Risks of Restrictive Mindsets of Indian Gen X Leaders

The baton of leadership is passing to Gen X leaders from baby boomers. In the flat world leadership challenges have multiplied. In the Indian context, Gen X leaders have seen India as a poor country in their childhood, a closed economy in their youth and a global powerhouse from late 30′s. Now in their 40′s they have to take over the leadership in organizations or as entrepreneurs. Will they be able to effectively transition into leadership roles or will they be inhibited by their thinking? Gen X leadership is one critical factor that can make or break India’s progress into joining the big league countries. Let us contemplate the leadership skills and attributes that Indian Gen X leaders need to address to succeed.

1. Entrepreneurship

In pre-independence  India, Tatas and Birlas made their mark. Then Dhirubhai Amabani changed Indian mindsets about business. Narayana Murti and Sunil Bharti Mittal from 1990′s showed the way to Indians to lead in new technology areas. However, post it, their have no big movers and shakers who have held the flag of Indian entrepreneurship high. Unlike the west, there are no Mark Zuckerberg’s in India.

Recently, Ashok Soota, Phaneesh Murthy and T.V.Mohandas Pai, all from information technology industry were in the news for their entrepreneurial spirit. Phaneesh Murthy, CEO if iGate, went through a career disaster a few years back due to a sexual harassment case at Infosys. He came back stronger, formed his own company and acquired Patni last year. Patni was where Narayana Murthi’s story started. Ashok Soota started Mindtree, sold it to make a huge profit, and has started Happiest Minds. Latest entrant, Mohandas Pai  has become the chief architect of a multi-discipline university cluster being planned by Dr Ranjan Pai of Manipal Education & Medical Group (MEMG) and opened an investment fund for entrepreneurs.

However, none of these path breakers are from Gen X, they are all older generations. Big family business names are searching for CEOs to run separate businesses for them, however, there is limited entrepreneurial talent in India. Does Gen X lack entrepreneurial spirit?

2. Strategic Thinking

While the west celebrates the success of college dropouts- Gates, Jobs, Zuckerberg, Indians remain obsessed with qualifications. From school to college, education is all about how well a student can memorize and reproduce a teacher’s lectures. Critical and independent thinking isn’t encouraged in Indian education systems or social structures. A youngster is considered well-behaved when s/he accepts elders and seniors instructions unquestionably. Gen X from childhood haven’t learnt to disagree without being disagreeable. Hence, as leaders they lack strategic and innovative thinking skills.

This is apparent that Indian banking system is suffering due to requests of corporate debt restructuring (CDR). In this year, the CDR amount is nearly Rs 2 lakh crore (USD 36,722 million) . Key reasons being management incompetence and diversion of funds. This situation is when Indian economy is having a robust growth and was not significantly impacted by financial crises. The Indian CXOs are inexperienced in strategically managing diverse variables in a dynamic global environment. Hence, Indian Gen X leaders are losing out. Indian business houses are looking at expats and NRIs for future business expansions. Specially, since some are venturing into global markets and setting operations in other countries.

3. Social Conditioning

Gen X was raised by parents who were born in pre-independence era. Most urban middle class families were so conservative, that Gen X wasn’t even allowed to date or chose marriage partners themselves. Most lived with their parents, got married and continued to live in joint families. Women didn’t work and were the perfect house wives. Interactions from people across the globe were limited. There were a number of restrictions on socializing with people of different religions, castes and races. Now times have drastically changed.

Gen Y is raised on a staple diet of MTV, club hopping and speed dating. There is hardly any difference between youth of west and India. In most organizations, nearly 60% of the workforce consists of Gen Y. Around 20-30% employees are women. Significant amount of revenue comes from exports, hence dealing with international customers and cultures is a mandatory skill.

In such a scenario, Gen X leaders face challenges in people management.  The war for talent is huge. Managing diversity is critical for success. From an autocratic work culture, organizations are shifting to consultative cultures. Indian managers have recently started focusing on building organization cultures. Most have limited experience in managing people across different cultures.

