People@Work

The difficulties of being a leader

KAMAL KARANTH | Updated on August 29, 2019

Deepinder Goyal, founder & CEO, Zomato

Should CEOs protect themselves, their employees, or their organisations during a crisis?

Whenever enterprises are in a crisis, one of two things happens — either the board sacks the CEO or the CEO cuts the headcount, keeping his/her job. The stock market accepts both responses positively, and this has become an acceptable reality. But on August 19, at the Business Roundtable in New York attended by nearly 200 CEOs, including Tim Cook of Apple, Jeff Bezos of Amazon and Mary Barra of General Motors, there was an unexpected twist to this philosophy of trying to please the shareholder.

The top leaders jointly issued a statement that they wanted to invest more in their employees, deliver value to customers, protect the environment, and deal fairly and ethically with their suppliers. It’s a tough act to follow through as the stock market, and institutional shareholders, may not share the same sentiment.

Performance blues

Bajaj Auto MD Rajiv Bajaj

 

When organisations face declining sales, as the auto industry is doing currently, they react by slashing headcount. Most often, it’s the lower levels where layoffs are most. So it was heartening to hear Bajaj Auto MD Rajiv Bajaj recently standing up for the cause of employees, pointing out that problems of slowdown faced by the industry were elsewhere and one should not play with employee lives by talking of job cuts.

It must be noted here that services organisations have significantly higher workforce cost whereas for manufacturers and other product companies, wage cost is barely in single digit. And yet, during a crisis, both react similarly.

When the organisation doesn’t perform to expectations, who should take the blame — the CEO, the leadership team, or the employees down the ladder?

It isn’t a tough one to answer, but we know where the axe falls frequently. If the CEOs don’t instantly trim the workforce, they will soon be the victims of their board.

The decision is ironical as most organisations take three months on an average to recruit their entry-level candidates and the time to hire increases as you go up the ladder. If you spend so much time and money to recruit, then would you not wait a little more before you press the trigger on layoffs?

Don’t forget that all organisations have regular attrition. If organisations wait for three months, the attrition more or less takes care of the headcount they eventually want to shed. This will reduce the bad press and internal moral issue that HR will have to deal with, not to forget the legal exposure due to mass terminations.

Accountability or irresponsibility

In a global meet, one of my peers was presenting her not so good quarter performance. Immediately, our boss pointed out the declining productivity per headcount and demanded an action plan.

She said “x” number of non-productive people are already on the Performance Improvement Plan and another ‘y’ number of non-performing people will be asked to go. Unfortunately, attrition was already more than 45 per cent. Our bosses did not explore if it was a leadership issue and hold the leader accountable for this non-performance. Many of us in the room were in the same boat, and our silence suited us.

On another occasion, we expanded into a new location with great fanfare and added to that business’s headcount. In about a year, the overall business tanked nationally, the new site, which was yet to take off, was under scrutiny and layoff was a logical consequence.

I was there when the affected employees were serving notice, and three of them chose to confront me. They asked how it was their fault when the entire business was doing poorly and blamed irresponsible leadership for their predicament. They also pointed out that the local market was doing well, corroborated by the fact that they already had got new jobs.

I could only muster an apology for the plight they were going through.

The PR pressures

Cathay Pacific CEO Rupert Hogg   -  REUTERS

 

The recent resignation of Cathay Pacific CEO Rupert Hogg highlights the external pressure factors on leaders as well. We will wait to hear his side of the story one day.

However, his resignation points to a situation leaders may land themselves in for no fault of theirs. Meanwhile, it’s essential to recognise the challenges that CEOs of large corporations that are in the public eye or marquee funded start-ups face, both on performance and public relations issues. Take what the Zomato CoFounder, Deepinder Goyal, had to go through during the recent dine-out discounts controversy.

Some leaders take personal responsibility and stand up, whereas some can become victims in these turbulent situations they did not cause or control.

Enter the bots

Picture a tomorrow when data and bots aid us to collate and present a timely picture of where the problems are. Will leadership look any different then? It will be interesting when the rule-based bots can use data/patterns to exemplify the poor decisions made by leaders. When the bots can present a pattern on employee behaviour/output, I wonder how we will be able to ignore it. Unlike in today’s world, where we can overlook inputs from our colleagues, bots will leave digital footprints of trends that are visible and traceable to many.

Imagine a financial analysis aided by the bots during a downturn. If the bots indicate cutting the salary of senior leaders or suggest layoffs, then CEOs will need to accept the reality. That’s a new challenge along with the existing pressures they currently manage.

It may appear that CEOs are easy punching bags for all the challenges that organisations face. But they are also the ones with big fat pay cheques and a laundry list of perks — plus they are the ones who turn up at events to pick up awards and PR accolades. So, shouldn’t we say that it comes with the territory?

We often say that leaders are judged by how they act during a performance decline or other organisation crisis. Now they will also be judged based on how they take responsibility during a crisis or how they put their colleagues under the bus. They will be damned if they do and damned if they don’t!

 

Kamal Karanth is co-founder of Xpheno, a specialist staffing solutions firm

Published on August 29, 2019

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