Elon Musk fired the Twitter board and senior managers the day he took control of Twitter. Twitter was underperforming, with 240 million users, 7,500 employees, $1.2 billion revenue last quarter, a cost base of $1.5 billion and a loss of ($344 million). One cannot argue the economics of the decision. But the public humiliation has costs for all involved – to Musk, toTwitter, its employees, and investors.
Family-run companies dominate the world, more so in Asia. Seventy-five per cent of families own and manage their enterprise. Family companies have outperformed multinationals and public sector companies over the years. However, Elon Musk is not the typical old world, monied family owner. He is a new type of technocrat owner. The challenge is when professional owners of companies behave like old-world monied owners. So, the professional team at Twitter would have expected more professionalism from Musk. Fair expectation but misplaced optimism?
CEO vs Owner
The owner/CEO relationship always favours the owner, irrespective of an independent board. Why is this so?
1.The owner’s presence is omnipresent irrespective of business involvement
2.Professionals serve at the behest of the owner
3.Ownership and management are rarely separate boxes
4.Historically, boards tend to serve the owner and not management. Europe has distinct supervisory and management boards to some good effect.
This kind of behaviour is accepted in the US, where quarter-on-quarter earnings determine everything and is not limited to owner driven companies; it happens in professional non-owner driven companies as well. When Nokia’s management changed in 2011, all the people who built Nokia were gotten rid of. By doing this, they destroyed the culture that built Nokia and buried the accumulated knowledge of the industry.
Public unceremonious dismissals have happened with Steve Jobs and John Sculley in Apple, Carol Bartz of Yahoo, and many Indian organisations. In many cases, the capability and competence has not been the issue, it has always been alignment and acceptance.
What can a professional CEO do in such cases?
1.He/She must have his/her own network.
2.Having a reputation for fairness and governance is important
3.Having multiple skills to move into new industries if one industry door is shut is important.
4.Articulate your point of view dispassionately, without bias.
Employees feel like rabbits in front of a headlight in these situations, not knowing which way to go. Time will tell if what Musk has done is good for Twitter. But trust is the loser at Twitter!
Shiv Shivakumar is Group Executive President (Corporate Strategy) at Aditya Birla Group.