Multinationals setting operations in India have found this social behavior of Indian managers counter productive. It hinders global cultural integration, team building and smooth communication. Sometimes the personal bias can create huge problems. Hence, most of the multinationals look for Indians with international work experience for critical CXO positions.  Here, the liberal thinkers in Indian Gen X group have made great strides.

4. Value System

Indian society holds family dearest. The family comes first even at the expense of society, and most Indians do not feel a responsibility for betterment of society. For instance, in US family and society hold equal importance, and most Americans voluntarily contribute towards social projects. Activism is high,and they hold government accountable and themselves responsible for improving society. Indian citizens on the other hand can be found lamenting about high corruption, poverty, lack of education, high crime rates, poor infrastructure etc. However, the apathy level is so high that they never try to find solutions, be responsible and take charge.

Some business houses have got inspired by Bill Gates and Warren Buffet’s pledge to donate their wealth. A few have started non-profit organizations, such as Premji, to contribute to the society. The business groups of CII, Chamber of Commerce, AIMA etc. have started lobbying with government to focus on growth. Nandan Nilekani joined government to run the UIDAI project. A few ex-CXOs have started consulting organizations to deal with social causes, lobby with government and bring change.

Gen X leaders have to carry this torch further. Singing unending woes and blaming the government isn’t a solution. They have to focus on corporate social responsibility and practice compassionate capitalism.

5. Running Large Operations

Indian managers are renowned for managing in chaos. Their jugado (Mr. Fix-it) skills are tremendous. However, that itself has restricted them from learning the advantages of well-defined processes, systems and procedures.

Gen X started working in organizations where the offices had 100-200 staff. Nearly everyone was a big fish in a small pond. An organization with 10,000 employees or Rs 500 crore (USD 91 million) turnover was considered big in India. Very few Gen X managers have worked in global organizations with billion dollar profit margins or over 100 thousand employees. Hence, most don’t understand the complexity of working in or running large scale operations in a cross cultural environment.

There are hardly any truly Indian multinational organizations, that have operations in more than 10 countries. Hence, the Gen X leaders fail to comprehend strategic and operational opportunities and risks that western multinational organizations are used to. The difference is so significant that Reliance Industries, a company of Ambani, has enjoyed high market capitalization for over a decade. But it is only half of Facebook 100 billion dollar value. Reliance Infocom and Reliance Retail both suffered hiccups in running operations for the first few years and customer service was pathetic. It took both companies nearly five years to straighten out operations despite there being no dearth of funds.

For Indian organization to grow to the next level, it needs leaders who can manage large-scale operations. Are Gen X leaders up to the task?

Closing Thoughts

Indian Gen X grew up in a social environment where failure was ridiculed, dissenting views were laughed at and independent thinkers stigmatized. Not surprisingly, majority of the Gen X is scared of trying new things and failing. Though failure is the best teacher, and it is not easy to learn when one is successful. The paradox is that all the requirements of a successful Gen X leader are completely opposite to the values they were raised with. The fastest learners and adapters will succeed in this battle and they will lead India to the next level of growth. The point to ponder on is, whether India is in short supply of Gen X leaders with these attributes? If yes, will India be able to be among the top 3 countries in the next decade?

References:

1. Ashok Soota – PromoterHappiest Minds
2. Mohandas Pai’s Business Plans

A Women’s Day Special – Play with Colors of Life

“How wrong is it for a woman to expect the man to build the world she wants, rather than to create it herself?”   ― Anaïs Nin

Women are smart. They demand equality and have a special day for women. Men claim superiority and have no men’s day. One can say the rest of the days are of them, but are they? The male gender suffers; poor chaps can’t even protest as it isn’t a masculine trait to show weakness. Women can complain, shed tears, howl their heart out and it reflects feminine traits. Mothers teach sons – boys don’t cry. Wives complain – Husbands are unemotional. Haven’t women successfully shackled men in a stereotypical image from birth?

Shouldn’t women be fighting for the male cause to bring in some emotional gender equality? Shall we start by being a bit more honest ? Lets discuss some of the things that women should do for themselves and the male gender on this women’s day.

