Corporate Social Responsibility The Dalai Lama Way

The new Companies Bill 2011, section 135 on Corporate Social Responsibility (CSR), has raised a lot of debate about the merits of holding companies responsible for social responsibility. Some have stoically  refuted that companies are any way liable for social responsibility as their objective is to earn profits. According to this view, earning profits and social responsibility are not complimentary goals. Another view presented, to which I subscribe, is that companies owe it to the society and must meet social responsibilities. Profitability and social responsibility are not divergent goals and are mutually beneficial.

Hence, I thought of sharing His Holiness The Dalai Lama’s ideas on social responsibility expressed in his book “My Spiritual Autobiography”. He epitomizes a socially responsible life. While the act is the dry subject, below are some deeper philosophical musings on social responsibility. Read on, and tell me, do you agree with it?

Section 135, Companies Bill 2011

The section stipulates that select Indian companies form a Corporate Social Responsibility (CSR) Committee with three or more directors of which one must be independent. The Committee will report to the board, formulate a CSR policy and recommend expenditure. The board is expected to approve the policy, make it available on the company website and ensure that at least 2% of average net profits of preceding three years is spent on CSR activities. If the CSR budget is not spent in a particular year, the same shall be disclosed with reasons for not doing so in the annual report. The section is applicable to companies that meet either of the following three criteria. That is, have a:

• net worth of Rs 500 crore or more or
• turnover of Rs 1000 crore or more or
• net profit of Rs 5 crore or more.

The big question is – should companies be asked to spend 2% of average net profits on CSR? Let me share the financial logic and the spiritual reasoning for doing so.

The Spiritual Reason

In the modern world we believe spirituality has no place in business. This is more of a western concept rather than an Indian one. In India, even a small shopkeeper will have a photograph of their god and start work after offering prayers. In my view, spirituality promotes ethical thinking and behavior. Organizations are in dire need of building an ethical culture. In the present world organization behavior and culture impacts society, hence one cannot dissociate the two. I am impressed with Dalai Lama’s story in his book. He said :-

 ”I remember an Indian politician who invited me to discuss this point with him. He said to me, with sincere humility, “Oh, but we’re politicians, not monks!” To which I replied: “Politicians need religion even more than a hermit in retreat. If a hermit acts inspired by bad motivation, he’ll harm only himself. But if a politician, who can directly influence an entire society, acts with bad motivation, a large number of people will experience the negative consequences.”

He has then further described spirituality as :

“Spirituality, in my view, consists of transforming the mind. The best way to transform it is to get used to thinking in a more altruistic way. So ethics is the basis for a secular spirituality for everyone, one that is not limited to a group of believers in one religion or another.“

The same logic applies to business also. A CEO’s decisions impacts thousands of employees, customers, suppliers, shareholders and the public. Can we afford a CEO not to be spiritually aware? Wouldn’t promoting secular ethics help organizations build an ethical culture? Studies indicate that major frauds in organizations – Enron, Satyam, Olympus – occurred when senior management stopped differentiating between right and wrong business practices and was governed by greed.

The Social Reason

Backbiting, backstabbing and bitching are thought of as normal in corporate world. Employees show surprise when a fellow colleague shows compassion, consideration and empathy. Fear, insecurity, ruthlessness and competitiveness have led to deterioration in human values and humanity . The paradox is that with these value systems and emotions prevailing in organizations, we want to create winning teams. A near impossibility, and then we wonder on reasons of failure.

The problem arises because of the thinking that emotions have no place in business. How is it possible to segregate emotions during business hours when we base 70-80% of decisions on emotions? Should one view it that good emotions have no place in business, only negative emotions are allowed? Dalai Lama   hit the nail on the head and identified the core problem in the following words:

“Unfortunately, love and compassion have been excluded from too many areas of social interaction, for too long a time.”

He further identified the impact of positive emotions on a human being. He aptly points out:

“A mind dedicated to compassion is like an overflowing reservoir: it is a constant source of energy, determination, and goodness. You could compare compassion to a seed. If you cultivate it, it makes an abundance of other excellent qualities blossom, such as forgiveness, tolerance, inner strength, and confidence, allowing us to conquer fear and anxiety. The compassionate mind is like an elixir: it has the strength to turn adverse situations into beneficial circumstances.”

