The Hindu Business Line : Earthquakes and tsunamis

At the mercy of the elements: Companies are frequently roiled by internal and external events that should be identified and controlled before they strike.

M. Chandrasekaran

Amar, a friend of over 20 years standing, who is a very successful CEO, looked harried and upset. It was the end of a long day and we were meeting at his club to unwind and to keep the wheels of the liquor industry moving.

He told me that he felt frustrated at having to constantly play third umpire between his senior managers. In his estimate, this took up more than half his time and he was deeply worried that this was beginning to affect his ability to focus on the multitude of challenges that he and his company faced from the external environment.

At that very moment someone switched on the TV and we were riveted by the images that flickered on the screen. It was a documentary on natural disasters and at that point they were showing the ravages visited by Tsunamis on communities.

Companies and individuals working in them are constantly buffeted by the corporate equivalent of earthquakes on a regular basis; these are mostly internally generated shocks. They are also pounded from time to time by what I would call Corporate Tsunamis — essentially external events driven by competition, governmental policies, environmental concerns and so on over which companies have very little control.

In order that the company and the individuals manning it are enabled to perform at their best, it becomes important to make sure that the negative impact of such occurrences are kept to a minimum. The good news is that corporate earthquakes for the most part are controllable because most of them are likely to be caused by tectonic plates composed of people rubbing against each other.

The trick is to identify the potential fault lines and ensure that roles and responsibilities are clearly assigned and communicated effectively. This is best done if people in the system understand and internalise the need to minimise earthquakes and also to act decisively when they see incipient signs of trouble brewing. Standing on the sidelines and not acting when it is required makes those involved as culpable of the crime as those who are committing it. The systems and processes, especially those that impact people, must be strong enough to be able to send out early warnings when trouble is brewing.

Disruption by external agencies

Companies also constantly face turbulence created by external factors. These do not amount to tsunamis but they have the capacity to create substantial damage. It is possible to mitigate the effects of turbulent seas through constant alertness to not just competitive activity but also the economic / political climate. To be well-prepared, intelligence gathering through the equivalent of long-range reconnaissance spy planes and satellites need to undertaken.

Companies then need to be able to take swift action when the turbulence is forecast. Corporate tsunamis are something else again. They are, by definition, far more difficult to predict and even more difficult to control since they are triggered by events from far-off shores. They strike without warning and leave the wreckage of companies behind. In a trice big names bite the dust. While it may be argued that companies cannot really do much to guard against tsunamis, it is equally true that a system constantly weakened by internal seismic activity and external turbulence that is a part of our lives today, puts up a very weak defence when a tsunami does strike.

Leaders have their work cut out. Tomorrow’s winners are those who can reduce fifth column activity from within, deal effectively against routine turbulence and be prepared to handle the aftermath of any tsunami. The question is not if it will strike, it is just a matter of when and how best to cope after it strikes. Amar, I wish you well.

(The writer is advisor to Manipal Medical and Education Group, 3i Infotech, Blue River Capital and IDFC PE.)

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