1. Miss Goody Two Shoes

Men are convinced women are more principled, honest and virtuous than them. Women have done a wonderful job of personal brand building. Most haven’t got their hands dirty publicly. However, surveys say women participate equally in sexual harassment in offices and are showing increasing propensity to commit white collar crime as their ratios improve in the workforce. Moreover, they backbite, rumor monger, tattletale and indirectly bully more than men in offices. Women are more likely to use sex to get a promotion. Yes, some strategically decide to sleep with the boss to boost their careers.

Women play an equal role in making destructive management practices flourish in an organization and do not hesitate to use them for personal gain. Let us stop playing the blame game and take ownership to improve the work climate within our organizations.

2. Women’s Worst Enemies

Women undercut women. They make loud claims that male gender does not support them. However, women make bad bosses to junior women. Women ruin careers of aspiring young women to remove competition. They feel insecure if men give attention to a younger woman, hence damage the youngsters chances of succeeding. If a senior male wishes to harass a young female, he uses her female colleagues to do so to avoid sexual harassment charges.

While women target the men’s club for all the negative events happening to them, they fail to collaborate to form a women’s club. With 20-50% female workforce in offices, female leaders need to push for reforms in their offices that benefit the gender. Laying the blame on male CXOs door doesn’t absolve women leaders of their responsibilities.

3. The Sacrificing Souls

Women undersell themselves by portraying the picture of sacrificing souls. At every opportunity they lament about the difficulties of being a mother and a career women. Yes, they have to make sacrifices but so do men, specially single dads. It is difficult but stop crying about it all the time. As Gloria Steimen said- “I have yet to hear a man ask for advice on how to combine marriage and a career.” 

Being successful is about managing different priorities effectively. Have you seen successful men or women incessantly talking about the same universal issue? Husband, kids and career are a woman’s personal choice, hence its an individual decision. No man or woman is going to get all three handed on a silver platter for all times. There is no point in attempting to win the corporate battle using these tactics.

Closing Thoughts

Fight the battle of equality on ethical and principled grounds, without playing the victim. Successful women don’t enact the damsel in distress routines while pointing fingers at others. Quit complaining and enjoy the colors of life. Be fair, be just and give both genders an equal chance of succeeding on merit and talent.

I know, women will be mad at me for writing this post.  But what to do, 90% of my readers are men .

Wishing all my readers a special women’s day and a happy Holi.

Risky Selection of Leaders

Everybody in the business world has a litany of woes about leaders. There are many causes attributed to it, but the pertinent question is- are we choosing the right leaders or is this a case of blind choosing the blind? I found some flabbergasting research highlighting that leadership selection is mostly done on attributes perceived to make a person successful. More often than not, the actual traits required for leadership are ignored.  Read on to assess for yourself whether organizations are doing risky selection of leaders.

1.    What attributes are organizations looking for?

The “2009 Best Companies for Leadership” report of Hay Group with Bloomberg identified 20 companies globally that were best in developing leadership talent. The results indicated that these companies gave better shareholder returns in short-term and over a 10-year period than the S&P 500. Infosys Technologies was the only Indian company in the listed 20. The graph below shows the traits top 20 companies value in leaders. Strategic thinking, execution and soft skills rate above technical skills.

2.    What is the percentage of effective leaders?

On the face of it, the above-mentioned attributes seem to be present in most of the staff. However, another survey -“The Global Leadership Forecast 2011” conducted by DDI  “found that only 33 percent of HR leaders are highly confident in their frontline leaders’ ability to ensure the future success of their organization.”  Now these frontline leaders are critical to the growth of the business as they interact with the customers. Hence, their leadership is crucial for increasing profitability of the organization

Secondly, in the long run these frontline managers are most likely to become business unit heads and hold other critical positions in the organization. We assume that with experience the leadership capabilities improve. This is an incorrect assumption. A research conducted by Hogan and Curphy (2004) asserts that managerial incompetence base rates are as high as 50% of all managers. So where are we going wrong? Dolitch & Cairo succinctly described the problem in the following words:

It’s instructive that an individual as ideally suited to a job as Pitt (former SEC chairman) could ultimately fail.  Too often, we assume that someone whose professional background is a perfect fit for a job—who has the ideal combination of intellectual acumen, experience, and expertise—cannot fail.  The lesson:  Never underestimate the power of personality in undermining the success of even the most brilliant and well-suited leader. (Dotlich & Cairo, 2003, p. 62)

3.    How are managers doing on personal attributes?

A 2010 survey of HayGroup- Emotional Intelligence at the heart of performance – identified the crux of the problem. It showed that out of 12 competencies for measuring emotional intelligence – 20% of the respondents had no strengths, 52% had 3 or fewer and just 16% had 9 or more. This means, that just 16% of the respondents are emotionally capable of being good leaders.

ESCI scores further analysis indicated that – the competencies typically seen as strength include achievement orientation, teamwork and organizational awareness. Whereas, those that typically require most development include emotional self-awareness, conflict management, influence and inspirational leadership. Think of it, without the emotional intelligence to understand one’s own and other people’s behavior, – can an individual positively influence others, lead teams and inspire people?

This means two things. First, that society doesn’t have a high percentage of emotionally intelligent people. Second, people without the emotional intelligence get leadership positions on technical and execution skills. Beyond a point, this results in failed leadership and causes damage to the organization. Leaders with low emotional self-awareness de-motivate 60% of the staff. The staff is disengaged, suffers in a toxic work environment and organization faces retention problems.

 4.    Why do organizations choose ineffective leaders?

 In light of the above facts, we assume the organizations should be doing a better job at selecting leaders. However, they are failing because psychologically humans chose leaders with negative traits. I am highlighting a couple of aspects on it.

Strategic thinking is the most important skill organizations are looking for amongst leaders. To develop a good strategy, leaders need to be creative thinkers. However, as I wrote previously in the article “Creativity @ Risk” based on the Jenniger S. Mueller’s research paper – people don’t chose leaders with creative ideas. When a person with creative ideas is pitted against a standard thinker who follows established norms, the standard thinker wins the leadership selection battle. People select the creative thinker only when specifically asked to choose a charismatic leader. Therefore, people by themselves may not choose an inspiring leader.  That means, people chose leaders based with whom they are comfortable with, rather than the intellectual capability of the leader. The clear message is that organizations will get strategic thinkers and inspiring leaders only when they specifically focus on identifying, developing and promoting them.

The second aspect is the soft skills or emotional competencies of the leaders. A research paper by Robert W. Livingston, Taya R. Cohe, & Nir Halevy titled – Empowering the wolf in sheep’s clothing: Why people choose the wrong leaders – highlights that people tend to chose leaders with harmful attributes and lacking emotional skills.  The research indicates that there is stark difference in what people say that they value as leadership traits and the people they select as leaders. People chose leaders who are socially appealing but may not be interested in the welfare of the group. Social individuals are perceived as high status. Although they may be more self-serving, power seeking and self-promoting, people prefer them to an altruistic person.

This means, paradoxically people chose a person as a leader who is domineering and competitive  rather than an empathic team player concerned over the welfare of his team mates. Nice guys lose the battle of leadership. Therefore, we shouldn’t be surprised that organizations have such aggressive cultures with backstabbing and backbiting being the norm.

The quandary is, that in a drive to achieve targets and growth, competitive people rule. The thinkers, team players, influencers and change agents are not preferred choice for leadership roles. The excessive focus on achieving numbers itself reduces profitability due to destructive corporate culture.

Organizations need to maintain balance while selecting leaders. The right mix is required. A sales team leader needs to be more emotionally aware of customer reactions and be sociable. On the other hand, to develop and train resources a learning and development leader needs to be altruistic and empathetic. Hence, organizations will reduce leadership selection risks by identifying various emotional capabilities and soft skills required by a leader to fulfill a job description.