Studies show that corporate philanthropy programs not only attract talent but retain employees. Employees at all level appreciate organizations that have a humane culture and are dedicated to the welfare of society. Although managements believe that numbers and targets drive achievement of profits, CSR activities contribute to the bottom line by improving ethics, culture, commitment and engagement levels within the organization.

Secondly, companies are linking CSR activities with their brands. Results show that customers view organizations better and are more loyal to products when they consider the company socially responsible.

Lastly, India really lags behind in charity. As per the Worlds Giving Index 2011, India ranks 91st among 153 countries assessed. India was ranked as the most uncharitable nation in South Asia, Pakistan, Bangladesh, Sri Lanka etc. all rank better than India. With India’s poverty levels and discrepancy in incomes, this status is really sad. 

The Financial Reason

Presently in Indian media there is a debate going on The National Food Security Bill ( NFSB). The objective of the bill is to eradicate hunger and malnutrition in the country. For 2011-12 financial year the food subsidy budget is  Rs 60,572 crore. The NFSB plans to provide subsidized food grains to 64% of the population with a budget of approximately Rs 95,000 crore. The debate is that should government be providing such a large subsidy to the poor?

Professor Bardhan rightly pointed out in Economic Times interview saying “About 9 % of GDP is being given to the relatively rich in the form of subsidies, why should the government then mind giving 1-2% of GDP to the poor.” Indian organizations receive benefit in the form of direct tax, excise duty and sales tax subsidies for building the industrial sector and exports. Should these be withdrawn to give the whole amount to the poor? Asking organizations to invest 2% of their average net profits in society seems a small price, when public money is being used to subsidize business. Of course some naysayers are saying that government is being financially irresponsible by giving this huge subsidy. Question remains, do they hold the same view on subsidies given to business sector?

This gets me back to Dalai Lama’s thinking - ”Everyone must assume his own share of universal responsibility.” Unless the corporate sector gets committed to fulfilling social responsibilities, the country will deteriorate. Besides economic power, the society needs a lot more to flourish and be healthy.

Closing Thoughts

I found Dali Lama’s description of his morning rituals enchanting. He narrates – “As a practicing Buddhist monk, as soon as I wake up I pay homage to the Buddha, and I try to prepare my mind to be more altruistic, more compassionate, during the day to come so that I can be of benefit of beings. Then I do physical exercise – I walk on a treadmill.” World’s most influential and renowned monk happily adopts modern day gadgets into his daily life. He talks of ethics of genetic engineering, global warming, environment risks etc. with complete ease and knowledge. However, we the management experts, the technical geniuses, the advocates of change hesitate to incorporate spirituality, compassion and social responsibility in business. Ironical isn’t it. Can we leave our hearts at home when we come to work?

I want to share the prayer Dalai Lama read on receiving the Nobel Peace Prize. He wishes that this prayer is on his lips when he dies. Very few people in the world can have this level of generosity of spirit, but maybe in 2012 we can think of new beginnings.

May I Remain In Order to Relieve the Suffering of the World

May I be the protector of the abandoned,
The guide for those who wander the path,
And for those who yearn for the other shore,
May I be the vessel, the ferry, the bridge;
May I be an island for those who need an island,
The lamp for those who need a lamp,
The bed for those who need a bed;
May I be the wish-fulling gem, the vase
With great treasure, a powerful mantra, the healing plant,
The wish granting tree, the cow of abundance.
As long as space remains,
As long as beings remain,
May I too remain
To relieve the sufferings of the world.

Indian saint Shantideva’s prayer read by Dalai Lama on accepting Nobel Peace Prize in 1989.

References:

1. My Spiritual Autobiography by His Holiness The Dalai Lama
2. New Companies Bill – Ministry of Corporate Affairs
3. India should cut wasteful expenditure on subsidies: US prof Pranab Bardhan

India Country Risks in 2012

Indian organizations are in for a rocky ride in 2012 as darkening clouds hang over India growth story. In some ways it is a make or break year for India’s continuing successful journey for economic growth and power. The world is watching and India cannot afford to flounder. However, the risks in the economic environment are acting as tsunamis and volcanoes, wiping out past efforts swiftly. This year Indian organizations need to watch out for external risks and triggers carefully, as they can have huge impact on the bottom line of the company.

