Indira Gandhi declared ‘Emergency’ in
1975. And it had a huge impact on industry.
The
economic situation was very tough. But with emergency rules in place,
Government, Police and all State apparatus worked efficiently for businesses.
Dissent was not tolerated and the environment had become favourable for ‘tough’
people decisions. Many entrepreneurs took immediate steps to remove managers
who did not meet the targets. Managers who suddenly faced performance pressure
were ill-equipped to handle the turmoil caused by oil-crisis. There was a fear
psychosis. Reasons for exit were not known to other employees and so they
imagined the reasons for showing the door. I had just joined the corporate world and I thought it was a very
opportunistic move, and resented it.
During
a downturn we see this happen to CEOs. Although there is often an opportunistic
aspect to the decision to replace the CEO.
The
moral of the story is that the expectation from a leader is that he must always
succeed! And people, organisations are merciless in their treatment of a leader
who has failed in their eyes. Whether somebody has succeeded or failed, particularly
a leader is a complex question. It is not just a matter of ‘hitting the target.’
The press reported in Sept 2010 [quote] “South
Korea's LG Electronics Inc ousted its chief executive on Friday, replacing him with a founding family member
in a bid to turn around its loss-making mobile phone business, the world's
third largest……Management changes are usually made at the end of the year but
the move, which takes effect from October 1, reflected an urgency to overhaul
the struggling mobile unit…..”We made the decision to give an incoming chief
executive enough time to prepare for next year," LG said in a statement.”
[Unquote].
What do you think? ‘There are wheels within wheels’ as PG Wodehouse
would say!
Are CEOs more vulnerable when the industry is not
doing well? Yes, the research suggests. And one of the causes of CEO’s
vulnerability is ‘over attribution of poor performance to CEO and under
attribution to economic circumstances.
This is what Mike Riddiford, Editor of CEO Forum
said [quote] "When their performance is assessed, most CEOs would like to
believe that factors outside their control (such as the general state of the
economy) do not affect that performance assessment, and it is purely relative
company performance that matters. This
has been the conventional wisdom for some time, but recent research from Stanford
academic Dirk Jenter and MIT’s Fadi Kanaan have challenged that
assumption. In a study that looked at
more than 1600 changes of CEO in the US between 1993 and 2001, they found that,
where the CEO had underperformed their industry peers, they were 50% more
likely to get fired if their peers were performing relatively poorly, than if
they were performing strongly.
Underperformance, then, is more of a career risk
in a struggling industry than an industry that is performing well. This, of course, flies in the face of strict
rationality: after all, a laggard achieving growth rates of 10% when his
industry is averaging 15% is destroying just as much value as a laggard who is
shrinking at 10% a year when her peers are shrinking at 5%. Yet poor relative performance
was most severely punished when times were tough: something some CEOs need to
clearly keep in mind in the current difficult environment some sectors are now
experiencing." [Unquote]
Recently
I read a story ‘The Short Happy Life of Francis Macomber.’ It is one of the
classics written by Ernest Hemingway. My imagery of a leader was that of
Francis Macomber in this story. I will explain it with synopsis of the story which
is available on Wikipedia.
Francis
Macomber and his wife Margaret are on a big-game safari in Africa, guided by professional
hunter Robert Wilson. Earlier, Francis had panicked when a wounded lion charged
him. Margaret mocks Macomber for this act of cowardice, and it is implied that
she sleeps with Wilson.
The
next day the party hunt buffalo. Macomber and Wilson hunt together where the
pair shoots 3 buffaloes. Two of the buffaloes are killed, but the first buffalo
is only wounded and has gone into the bush. Macomber now feels confident, and
he and Wilson proceed to track the wounded animal, paralleling the circumstances
of the previous day's lion hunt.
When
they find the buffalo, it charges Macomber. Although he stands his ground and
fires at it, his shots are too high. Wilson fires at the beast as well, but it
keeps charging. Macomber kills the buffalo at the last second. At the same
time, Margaret also fires a shot from the car. Her shot misses buffalo and
kills Macomber.
The
Short Happy Life of Francis Macomber is acclaimed as one of Hemingway’s most
successful artistic achievements. This is largely due to the ambiguous
complexity of characters and their motivations, and the debate this ambiguity
has generated. ……
……It
is no coincidence that Margaret is the one who kills him: there is an
unresolved debate as to whether she murdered Macomber, or accidentally killed
him. If she purposefully shoots him, she has preserved her dominance in the
relationship, and ensures that she will keep his wealth (presumably the only
reason they married in the first place).
I have always felt that many leaders face the
dilemmas of Francis, and they are like Francis. Organisations are merciless [and
like Margaret, opportunistic and predatory] in making demands and they are
uncompromising in their attitude. One failure is often the invitation to write the
leader’s epitaph.
But rules have exceptions. The only leaders who
can get away with non-performance are heads of the State. Like Dr Man Mohan
Singh or President Obama as some would believe. Isn’t that’s interesting!
Vivek