Experts said that while CEOs from outside the company are given high targets and little time, sometimes too much proximity between old regime and new could be disruptive
Vishal Sikka, who stepped down as Infosys MD and CEO on Friday, said the continuous drumbeat of distractions and negativity over the last several months inhibited their ability to make positive change and stay focused on value creation. He said that addressing the noise by itself is damaging; hundreds of hours of his own time has gone into this recently. Industry experts said outsiders who are brought in to bring about such huge structural changes in the company often pay the price.
While Infosys co-founder Narayana Murthy said his primary concern was the deteriorating standards of corporate governance, Sikka maintained that all allegations have been repeatedly proven false and baseless by multiple, independent investigations.
A Ph.D in computer science from Stanford University, Sikka was brought in taken into account his ability to leverage technology to help businesses become more competitive, as board members in an earlier Infosys statement had said.
Sachin Rajan, Consultant at Russell Reynolds Associates noted there is a tendency to expect the CEO to be in line with the founder. But, the contributions made in the years of building a company with the new CEO are not comparable.
“The new CEO is often expected to be a magic wand to get the years of experience that founder has and take the company to the next level rapidly. That doesn’t happen,” he added.
In the past few months there has been a tiff between the founder and the Infosys management with Murthy raising concerns about compensation hike to COO UB Pravin Rao as well as severance pay to former CFO Rajiv Bansal.
Sujaya Banerjee, Chief Executive Officer of Capstone People Consulting said that founders/promoters have a deep emotional connect to the organisation that they built and has been run in a certain way.
“When we get a professional, there is a lot of romance associated with the transformational agenda. But, there is a lot of price that has to be paid for that organisational transformation,” she said.
Banerjee explained that when an outsider is portrayed as a savior who will drive change and they buy into the idea, there are a lot of stumbling blocks to drive a change of this kind.
In his resignation letter to the Infosys board, Sikka said the structural challenges this (allegations) engenders within the organisation, has a very damaging effect on their ability to carry out any kind of a transformation, especially one that is as fundamental as transforming from a cost-oriented to an innovation-oriented value delivery to clients.
Murthy has responded to Sikka’s letter and the Infosys statement saying that he has never sought any money, position for children or power.
“There is a huge risk associated with taking on these journeys for a new CEO because it can both ways. There is also a chance that they may be a victim of that change. Here, it is crucial to be able to constantly befriend and earn the trust of the old order,” said Banerjee.
While the Infosys board will be on the lookout for a new chief executive officer, experts like Banerjee said they should just go the Tata way and get someone who is an old-timer and trusted by all stakeholders.
Sikka has stated that he will be working closely with the board and the senior management team to plan out the details and the timelines to ensure a smooth transition and in the meantime, continue work without disruption.
Experts pointed that often there is huge pressure for a new CEO, especially an outsider, if they have been brought to pull up the company. Especially, because a quick turnaround is expected.
Rajan said even if a new CEO is able to have a stable run for a couple of years without anything getting derailed; that should be seen as a success. “But often the next trajectory of growth is expected to be immediately start appearing. That is where the disconnect begins,” he added.
There is also murmur that promoters sometimes tend to be too close to the day-to-day affairs of the company, which may lead to some differences of opinion. This is because the business is done now could be much different from how it was conducted earlier.
“Sometimes there is way too much proximity and way too much access. There will always be a cohort in an organisation that will resist change and know that they have access to and can gravitate to the older regime. This may get disruptive,” explained Rajan.Consultants believe founder-promoters should have well-defined areas of functioning so that any minor differences with the current board or the top management can be ironed out easily. Without that, there is always a grey area of what is the CEO’s responsibility and to what extent they have the freedom to exercise their rights.