The prophets of gloom and doom predict that India’s GDP in 2012-2013 financial year will be between 6-7%. In light of prevailing political and economic environment this statement is a conservative realistic assessment. Hence, organizations to sustain and grow in 2012 need to conduct strategic risk assessment of India country risks. I am giving below my top four.

1. Political Paralysis

In 2011, Prime Minster Manmohan Singh’s reputation has nose-dived as the country was engulfed in corruption scandals. His continuance as Prime Minster till the end of term is widely debated in political circles. The Congress party is facing another crises due to Sonia Gandhi’s ill-health. Public is speculating that she has undergone surgery to treat cancer in USA. Hence, rumors are rife about Rahul Gandhi  taking over the reigns of the party. Moreover, senior Congress party leaders are having spats in public.

On the hand, Bhartiya Janta Party (BJP), the main party in opposition, is suffering from lack of strong leadership at national level. The ex-chief minister of Karnataka, Mr. B. S. Yeddyruppa, openly contravened orders of BJP leadership team when named in Illegal Mining Report.  At state level, local parties are gaining prominence and strength.

Last but not the least, Anna Hazare’s fight against corruption has awakened the middle class. Finally, they have lost their apathy and are demanding better governance.

Considering all aspects, there is little likelihood of a strong national party leading India in 2012. Moreover, political commentators are hinting about mid-term polls due to fishers in Congress party and it’s deteriorating credibility. Therefore, large organizations must manage political risks at national and local state level. Keep in mind sensitivities of various political parties otherwise their is a probability of getting caught in a tug of war. Also, adjust the growth plans for government ineffectiveness.

2. Financial Market Turmoil

Indian markets in 2011 have done badly on financial indicators. There is slowdown in growth and in October 2011 industrial output contracted by 5.1%. Fiscal and current deficit are expected to cross 3% and 5% of the GDP respectively in 2011-2012. The GDP growth forecast for the year was reduced to 7.5% on 10 Dec 2011.

Sensex on 16 December 2011 closed at 15,491, a 25 month low. Stock brokers predict that the market is not going to rise in a hurry.

Business Standard reported in its weekly report on 16 December that “The WPI inflation for the month of November came in at 9.11 per cent compared to 9.73 per cent in October. The market was looking at an inflation of below 9 per cent for November. Inflation for November 2010 stood at 8.2%. India’s food inflation eased to 4.35% in the year to December 3 — its lowest reading since late February 2008 — from an annual 6.60% rise in the previous week, government data showed today.

Further, On Thursday, the Indian rupee touched a record low of 54.30 to the US dollar on the back of sustained foreign fund capital outflows in view of the fall in the equity markets, coupled with a stronger dollar in global markets.”

The Finance Minister Pranab Mukherjee recently commented in a meeting – “The present indicators show that both private consumption and investment sentiments have weakened and it is this weakening of sentiments that makes it necessary to shift our focus back to near term issues.“

Moreover, Moody’s in November 2011, “downgraded the entire Indian banking system’s rating outlook from “stable” to “negative,” citing the likely deterioration in asset quality in the months ahead.” Additionally, aviation, telecom, commercial real estate and power utilities industries collectively owe banks Rs 5 lakh crore. These industries are most affected by the slow down.

The financial market situation is unlikely to improve in the short run. India will most probably not see a double-digit growth in GDP in 2012-2013. Companies need to risk adjust the financial growth numbers keeping in mind the prevailing situation. . Conservative estimates and cost control will steer the organizations in safe waters. Maintain good liquidity throughout the year as banks are not going to save organizations in a crunch.

3. Future Regulatory Reforms

The regulatory reforms came to a standstill in 2011. The political deadlock between UPA government and BJP opposition party pushed all reforms on the back burner. The business leaders came out strongly criticizing the political parties for hampering economic growth. The unhappiness of corporate world is evident that investments – domestic and foreign – are at an all time low.

The government in December 2011 parliament session had a list of 50 Bills for approval. Some of the Bills presented were Companies Bill 2011, Banking Laws Amendment Bill 2011,Prevention of Money Laundering (Amendment) Bill,  Direct Taxes Code Bill, 2010, Forward Contracts (Regulation) Amendment Bill, 2010; Pension Fund Regulatory and Development Authority Bill, 2011, Securities and Exchange Board of India (Amendment) Bill 2009; Insurance Laws (Amendment) Bill, 2008 and Regulation of Factor (Assignment of Receivables) Bill, 2011, among others.

