If only Raju had read Jack Welch

A few days after the icon-turnedconman Ramal inga Raju dropped the Satyam bombshell, a friend of mine who happens to be a financial consultant, recommended that I read Jack Welch’s Winning.





Welch, during his 40-year career at General Electric, led the company to success around the globe in multiple markets and against brutal competition, before retiring in 2001 as chairman and CEO. If the legendary Bill Gates described the book as “a candid and comprehensive look at how to succeed in business — for everyone from college graduates to CEOs’’, another legend, Warren Buffet, said “no other management book will ever be needed.’’ As I finished reading it in a week, writing reports on the Satyam scandal in between, there was no doubt that both Gates and Buffet were right, and I was left wondering how much of what was said in the 360-page book was true in the case of the Hyderabad-based IT major.



Many experts have speculated — in speech and print — as to how this fraud, said to be one of the biggest in corporate India, could have occurred. At the risk of being called cynical, I doubt whether it would be fully unravelled given the politico-corporate nexus (with due apologies to Hon’ble MP Jayanthi Natarajan who appears to be upset over politicians being blamed for the scandal).



Many also likened it to what happened to Enron or Arthur Andersen, but the question that remains is what is the common “wrecking point’’, so to speak, between the three. For this, we need to go back to Jack Welch to grasp the disconnect between mission and values, the most abstract, overused and misunderstood words in business but all the same critical for success.



Founded almost a century ago, Arthur Andersen’s mission was to be the most respected and trusted auditing firm in the world. It was a company that prided itself on the courage to say no, even if that meant losing a client. Not surprisingly, it earned respect around the globe. As the boom period arrived in the ’80s, Arthur Andersen decided to enter the consulting business, where there was excitement and big money.



The conscientiousness that guided the accounting firm gave way to aggressive sales behaviour by marketing men and soon the consulting business had eclipsed the auditing side. Quite naturally, disputes arose over which was the better business and soon the partners ended up in courts, leading to the collapse of the company in 2002.



The case of Enron, as Jack Welch tells us, was no different. It was a simple pipeline and energy company, engaged in supplying gas from one point to another, cheaply and quickly. Then, the company changed missions and made Enron a predominantly trading firm. Again, the goal was faster growth. The trading desk was where everyone wanted to be, and the pipeline and energy business was relegated to the background.



Ultimately, Enron collapsed.



Now, the Ramalinga Raju story. Having failed in quite a few businesses in the early stages of his entrepreneurship, Ramalinga Raju, like many others, ventured into software in the late ’80s. Raju’s mission was to be among the top IT companies but when the company grew significantly, then began the disconnect between the mission and values. The initial group of people who shaped and gave a direction to the company found themselves expendable. Hiring was done left, right and centre — often reportedly for pecuniary considerations by those vested with that authority — as businesses are also appraised in terms of employee strength. Then, there was lack of candour, the biggest dirty little secret in business, as Welch calls it. It blocks smart ideas, quick action and valuable ideas from the staff.



A very senior staffer at Satyam narrated how the only dictum for employees was to do what Ramalinga Raju wanted them to. No one really exercised their brains and even if they did, they were unwilling to tell the boss that what he wanted to be done may not be the best course of action. Just one example.



A year ago, Raju desired that an internal survey be done on client satisfaction, obviously because he smelt that all was not well.



Quite a few wanted to tell the truth but the response they got from the group heads was to soften the bad news. Ultimately, the CEO was given survey forms in which client satisfaction was rated at 8 or 9 out of 10, far from reality. Not being candid is self-interest — making one’s own life easier — and that is what Satyam heads were advised to do.



In one of those innumerable meetings Jack Welch addressed since his retirement, he was once asked by a young woman how any businessperson could practise candour when “only the voice of the boss is allowed.’’ His counter-query was: “Why aren’t you asking those questions to your own bosses?’’ Pat came her answer: “I can’t bring that up.



I’d get killed.’’ It was no different at Satyam where if you wanted to keep the job you had to shut your mouth, just as its former chief finance officer Vadlamani Srinivas did. All he did was to sign wherever he was asked to. Like many others, he wanted to keep the job and was paid handsomely too for remaining silent. If only Ramalinga Raju had chosen a core team of professionals and not mere yes-men, the current crisis in Satyam may perhaps have been averted.



Over a period, corporate values in Satyam were given the go-by. Like Andersen and Enron, Raju also embarked on a short-cut method to make big money. The path chosen was real estate and infrastructure. Over the past two years, Satyam staffers often gossiped in canteens over lunch that their boss was no longer interested in the software business and would soon plunge into infrastructure projects. For Raju, the focus moved away from managing creative brains in the best possible manner to engaging powerbrokers (liaison officers as they are euphemistically called) to deal with the political system for bagging contracts. The inevitable collapse happened and the rest is history.



Having said this, the fact remains that for millions of young minds in the state of Andhra Pradesh, if not in the country, Ramalinga Raju was an icon. Getting a job in Satyam was their guiding star while pursuing their software education. Thus, more than the magnitude of the fraud, the bigger damage is the hurt that someone whom they had eulogised and looked up to for inspiration is now charged with a host of offences.



Not just the young. Raju was a role model even for businessmen who kept dreaming of making it big like him. “Are you from Ramalinga Raju’s State?” was a frequent question whenever they went out of the State or country. Now, the same query which once elicited pride smacks of ridicule.



The money involved in the fraud may be recovered, Satyam may be back on track but the beating the image has taken will take a lot of time to repair.