Leadership: Measuring Corporate Success

Updated: Oct 5 2002, 05:30am hrs
Why do some companies acquire greatness, while others dont The question has become more significant at this point of time. We now find that several old business houses are either stagnating or declining. On the other end, many new business groups like Reliance Industries and Infosys Technologies are becoming stronger, year after year.

Though both, the declining and the growing business houses, are functioning in the same corporate and socio-political milieu, why do some show a high degree of corporate success while others prove to be failures The unanimous view of the management experts was that the real differentiator between success and failure was the chief executive officer (CEO) of the company.

In contemporary corporate India, two names fit this category: Reliances Dhirubhai Ambani, who unfortunately died a few months back, and a living icon N. R. Narayana Murthy of Infosys. Ambani proved that Indians could become world class entrepreneurs. He set a scorching pace to become the head of a company that became worlds largest manufacturer of paraxylene and PET. Not satisfied with that, he set up worlds largest multi-feed refinery. Dhirubhai was not highly educated with high flying management degrees. But he had a vision and understood the minds of men. He could foresee what the future needs of the country and the people were and followed an audacious but classic business strategy. He believed in three things: rational decision-making, focusing on the small investors, and finally depending on a trusted team of managers.

The greatest success of a CEO depends on whether or not he or she is able to professionalise the management and generate a second line of leadership. Most of the Indian CEOs fail in both. They neither professionalise their businesses nor build and train their successors.

Dhirubhai, right from the beginning, picked up the best talent from the market, gave them maximum freedom to operate and heavily depended on their expertise. Though uneducated in management skills, he sent both his sons to good management schools and gave them full training in running the business.

Nagavara Ramarao Narayana Murthy is another CEO to prove that it is the institution of CEO that makes the company a success. As chairman and chief mentor of Infosys Technologies Limited, Murthy was responsible for giving the domestic software industry a global face. The success strategy of Narayana Murthy was threefold. First, he developed healthy relations with the employees, as they were the only ones who were the bridge between the clients and the company. To create a lasting interest in the company, he shared the created wealth with employees.

Secondly, he sought to generate a true trust in the products and services of the company. Finally, he endeavoured to provide the best to the customer so that she never thinks of shifting to others. This corporate philosophy resulted in a strong client base that gave high net worth to Infosys. Good CEOs are made, not born. Late Mohan Singh Oberoi was cited an example of what a CEO can make a corporate entity out of nothing. Oberoi Hotel was not at all in the reckoning at the time of Indias independence. Today, the hotel chain is world class and stands amongst the best in the world.

P L Tandon is another example to prove that the CEO makes or unmakes a company. Tandon was the CEO of the Hindustan Liver Limited (HLL), State Trading Corporation (STC), and Punjab National Bank (PNB). Driven by the growth of the organisation, Tandon developed systems, transforming the three companies, to lead them in new directions. Unfortunately, STC could not maintain the direction and fell back into the bureaucratic rut. HLL and PNB continued in the new moulds and have been on the progressive path.

Today corporate India is in the midst of its greatest challenge-the need to create a new corporate environment to live and work in. And to develop that, the CEOs have to play a major role because the challenge today is not national but global. The sooner Indian companies realise that the success of business is in building excellent corporate governance systemswhich can be brought about only by good CEOsthe faster will be business will prosper.

(The author is former resident editor of The Financial Express, Delhi. He can be reached at [email protected])