This shows the pending backlog of bills requiring approval in the parliament. Business leaders are likely to lobby for approval of these bills in 2012. Hence, risk managers need to be geared to manage numerous regulatory changes in 2012.

4. Skyrocketing Corruption & Bribery

In light of various scams - telecom, mining, land, etc, – the corruption perception index in 2011 has fallen to 3.1 from 2010′s 3.3. India’s world ranking in corruption has gone lower to 95 from a total of 183 countries assessed. This is not surprising as Indian’s in 2011 saw well known politicians and business owners implicated in scam cases.

The recently released report of Global Financial Integrity - Illicit Financial Flows from Developing Countries Over the Decade Ending 2009 – states that trade mis-pricing accounts over 80% of the illicit financial flows in Asia. India in the last decade lost US $104 billions in illicit flows and is ranked 15th highest among developing countries with China topping at US $ 2467 billion. Though in comparison to China, India doesn’t appear to be doing badly, but that is distorted reality. A couple of activists and whistle blowers lost their lives during the year for uncovering corruption cases.

In 2011, Anna Hazare initiated public rallies to force government to pass Lok Pal Bill. Although, parliament is expected to pass it in December 2011 winter session, the implementation will take some time. The government’s sincerity in eradicating corruption is questionable as the various anti-graft bills are being used to play political football. The UPA government to counteract Hazare’s war cry has presented three additional anti-graft namely –  Judicial Accountability Bill,  Public Interest Disclosure Bill (Protection to Whistleblowers Bill) and the Citizens’ Charter – in the parliament in December 2011. A step in the right direction but the road ahead is tough. Passing bills and implementing them are different ball games.

In light of the fraud cases, high-level prosecutions and political games, the Indian corporate world has become vary. In 2012, organizations must focus on implementing a code of conduct for employees and provide training to them on business ethics. The legal and reputation risks will be extremely high if these aspects are ignored.  The situation becomes more tricky for US and UK multinationals as they are governed by FCPA of their respective countries.

Closing Thoughts

Political deadlock, inflation and corruption have taken the air out of India’s growth story. 2012 will be the decisive year in assessing whether India can surmount these obstacles and accelerate economic growth or  go on a downward spiral. Organizations must maintain a balance between growth and risks. The downside risks can cost heavily and there may be no quick ways to turn around numbers. Hence, doing proper planning, implementation and cost effective operational execution are key for success.

References:

1. Illicit Financial Flows from Developing Countries Over the Decade Ending 2009 – By Global Financial Integrity
2. Corruption Perception Index
3. Weekly Report: Sensex, Nifty hit 2-yr lows on growth woes - Business Standard

Risks in Budgeting and Forecasting Process

When I go shopping more often than not I blow my budget. You see, in the shopping mall my requirements far exceed the forecast. My three finance qualifications come to naught in this simple expenditure planning. So I understand why budgets of organizations go wrong. But the risks associated with an organization’s inaccurate budgeting and forecasting process are far higher.

For instance, the CAG report on Air India states that airplanes were purchased based on an estimated huge market growth and share. The government airlines is now nearly bankrupt. More recent is the case of Kingfisher Airlines. The company is facing a huge liquidity crunch and may go bust if banks do not bail it out. Though I haven’t analyzed the financial statements, the question does come up – didn’t they see this coming? What kind of cash flow forecasting was the finance team doing? The airlines grew quite fast, where there any checks kept on expenditure and how was it linked back to revenues?

These are basic questions, and show the impact on the organization when proper techniques are not used for budgeting and forecasting. In the next quarter, Indian organizations will commence their budgeting process for the financial year 2011-2012. I thought it is a good time to study the best practices of budgeting and forecasting, and share with you my understanding of the risks associated with it. I delved into the SAP CFO forum research papers and here are some interesting points.

1. Business Drivers for Budgeting and Forecasting

According to Aberdeen and SAP report the top three drivers for budgeting and forecasting in 2011 were to help organizations deal with market volatility, aligning strategy and doing cost control. As these three have been major drivers for the past three years, one can safely assume considering the global economy that in 2012 also, these three will prevail.