 Closing thoughts

 When one does the math for ineffective leaders, the failure rate is remarkable. While most organizations are focusing on developing leadership talent, a root cause analysis for failure of leadership and selection of ineffective leaders is not done. Realization dawns normally when organization is on the brink of a catastrophe.

Therefore, it is a good idea to build in an emotional competency evaluation system for selecting leaders. A fine balance has to be maintained between technical and emotional competency of the individual and organization objectives and culture. Without plotting the data on a matrix and evaluating it objectively, organizations might not get the right leaders. While leadership is a soft skill organizations require hard data to select a good leader. Leaders can make or break an organization; hence, huge risks occur when wrong leaders are selected. Risk managers must call management attention for selecting good leaders by conducting a leadership skill assessment.

References:

1. Better Leaders, Better Outcomes The Power of Selection Tools to Drive Business Results – A research paper by DDI

2. 2009 Best Companies  for Leadership -The future of leadership: a spotlight on the best -Hay Group Webinar Feb 18, 2010

3. EI at the heart of performance -The implications of our 2010 ESCI research – Hay Group

4. Empowering the wolf in sheep’s clothing: Why people choose the wrong leaders – Robert W. Livingston, Taya R. Cohen, & Nir Halevy- Kellogg School of Management, Northwestern University

Auditors Create Caustic Work Environment

When I say auditors create caustic work environment, I expect an indignant response from auditorville to the effect – “What are you saying, we are beacons of decency and always walk the high moral ground.” A question that begs an answer is – have auditors acknowledged the angst of business teams and if so, what have they done about it? Auditors sing paeans about their positive contribution to business operations. However, business teams frequently hold the opinion that auditors badger and bulldoze them. Such contrarian views create disharmony in the working environment. Hence, to some extent auditors can be said to be contributing to building a negative work culture.

Now before going on the defensive, just hear me out. As auditors, we sometimes build walls between audit and business teams without realizing that we are doing so. As clichéd as it may sound, our attitude and approach cause negative perceptions and build resistance amongst business teams. From being harbingers of building a risk culture in the organization, we become potent controversy creators.

Let me give a few examples here and some suggestions to corroborate my statement. Tell me whether you agree or disagree with the scenarios mentioned below.

1.    Park your ego at the door 

Whenever I read a blog and to see the text I have to close an advertisement, I am irritated. I feel why I am being forced to read an advertisement when I wish to read the article. I didn’t sign off for seeing a large advertisement covering the text. The interruption in my desire to read the blog post by closing the advertisement is a cause of annoyance.

Come to think of it, as auditors we are equivalent to these advertisements to business managers. Audit projects interrupt their smooth operations, as business managers prefer focusing on their key result areas. We are irritants to them and can become a source of stress if not managed properly. 

A few auditors deal with business managers with a sense of narcissistic entitlement.  Auditors somewhat falsely believe since they are auditing the work of business teams they have the upper hand and are superior. In some cases, without having knowledge and experience of business operations, auditors still believe that their opinions and suggestions must be accepted by business managers.

Sometimes auditors forget that the business managers have a different set of strengths and must be appreciated for the same. Rather than adopting a command-control structure, a positive culture is formed when auditors handhold the business teams.

2.    Don’t make a mountain of a molehill

Ever felt the urge as an auditor to present a B or C level observation in a manner to senior management as if the sky is falling. Just to settle an old grouse with the business manager and show him/her in bad light. Well you won’t be the first one, and as humans, all of us feel tempted sometime in our career to be spiteful. However, each such incident causes distrust amongst business teams.

To put it bluntly, auditors enjoy the privilege of having access to confidential information of the organization and to senior management. If they wish, they can abuse this power by politicizing audit observations to harm business teams. Each audit project gives auditors new ammunition to use against business teams. The idea to politicize audit report findings may appear tempting; however, auditors end up creating potential hurdles for themselves.  Whenever an audit is scheduled business managers would perceive that they are dancing with wolves and will be eaten alive for lunch.

