends, but Hoffner had already decided. He is out! And in the next few days, along with his wife, a psychiatrist who is also into motivational speaking for corporates, Hoffner meets someone who is destined to be his new boss. At the new workplace, which Hoffner finds entirely different from his old one, it is all about eastern philosophy, meditation, and making things happen. It is also about merging Vedic principles with modern management. It looks too idealistic to be practical. However, the fact that writers still delve into eastern philosophy to suggest solutions for problems of western management shows that the trend, set by Yoga, is still alive and kicking. Publisher: Jaico Books Price: Rs 295

OTHER RELEASES

Multiple purposes THE REAL QUESTION is, do we need one more book on India’s holy sites? But once you start reading, you can’t put it down. Stephen Knapp’s 599-page book could prove to be useful because both the discerning traveler and the tourist can use it for reference. Publisher: Jaico Books Price: Rs 395

Life is here JUDD FOXMAN, JONATHAN Tropper’s protagonist in This Is Where I Leave You, is headed for a divorce—and unemployment. His predicament is linked to his wife’s affair with his boss. A stunning follow-up to his own How to Talk to a Widower. Publisher: Orion books Price: Available at Amazon UK