 Moreover, Indian economy year-end scenario is turning bleak. As per recent reports GDP is expected to show just around 7.25-7.75% growth in 2011, instead of the initial 9% growth forecast. Sensex has fallen one fifth in the year and presently India is among the worst performing stock markets in the world. Organizations have cut down on capital expenditure to maintain profitability. Hence, in the coming financial year, Indian organizations will face all the five pressures mentioned in the graph above. Therefore, it has become more critical to do accurate budgeting and forecasting.

2.   Risk Adjusted Forecasting

In another SAP white paper titled “Increasing Competitiveness through Closed Loop Performance Management” I came across an interesting point. It emphasized on implementing integrated financial performance management processes that “comprise strategy planning, budgeting and operational planning, forecasting, management reporting, profitability and cost management, and risk management.” It further added that in most organizations the “various performance management systems remain disconnected specially risk management.”

Now the question that begs an answer is – are risk managers having a look at the budgeting process to ensure all management systems are linked together? Secondly, are they reviewing the budgets, facilitating the business teams in identifying risks and adjusting the budgets accordingly?

In my view if risk managers are taking a hands off approach during the budgeting process, then they are doing the organization a major disfavor. They should proactively participate in the process, identify the problem areas and discrepancies, highlight the risks and inaccuracies, and facilitate management in preparing flexible budgets.

The benefits of this approach can be seen in the Infosys case. The company was recently in the news for asking its employees to sacrifice two Saturdays in this quarter to meet the budgets. Though I have different views on the action taken by Infosys to call employees on weekends, it does show that they are proactive in managing their forecasts. The management assessed the risk of failure of forecast and took action. Hence, there is a lesson to be learned here for all organizations. Organizations should build in internal and external events triggers for internal and external  events to adjust forecasts timely.

3. Flexible Forecasting

A new report of SAP with CFO Research Services highlights the risks of having fixed budgets based on historical data. It states that due to the changing business environment forecast numbers are “continually measured against real-world results and recalibrated to meet new threats and take hold of new opportunities as they arise. “ Further on it adds that “The time-honored tradition of beating the budget by surpassing revenue targets is no longer a reason for celebration; it’s one sign that the budgeting process took so long that the assumptions underlying it grew stale.”

The CFOs interviewed in the report state that building flexibility into planning assumptions and processes is of paramount importance. With Mobiles and Tablets, realtime information on sales, expenses etc. is available. Hence, now forecasts require regular examination of the underlying assumptions. The market dynamics ensure that one has to go back to the drawing board periodically to study the movement and re-strategize. Annual fixed budgets are becoming a thing of the past and CFOs are in favor of rolling budgets.

In light of this aspect, the points I mentioned in my earlier post that risk managers need to actively participate in strategic risk management holds true. In this scenario, risk managers must review the budgets assumptions and risks on a monthly/ quarterly basis to ensure smooth sailing. A once in a year periodic review doesn’t hold much water. They must make sure that organization’s strategy, operations plans, and budgets are continuously aligned.

Closing Thoughts

Budgets are no longer just the domain of finance department. In the present environment budgets must be developed with a combination of top down and bottoms up approach. While the strategy is developed at senior management level, the execution plans are developed down the lines. They have the real information on market dynamics, numbers and risks. The views of various departments -sales, human resources, purchases etc. need to be incorporated to form realistic assumptions and understand associated risks. Hence, risk managers have a significant role to play in this process.

Share your opinion here. Do you think Indian organizations have robust budgeting and forecasting processes?

References:

1. Economy in Distress as Factory Output Slumps : Economic Times 13 Dec 2011
2. Financial Planning, Budgeting & Forecasting in the New Economy : Aberdeen Group with SAP
3. Increasing Competitiveness through Closed Loop Performance Management – SAP
4. Accelerating the Speed of Intelligence for Fast and Flexible Forecasting – SAP with CFO Research Services

You can find the reports at http://www.sapcfo.com/

This article was published in The Business Enterprise Magazine January 2012 issue.

Derailment of Leaders- Profiling Steve Jobs

The corporate world citizens operate on two myths – “We all are great leaders” and “We all have bad bosses”. We cling to these two fallacies with our dear life, most probably because if we let it go, corporate life may become unbearable. These two paradoxical statements make us feel better about ourselves as the delusional views cushion us from harsh realities.

The problem arises due to corporate world’s obsession with leadership. Interviewers question a 21-year-old fresher in the first interview about his/her leadership skills. After six months, s/he will give an opinion how the CEO doesn’t have adequate leadership skills. An employee will risk his/her career if s/he admits that they are good managers and do not have adequate leadership skills. This is despite the fact that most leadership surveys show that 50% of the managers are ineffective leaders.