Auditors need to take care that they do not damage anyone’s credibility. They need to empathize with the business managers and work together with them to resolve organization issues.

3.    Don’t take yourself so seriously

 Key to building good relationships is that communicate in a manner where the receiver of the message first gets a message that generates positive emotions. After making the emotional deposit, then maybe share a critical view and then again make an emotional deposit. This ensures that the receiver is positively inclined to take negative feedback and initiate dialogue. However, sometimes auditors don’t spend time on niceties. Auditors have the reputation of being brusque and humorless. They carry the serious furrowed-brow look, which makes them somewhat unapproachable to business teams. Without humor and empathy forming socially harmonious relationships becomes challenging.

 If you don’t beleive me, read the story below to understand the sentiments of the business teams for their auditors.

 A senior auditor and business manager were kidnapped. The kidnappers called the CEO for ransom money threatening to kill both of them. The CEO did a quick math and said “Go ahead and shoot them, in the ransom money amount, I can hire 20 more.”

Now the kidnappers asked the auditor what his last wish was. The auditor said – “It has saddened me to hear that my CEO whom I had worked for 20 years has no value for me. I have always worked diligently; hence as my last act on this earth I would like to read out my audit report to the business manager.”

The kidnappers saw no harm in the request and asked the business manager his last wish. The business manager looked deeply into the eyes of the auditor and requested pleadingly to the kidnappers – “Shoot me immediately”.

 Closing Thoughts

In my view one of the important things to do for making audit project successful is to make collaboration enjoyable for the business teams. Auditors have the choice to be enablers, navigators or roadblocks to the success of business teams.

According to you what lessons should audit teams learn to improve the working environment of audit projects and develop stronger relationships with business teams?

Communicating to Bore Audience to Death – Come Join the Club.

One of the perks of an auditing career is that one can write boring and dry reports. Despite this, stakeholders still read every line of the report to see what is at risk, and how it affects their business. I call it a perk, since in this information age the probability of anyone reading a completely boring 50-page report or presentation is very low. Auditors have the privilege of writing them and repeatedly issuing them to an audience that never ignores the report.

 I as an auditor can give you various explanations on why auditorville try and put their audience to sleep without using any sedatives. Besides being caring citizens and do-gooders (at least we like to think so) to reduce insomnia amongst business managers, we write long pointless boring reports because our respective institutes guidelines say so. Now don’t ask me for evidence on this statement, it is an unwritten rule and accepted social etiquette of auditors. We believe our stakeholders should appreciate us for our tenacity to write such reports.

An Auditors Audience Courtesy visualphotos.com

On issuing the report, we choose to give a 30 slides presentation on the same in a monotone. This again is inspired by our charitable nature. Within 5 minutes of our presentation, nothing registers with the audience, some give glazed and blank looks while others nod off. This ensures that our presentation does not cause undue stress to our stakeholders and we do not have to provide emergency medical treatment to senior people. In case anyone shows interest and asks questions, we use mindboggling technical jargon to cause confusion and ensure inattentiveness in future. We feel entitled to use PowerPoint to use our “power” to make “pointless” presentations.

After issuing the report and giving the presentation, amongst auditorville we pat ourselves on the back for a job well done. So what if CXOs are left scratching their heads trying to figure out what we were trying to say in the lengthy presentation. Why should auditors tell CXOs in five minutes or two sentences what the main points are and how they should be mitigating risks? Do the CXOs expect us to sacrifice our sense of entitlement in boring them to death and not crib about them?

Come on now, admit it, as an auditor sometime in your career, you have done this. Some of us do it without realizing what we are doing and understanding our stakeholders expectations. We are prone to this as we rarely take feedback from other readers.

I realized that I was addicted to writing a thesis when I started this blog. I wrote a few articles, and then joined a Writers Forum on LinkedIn. I thought it would be a good idea to ask experienced writers viewpoint on the articles. Wow, did I get feedback. It ranged from “your blog post reads like a research paper” to “subject matter experts write technical jargon which normal readers won’t read, please use a ghost writer”. Some kindly suggested that they are willing to train me to write a blog post. Their points were valid and I wondered whether it was a good idea to hide under the writing-table. But, being a true battle hardened auditor I gained solace and comfort from other risk management bloggers. They were writing in the same style and tone. Yippee!

