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Case Analysis: The Enemy Within

How can the Board decide what needs to be done with a member of the MC without the knowledge of the CEO?

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Conflicts in any role are a given. But as a CEO, the nature of conflicts are of a different degree, many a times bordering right and wrong, legal and illegal, etc. Most times there are no precedents to fall back. Especially in this VUCA World (Volatile, Uncertainty, Complexity and Ambiguity), it is so dynamic and the war on all fronts is so dramatic. That’s what makes roles at the top lonely. Grey areas far outstrip black and white zones of decision making. Anand Mitra is no exception.

But, over the course of development of management and leadership since the Industrial Revolution, the functions of boards and their roles and responsibilities have evolved considerably. Today, given social activism on multiple channels of media, corporate governance has reached a crescendo. This has also resulted in blurring of the role clarity between CEO and Boards. And the matter is only compounded as many a times the CEO is also a member of the Board. The question every one struggles in this interface between boards and CEO is how close is close and how far is far? These tensions in role responsibilities need deft handling, else frustrations are galore. Mature Board members handle it well. Most promoter-led companies respect the letter very well but bury the spirit hundred fathoms deep!

Gemmet seems to have gone overboard. How can Board decide what needs to be done with a member of the management committee without the knowledge of the CEO? Yes, the HR Head is a key member of this decision-making process, but it has to be first a bipartite discussion between the Board and the CEO and thereafter as a tripartite with the HR Head to iron out any blind side issues. In fact, if the management team is mature, you see that CEOs and HR heads concur on leadership issues first and then present their joint views to the Nomination & Remuneration Committee. In this case, for reasons beyond anyone’s rational understanding, the Board at Gemmet took the reins into their hands and are compelling the CEO to toe the line. To outsiders, it looks like a strong message to Anand that he is no longer in the driving seat. It is a good practice for companies to engage people like Naman Firoze so that Management Committee performance is supported with additional reinforcements. However, here you see the CEO feeling so lonely and the chasm between him and Board seems to be so wide that he is not in a position to even discuss with them. But despite having such mechanisms, the Board jumped many layers to arrive at this embarrassing phase.

Yes, there are times when you need to play tactically with the external world, especially with stock markets and other financial institutions. But, this thought process at Gemmet seems out of the rational mind. The Board thinks the CEO is good to continue and hence the need for a sacrificial goat to save him, and yet the very same CEO is thinking of quitting and thinks the company he works for is not being fair!! Now let’s not forget that Anand who has been in this role for eight years is also on the Marketing Board of Asia contributing to their regional strategy. There are many questions which beg answers here: The goal setting process, performance review process, talent management process, trust issues and most importantly the fairness quotient. According to CEO’s self- assessment Abhiram Murthy has delivered on numbers in three of four years. That is a pretty good run rate that does not put someone on the firing line. And the fact that the market is going through tribulations; head room for growth is always anybody’s guess. In such a scenario, instead of strengthening the management team, Board seems to play its own games. The other key question is how come one Board member has reached this far? What are other Board members doing? Especially Independent Directors who need to strongly advocate the right process of first discussing this with the CEO and jointly arriving at a strategy for the market to manage perceptions and performance issues. What about seven months of performance that was slipping ? What was Board doing all along? Did they weigh the risk involved of what would happen to their stock if their CEO resigns along with Abhiram?

Anand is absolutely right that sales numbers of one year is not the only dimension to look at if one needs to take a strategic view of the business. It is all about balancing between current performance and future investments to ensure sustained long term health of the company. He is also bang on to say that the whole performance of the company cannot squarely sit on one person’s shoulders. What about team work? Especially when chips are down, culture is looked through the prism to understand the real character of the company. And for sure, Gemmet is in troubled waters and head winds don’t seem to be in a mood to help. The failures of the system are horrendous and without exaggeration one might urge upon the need for the company to undergo grave surgery, radical mutations and installation of new thinking.

Anand’s choice is anybody’s guess. But, if Anand needs to walk on the right path, he should work on a three-pronged strategy: work with Board, work with his management team and work on himself. To begin with he needs to convene a special board meeting or the NRC meeting and have a dialogue with the Board in an atmosphere of candour and openness and advocate his point of view. He should convince the Board that the better strategy is to revise the guidance to the street or some tactical ways to manage the fall out with the financial world and put performance enhancing measures into place. He should use the threat of his wanting to quit in a measured tone so as to use push strategy. He should manoeuvre to polarise the Board who are on his side and leverage their capacity to overpower the Board with his thought process. He needs to walk the middle path of doing the right thing and with good understanding of the realities that surround him. What Anand does at this stage has huge implications for Gemmet and its large employee base. While pushing things at a tactical level to come out of this self-inflicted crisis, he should also start laying the foundation for long term thinking on the pertinent questions he raised. He has to engage with a strong consulting form that is good with Boards and lay down the principles of engagement between Board and the management team. It helps to have a third party facilitate this so that emotions are at bay and plug the grey areas of Board’s role vis a vis management team. There seems to be also a need to look at the company performance review process and how the Board is being updated every quarter. There are some obvious chinks in the armour. In the same manner Anand needs to have a heart to heart conversation with his HR Head and drive home the principles of Board engagement. He has to be careful so as to not become negative or become aggressive having been through a near catastrophe. Working with Naman, he needs to create a framework of performance reviews with his team as also reflect his own styles. Honest reflection on what he could have done to pre-empt the Board is critical for his self-development and be aware of any blind slides to his management style.

Leadership is a huge responsibility. It is much more than a job and deliverables and achievements. It is about leading an organisation into a future where all stake holders feel successful.

To do so, first it is about leading from within so that we can manifest our thoughts into action and when one does this with integrity, the dissonance within and without is far less. It paves way for courage of conviction which in turn drives right action. It has always been about the competence-confidence spiral. Anand has that opportunity when he comes to office the next day and pulls himself and Gemmet out of this hopelessness. He has to bear in mind that even Boards can make mistakes. But collectively, they can even come out of such a deep quagmire.

Many a times, funnily the enemy is within and we are so caught up with the inside world. It is within each of us and within our own surroundings. This is the worst enemy to fight as we most often miss it in broad day light. When you look at failure, most often it is this enemy from within that consumes our energies and we don’t even see competition trouncing us in our back yard. And mostly we see intelligent, hardworking, bright people at the helm of affairs missing woods for trees.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

A.V.K. Mohan

The writer was till recently Senior Director – Group Human Capital at Max India

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