Case Analysis: Quick, Get A Plan
Anand must put the facts on the table. Call a cross functional team to analyse. Create a recovery plan
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Gemmet CEO Anand Mitra’s situation is neither uncommon nor out of his control as he makes out to be to Naman, his advisor. This is a typical case of a CEO who has failed to manage expectations of the Board, the investors and is now feeling cornered by forces within and outside the organisation. Most of us think of the CEO as someone at the TOP of the pyramid. Actually nothing could be further from the reality in today’s corporate world. In an utterly transparent world we habit, the CEOs have another inverted pyramid sitting atop them. Imagine this pyramid to be the Board, investors, media and the civil society. The CEO is accountable to manage them as they are to manage their under fire sales heads. However commonplace this case study, it brings out with stunning clarity the issues that need to be resolved by CEOs on a regular basis. I have organised them in five buckets; see if these resonate with you.
Missing a forecast is one thing, but the way Gemmet missed it indicates wrong planning.
In most companies, sophisticated demand forecasting tools are used, business risk matrices drawn up and then followed up by rigorous debate to arrive at a consensus number. Most CEOs build “reasonable stretch” and then cast the financial plan on these numbers. The better CEOs will always have “contingency” numbers for unforeseen situations that always arise during the course of the performance year. This is the very foundation of building a solid financial plan — especially when faced with either the shareholders or even more so the prospect of going public.
Investors dislike nothing more than shocks. Anand should have had the courage to face up to his Board and investors and given them sound logic for HIS financial plan. It is quite obvious from the statements Anand makes to Naman that he never believed in the numbers submitted to the Board.
Some samples: ‘I argued that 9 per cent was a hell of a lot because it’s not just contributed by our foods.’ Or take this statement: ‘Hence 9 per cent was very bullish and I had in fact asked for 5 per cent, which was very doable. But we were unable to even deliver the 5 per cent, which was my most likely estimate.’
Investors will not buy scapegoats:
Anand is at pains to explain that essentially the reason for removing the sales head is an offering to the investors and keeping them at bay. This reflects an underestimation on the part of Anand as to how sharp investors are and how well they unpack corporate performance. I cannot imagine investors believing that company missed its results due to the leadership of one sales head.
In fact, if that be the case, it reflects poor systems and foundations of the sales organisation and company as a whole. It will be a larger cause of concern to investors. So, the Board will be well advised to not explain away the lack of performance by “conveniently and superficially” surmising that the Head of Sales, Abhiram Murthy, is to blame.
Rationally evaluate performance
Anand’s statements about Abhiram reflect a bias for past performance and a soft spot for his mentee and that can often cloud hard fact-based evaluation. Very often, sales heads who have done well for many years suddenly hit a performance wall. Past performance is not a marker, let alone guarantee for future success. Perhaps there has been a shift in the channel dynamics of Gemmet with the emergence first of Modern Trade and now e-commerce, which Abhiram is unable to leverage. Or other dynamics that he has likely been unable to face. A younger, less loyal sales force, distributor aspirations for returns might need a leader more in tune with this generation. Which one was it? If we go by Anand’s words, Abhiram has done his best. Has he? We don’t know what the exact reasons are but as a CEO, Anand has to be discussing these aspects of Abhiram instead of getting rosy eyed about the loyalty he has displayed. He must use matrices like market share, distribution numbers, sales force effectiveness matrices and engagement scores to make a comprehensive diagnosis of the problem.
Sales Head as a leader of people
Anand must realise that removing the sales head (should he too indeed come to the conclusion that it is Abhiram who is personally responsible) will have wider ramifications. Aside from being ineffective in reassuring investors (this point I have earlier made) this will send a shock wave of no confidence in the entire sales force, not to mention confusion. We can safely assume Abhiram is a popular leader of the sales team. He has delivered his goals for the past three years; folks would have earned their bonuses, got promotions and generally enjoyed working for this organisation. Removing the leader of a consistently high performing team is as much signal that Anand holds the larger sales team responsible as it is a reflection of Abhiram’s own leadership.
Then again, not just the sales team, the job market is watching, the head hunters are observing and this does a lot of damage to the employer brand. Times are unusual. Everyone is watching everyone else. And companies have a lot to account for. A longstanding star employee being sacked alerts foreign investors, placement firms, competition and the social media. Hence any such move must be made with utmost care. That the Board of Gemmet has chosen the route of sacking
is surprising. If this is an MNC or an Indian conglomerate, a move to another assignment is generally a good idea. Perhaps in a role that fits Abhiram’s skills sets. This can be seen as an “easing out” as opposed to a “sacking”.
I would not recommend the sacking route unless there was evidence of wrongdoing — which does not seem to evidence from this case study. Facts say that Naman has been mentoring Abhiram. Any aberration would have shown up and it has evidently not. Even if Abhiram is personally responsible for this debacle, he must be given a face-saving assignment where he can prove himself once again.
Never try to eat someone else’s lunch
If you go back to the beginning of the narrative, we find some amount of business growth was written on account of a key competitor having been wiped out from the market by the regulator.
As a CEO, Anand should adopt a win-win approach and not try to take advantage of a rival’s adversity. (He has condemned it with his tone and does not appear to be given to such practice. But he has heard the suggestion and probably not shot it down vociferously.) Not because there is anything immoral but because the reputation of Gemmet as an opportunistic company will gain credence with the regulator, trade partners and society; and in general, this is very undesirable. A larger reason is that, while one competitor has been pulled up, consumers tend to penalise (with their doubt and suspicion) all manufacturers of the product category.
The negative fallout must be managed as a risk and not factor in as a pipeline fill, growth opportunity. This is a small but material error of judgement that the CEO must avoid. Increasing regulator activity will mean that CEOs will routinely face the situation and they must consider this argument before factoring in actions.
All is not lost. Anand must get down to making a recovery plan. Put the facts on the table. Call a cross functional team to analyse. Make and validate hypothesis. Create a time-bound recovery plan. For the moment he must communicate to the Board to hold such decisions as are seemingly hasty, assure them of a numbers based depth analysis that will help them as a team to work on the recovery plan. Then, he must go to the Board and sell the plan. It is going to be tough but this is needed to win back his credibility, not to mention that of Abhiram.
Anand’s best chance is with the team he has for the moment. Any changes to the management committee must be made in the medium term. You don’t throw your trusted generals off the ship in the middle of a high sea battle. Gemmet can ill afford to lose its Head of Sales.
The smarter way forward is to come to the shore, find a great replacement and give an honorable discharge if that is the only way. Good for the crew — this increases your chances of winning the battle. If Anand is feeling lonely and isolated, I would recommend he call his MC and have a good heart to heart chat, show his true feeling, rally them around and get moving.
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