On the humorous side it reminds me of Scott Adams definition of leadership – “Leadership is an intangible quality with no clear definition. That’s probably a good thing, because if people being led knew the definition, they would hunt down their leaders and kill them.”

On a serious note, I couldn’t help contemplating about Steve Jobs, considered the most successful CEO in our times. He is one of the few CEOs who was thrown out of the company he formed and came back to succeed beyond anyone’s expectations. On the positive side, people viewed him as a visionary, innovator and a driving force. Moreover, his negative traits were equally prominent. His teams said he suffered from “distorted reality”, bullied them no end and was extremely insulting. His professional career shows that in some ways he was an insufferable bad boss and an incredibly good leader. The complexities of his character make an interesting case study to assess leadership derailment.

I read his biography by Walter Isaacson and mapped his leadership skills to the traits mentioned in Michael James Benson’s research paper titled “A Walk on the Dark Side of Personality & Implications for Leadership (In)Effectiveness.” Briefly, it states that derailed leaders have same traits as successful leaders. However, they have additional traits and personality flaws that cause derailment. In Isaacson’s book, initially Jobs showed most of the traits that result in leadership derailment. In his second coming at Apple, he showed more maturity and balanced it out. A mellow version of his intense personality made him more successful.

It is important for risk managers to understand the derailment traits for leadership. Enron, WorldCom, Satyam are prime examples of leadership gone wrong. Prevalence of derailment traits and major personality flaws cause leaders to take unnecessary business risks, create dysfunctional work cultures and have low focus on corporate governance. As top management drives the risk culture in an organization, it is worthwhile for risk managers to assess their derailment characteristics.

In the following paragraphs, I am discussing five derailment traits and am exemplifying it with Steve Jobs life. Before you start reading it, remember all leaders have these traits. Leaders possessing these traits in low to moderate qualities continue to be successful. However, excessiveness of these traits causes derailment.

1.       Ego-centered

People close to Steve Jobs thought that he felt a strong sense of abandonment due to his adoption. This propelled him to consider himself special,  i.e. not required to follow norms of regular people. His ex-girlfriend Redse even thought that he had narcissistic personality disorder.

An amusing story about his employee badge showed his false sense of entitlement. On Apple’s formation, Scott assigned employee badge number #1 to Woznaik and #2 to Jobs. Steve demanded badge #1 and when he didn’t get it, he asked for  badge #0. He kept the badge, though Bank of America still processed his salary as employee number #2.

 His personality flaws showed in other small things. For example, he didn’t want a “reserved for CEO” parking slot, however parked his car in slots reserved for handicapped people.

 His ego-centrism drove Apple in murky waters. He wished to project the image that he didn’t work for money and took a salary of $1 per year as CEO. In 2000 when the board offered him $14 million stock options, he refused and asked for a plane. Subsequently, he demanded $20 million stock options. He received backdated stock options and although he didn’t make any monetary gains from it, Apple got some negative publicity as SEC investigated the case. Walter commented that – “On compensation issues in particular, the difficulty of defying his whims drove some good people to make some bad mistakes.”

 2.    Manipulation

 Everyone thought Steve Jobs was a master manipulator.  Sometimes, for him there was no difference between truth and lies. Bud Tribble one of his teammates said Steve doesn’t accept facts, which do not fit, into his picture. He said, “Steve has a reality distortion field. In his presence, reality is malleable.”  

 Another colleague Andy Hertzfeld said that even if one knew that Steve was manipulating, a person still was influenced. He stated- “The reality distortion field was a confounding mélange of a charismatic rhetorical style, indomitable will, and eagerness to bend any fact to fit the purpose at hand.”  

 Adding to the trouble, his teams complained that if their idea were a good one – “he would soon be telling people about it as though it was his own.”

 Apple employees though knew they had a difficult boss, still considered themselves lucky to be working for him. He inspired people to do what they thought was unachievable. Most probably because manipulators are great at cajoling, persuading and flattering people into complying with their wishes.

However, this did create a dysfunctional culture in Apple. Due to his oscillating behavior, his staff handled him like fragile glass. Most probably, Apple lost quite a few top performers because of this treatment given to them.

