Nandan Nilekani described Infosys as an “ultimate professionals’ company” at the company’s 40th-anniversary celebrations a few days ago. The point was well made, as the journey of seven engineers who came together to launch Infosys Consultants with a modest investment of `10,000 has been truly incredible. None of them could have perhaps imagined that, in its 40th year, Infosys would have a revenue of over $16 billion and 314,000 employees. Most important, India’s second-largest information technology service provider remains one of the country’s most ethical and respected names.
So, by and large, Nilekani’s description of Infosys as an ultimate professionals’ company is correct. However, there have been at least a couple of occasions in the past when Infosys could have done better to live up to this tag that Nilekani has attached to the company.
The first was the decision to give each co-founder an opportunity to steer the company after Narayana Murthy completed his term. A professionals’ company would always give supremacy to meritocracy, which means the best person should get the top job. Infosys, however, wavered—five of the co-founders (the two others had stepped down from their board seats) took their turns to run the company. Not much is known whether any objective assessment of their competence was made. The status of a founder should not automatically make someone suitable for the top position. After all, the CEO’s post can’t be a sort of candy to be distributed towards the closing stages of one’s professional life.
But Infosys made that mistake with not-so-happy results. While Nilekani’s tenure was outstanding, the same can’t be said about the others. In fact, the company’s sub-par performance prompted some shareholders to demand Murthy’s return in 2013. And Murthy did return to Infosys to steer the troubled ship to safety for one full year before the company was handed over to an outsider in August 2014. That was the biggest management transition in the firm that was then 33 years old.
An ultimate professionals’ company should have had a robust talent management and succession system in place so that it didn’t have to request its retired chairmen to come back and play the role of a saviour—not once, but twice. For example, when he left the CEO’s post, Nilekani was very clear about one thing, both in public and in private: he would never, ever return to the company he and his co-founders built from scratch in 1981 into an IT giant. But after Murthy, he had to come back to Infosys, which was battling the worst crisis in its history.
Second, the experience of the first two outsiders—R Seshasayee and Vishal Sikka—who took over from Murthy in 2014 was harrowing, to say the least. It came to a point when Seshasayee, a respected name in corporate circles, had to issue a public statement to say that Murthy’s campaign on alleged governance lapses during his tenure “had slipped into personal attacks and slander”.
This was in response to Murthy quoting an anonymous whistleblower letter that said Seshasayee had lied to shareholders about payments made to former chief financial officer Rajiv Bansal. In his statement, Seshasayee also said that Murthy had praised him as ‘man of high integrity’ till recently and that he was at a loss to understand the founder’s motivation.
The tussles between Murthy and Sikka had begun right after the Panaya acquisition in 2015. Murthy sought answers from the board for taking a decision to acquire Panaya. The hint was clear: Murthy saw huge lapses in governance and due diligence as far as the deal was concerned. While any shareholder has the right to raise questions, was it right to pass a judgement, especially when neither the board nor anybody else has been able to find any concrete proof of wrongdoing?
After taking over as chairman, Nilekani had indicated that he would take a tough approach in fixing all the corporate governance issues on the Infosys board, including the probe report on the company’s 2015 Panaya acquisition that Murthy had repeatedly insisted should be made public. But that report has still not been made public.
Sikka had no option but to quit after the publication of the contents of a letter written by Murthy to half-a-dozen of his closest advisers. In the letter, Murthy wrote that three independent directors of Infosys had told him that Sikka wasn’t made of CEO stuff and was more of chief technology officer “material”.
Is that how things should have panned out in an “ultimate professionals’ company”?
An organisation can’t be run in the belief that the founder will be around forever. So, the questions the founders should ask are: Have they prepared the organisation to survive and thrive without their presence? Can they think of leaving? If the answer is ‘no’, then the founders have somehow made the organisation about themselves, rather than about the mission.
According to Deloitte, the lack of a proper governance framework, which quite often negatively affects the ability of the organisation to control its actions, results in inconsistencies in the way business is conducted. Outside leaders frequently find themselves tied up in the day-to-day operational aspects, while the founder fosters a paternalistic culture and has the final say on all strategic matters.
At the 40th anniversary celebrations, Nilekani said, “We are also mortals. I don’t see myself in this position (chairman) for long… but I haven’t yet found someone suitable to take over charge”. That statement itself shows the dilemma that Infosys faces—while Salil Parekh has done a sterling job as an outsider-CEO, the company’s real problem is finding a future path where the founders are not in the picture in running Infosys. Nilekani has a tough job on his hands, indeed.