Google, Mahindra Satyam and VMD Syndrome On March 5, 2009, I wrote my first blog “Value Management Deficiency Syndrome” triggered by the Satyam fiasco, Madoff and the likes. Global meltdown exposed more of their ilk. I had identified Satyam Computers Ltd as a classical case of “Value Management Deficiency Syndrome” with goal divergence of the promoter as individual and as promoter of the company resulting in value system of individual crushing the value system of the company. Rest is history. As I stated in my first blog “A value system is evolved & sustained over a period in a collaborative fashion with all these stakeholders. Identification and continuous monitoring of deficiencies in management of “Value System” through benchmarking and quantitative & qualitative analytical models as part of the internal process of management led by the CEO would yield rich dividends in the long run. Annual or periodic reviews of value system would ensure consistency, compliance and communication down the line about how important the value system is to the stakeholders. Value System would always come under pressure from demands of different stakeholders. That is where comes the trade off in values visavis goals and signals beginning of the downslide.” I had sent a copy of my blog to Shri Kiran Karnik, Chairman of Satyam’s new board appointed by the government of India. Then came Mahindra Group to take over Satyam and in less than a year, Mahindra Satyam, the new entity, has left behind the mess and is on growth track. Mr.Anand Mahindra, Chairman of Mahindra Satyam gave an interview to Business World on how they have gone about to restore the confidence of the stake holders and strict actions taken to lift the value system of the organization to match with that of Mahindra Group. It is interesting to read his interview and I have referred to a few lines from the same for analysis. He says he separated the company’s business model & strengths and ethics or value system. Business strengths of Satyam were quite complimentary to Mahindra’s IT business & would add to horizontal spread. They identified erosion of value system as the reason for the fiasco of Satyam. Focus on Ethics & Values: After take over, the CEO of Mahindra Satyam communicated the new ethics & values to all the employees, concentrated on enforcing the do’s and don’ts, and even sacked employees found to be taking gifts or joining dinners with customers. It was a strong signal to employees to stick to the new value system. They also rewrote the corporate governance guidelines. Interestingly, they have a Chief Compliance Officer (CCO), who may be a retired judge, reporting to Chairman. The employees are required to report inconsistencies and complaints about ethics in a mailbox. However, this mailbox should not be treated like a suggestion box which remains empty. Capturing Deficiencies:
I had banked upon a practice perfected by Toyota in 1980s called “Things Gone Wrong” (TGW) and introduced same in my organization with modifications to suit our needs in 199899 to capture the anomalies, variations and deficiencies in processes and various functions. The feedback was captured on white boards in shop floors & departments and entered into a master register to arrest the organizational decay. We succeeded in capturing more than a thousand points of feedback (called TGWs) in one year on which we acted for reversal of the trend. This helped us to improve the quality systems and concern for values in dealing with various functions and vendors. It also improved interdepartmental cooperation due common value system understood by all. The mailbox initiative by Mahindra Satyam can definitely help to manage the deficiencies in the values inherited from Mr.B. Ramaling Raju. However, it should be institutionalized. Measuring to Manage Values: Mahindra Satyam should create a permanent system, for measuring deficiencies in managing the value system by focusing on key parameters, as stated above, which reflect values dear to them. These parameters can be integrated even in performance evaluation model of employees at different levels. That will bring in a sense of priority for trade off while dealing with different situations as simple as joining a customer for dinner. Mahindra Satyam went to their customers to restore their confidence and have won many customers and their stock has gone on the bourses. Their emphasis has been on “walk the talk” with customers. As Mr. Mahindra says he is not celebrating yet. But well begun is half done. Their approach is right and their success story would definitely find a place in the case studies on turn around in top business schools not just for turn around of the top line & bottomline but for turnaround of the value system. Moral High Ground: Talking about erosion of value systems, an important development on the positive side of VMD Syndrome is Google’s operations in China. Google has threatened China of pull out of their market due to breach of cyber securities of human rights activists. Is Google reacting sharply only due to breach of security and genuine concern for human rights or is there any other reason for pulling out of China which is largest market for internet advertising? Their taking a moral high ground in support of human rights is laudable as it speaks for their concern for their value system. But Chinese have all along been known for scant respect for such things when it comes to business and politics both. It was so when Google entered China market, has been etched in our memories with Tiananmen Square and it is not a new development. Chinese government has offered to discuss and find a way out. World would definitely appreciate if Google puts their concern for human right above their business interests. However, let Google be very sure of this posturing as they would
have to walk this talk in other global markets also. There are number of dictatorships and even democracies which have cyber censors and human rights violations. They may not be big markets for Google. But once they take a moral high ground they can not come down on any other pretext in other markets also. Round II of Mini Global Melt Down? One year after the global meltdown, which I attributed to erosion of value systems, Indian banking system is yet to learn lessons. While some reforms have been introduced by SEBI for market regulation, there is a strange situation wherein public money is finding way to most unsecured speculative markets. With high interest rates there are no takers for high cost loans from industry which prefers raising funds overseas at lower cost. The banks therefore diverted their surplus of a more than one lakh crores (US $ 200 billion) to mutual funds for a decent return. This fueled the markets creating a bubble. RBI was forced to nudge the banks to withdraw money from mutual funds and the banks obliged. The contradiction is that we hear about possibility of raising interest rates to control inflation due to excess of liquidity. RBI knows its job better. But the guidelines to banks must secure public money amid temptations of artificial quick gains at the cost of small investors in mutual funds in the markets. Because when large investors like banks pull out as they all did together last week, the genuine investors lost money. The games of big sharks cost the banking systems in the western world their very existence last year. Nevertheless, billions of dollars are still being distributed by banks in US & Europe as bonuses to employees. Survivors of the melt down are again at it. There are enough bubbles waiting to explode from China to Dubai to Ukraine for Round II of global meltdown. Therefore bringing the systems to manage the deficiencies in the values and save the markets, economies & common man should be the focus for the banking & financial systems. Vijay M. Deshpande Corporate Advisor, Strategic Management Initiative, Pune January 22, 2010 Scroll down for my other blogs Or visit www.strami.com