He definitely lost his job as a CEO because his manipulations caused turmoil in Apple in 1985. Apple board ousted him out and Sculley remained.

3.    Micromanaging

In some ways, Jobs can be categorized as a control freak. He chose to integrate hardware and software of his products to control customer experience. At one point of time, he banned download of applications to iPad and iPhone that defame people, were politically explosive or pornographic. He morally policed his customers.  According to him, he was providing his customers – “Freedom from programs that steal your private data. Freedom from programs that trash your battery. Freedom from porn.”

Throughout his career, he was at war with Bill Gates on open versus closed platforms. Gates promoted open systems while Jobs ardently opposed it. Though he professed to belong to hacker counterculture, he didn’t want people to be able to use Apple’s platforms without permission.

Even in designing and developing products, Jobs controlled every aspect of the decision-making. His teams while appreciating his capacity to go into the details, did resent lack of authority to some extent. He had the final say even on the look of the cord and sockets of the products. He ran the organization at 10,000 feet and zero feet.

The awesome bit is that with his ideas and approach he managed to change six industries and developed path-breaking products. In this, his customers were not complaining, his competitors were. His control philosophy made the technological world sit up and take notice. One has to marvel at it, and contemplate whether micro managing has benefits in some situations.

4.     Intimidating

Steve Jobs learnt his most effective intimidation trick from Robert Friedland in college. He unblinkingly stared intensely at others and them kept silent for a long time to unnerve opponents.

Moreover, if some project or product didn’t meet his “insanely great” standard, the product was shit and the guy was a bozo. His colleagues referred it to as “hero/shithead dichotomy”. He voiced his unedited opinions without the normal social graces that caused many of his teammates to breakdown emotionally. . His frequent unfiltered scathing comments were hurtful and created a fear factor. Although, known to be emotionally intelligent, he was unrepentant of mistreating others.

Though his behavior looked like my way of highway, he succeeded as he appreciated the people who confronted him. His teams could push back and if Steve found the person capable, he would respect the person. His Mac team gave an annual award to the employee who did the best job of standing up to him. “Jobs knew about it and liked it.”

However, in the second stint as CEO, his intimidating nature negatively affected independence of the board. For instance, he invited former SEC chairperson Arthur Levitt to join the board. But, when he read Levitt’s speech on independence of board, he withdrew the invitation on phone.

5.    Passive Aggressive

 Jobs was blatantly aggressive; hence, this trait didn’t fit his personality. However, his partner Steve Woznaik did show this trait to an excessive level. For instance, Woznaik was hesitant of participating in Apple in a leadership position. He said he was happy that – “I could stay at the bottom of the organization chart as an engineer.” He never attempted to be a manager or leader. He played the good guy image to the hilt. While he appeared satisfied for Jobs to take up the mantle of bad guy and fight the corporate battles.

Woznaik claimed in his biography that he did a job for Atari to remove chips and Steve cheated him of the bonus. He claimed  - “Ethics always mattered to me, and I still don’t understand why he would’ve gotten paid one thing and told me he’d gotten paid another. But, you know, people are different.” He further added – “I would rather let it pass. It’s not something I want to judge Steve by.”

 Steve Jobs on the other hand denied the allegation and said that he has always been fair to Woz. He said in his defense – “In mean, Woz stopped working in 1978. He never did an ounce of work after 1978. And yet he got exactly the same shares of Apple stock that I did.” It showed Woz avoided confronting Steve though didn’t mind maligning his reputation. Woz projected an image of childlike innocence. I suspect, without Steve Jobs driving force and personality Apple would have collapsed if Woz had become the torch-bearer.

Closing thoughts

Leadership is a complex phenomenon and the more I read about it, the more I think Scott Adams definition is accurate. There is a lot of truth in it. However, as risk managers we cannot take leadership derailment traits lightly. Excessive derailment traits create a dysfunctional organization culture. They are a harbinger of unprecedented risk taking activities. Uncontrolled behavior can put organizations in peril. Hence, risk managers need to devise ways to monitor it. They must ensure proper checks are incorporated in succession planning for early detection of derailment traits.

“One more thing”, what do you think it takes to become a Steve Jobs of risk management?

References:

1. New Explorations in the Field of Leadership Research: A Walk on the Dark Side of Personality & Implications for Leadership (In)Effectiveness - By Michael James Benson

2. Steve Jobs – Biography by Walter Isaacson