I know it is disheartening to hear that these mere earthlings don’t understand our superior technical knowledge. Some bosses are rude enough to advise us that we take help of the communication team in the organization. Now how can auditors with their sensitive and confidential information rely upon a communication manager? Either ways, communication team is only experienced in writing poetry and jingles. Auditors are a breed apart.

Now with my serious-concentrating-furrowed-auditor look I would like to tell you the main observation and recommendation.

Observation

Auditors spend 40% of their project time in documentation, writing reports and giving presentations. However, it has been noticed that communication skills are an auditor’s weakest link. Without the ability to effectively communicate, auditors are unable to influence stakeholders and get their buy-in. Hence, the audit recommendations do not get the desired attention.

Recommendation

We suggest that organization should provide auditors required training in verbal and written communication skills to address this drawback.

Sounded familiar, didn’t it. Where do you think we are going wrong? Any ideas?

Images of a Chief Risk Officer

Indians are euphoric this April due to two major victories, one that is an Indian passion and the other is slowing making India hollow. Yes, I am talking about two most common words you are likely to hear this season – Cricket and Corruption. The elation of Indian cricket team winning the World Cut hadn’t died down when Anna Hazare launched his protest against the Lokpal Bill. Government bowed down to the public protest and both the wins made Indians proud.

The two events got me thinking. The Indian cricket team honored Sachin Tendulkar with the win. Each team-member said they wished to honor him for 20 years of dedicated commitment to Indian cricket. Sachin’s attributes are that he has domain knowledge of the game, an expertise few players have, he mentors and supports junior players, team depends on him for taking them out of tough spots and he is dependable and reliable. He doesn’t have a formal leadership role. He gave up captaincy when he realized he is not suited for it.  Clearly a man who knows his strengths and limits!

If you see Anna Hazare, he is a 72-year-old man who enjoys the reputation of impeccable integrity. The government listened to his demands as he commands a moral authority, which few leaders enjoy. It is not that everyone can go on a fast-unto-death and expect the government to agree to modify a proposed law. People supported him because he led from the front; he has sacrificed his life for the community without any interest in power or money. Again, he has no formal authority as he is not an elected member of parliament nor does he hold any position. People respect him for his moral courage and commitment.

Now look at the qualities of these two men- Sachin Tendulkar and Anna Hazare. Aren’t these what a Chief Risk Officer (CRO) of an organization should be having? Risk managers generally complain that they have limited access to board and CEO and business team do not listen to their advice. Hence, they are struggling to be heard by senior management and business teams. However, if you think deeply does it not appear that senior management and business managers are not relying on risk managers because they might be reflecting incorrect attributes?

In my view, a CRO provides value to the board and CEO at strategy and policy level. The CRO is not the captain of the ship, but should be able to guide senior management in understanding the risks and address them. For business managers a CRO needs to mentor them in running business operations with minimum risks. To do so, CRO needs to have a combined reputation of Tendulkar and Hazare. S/He  needs to have a reputation of impeccable integrity, domain knowledge and expertise, trustworthiness and reliability , a team player and with an ability to sacrifice personal agendas for greater good of business. If s/he has this reputation, probability is that both senior management and business managers will be more forthcoming in involving him/her to understand and mitigate risks.

Images & Shadows

This prompts me into thinking the second aspect of the problem. What are the images CRO have in the organization and how are these benefitting or negating them?

1.       Nitpicker  to Troublemaker

 Most CROs complain that they are unable to get into CEO’s cartel. The challenges they face are that on one hand CEOs and board think that CROs are nitpickers who can’t provide much value add at strategic and business level. On the other hand, the CROs who do manage to attend CEO and board meetings may face significant resistance to their views.  I had covered this aspect in the article “Independence of Internal Auditors – An Oxymoron”.  As per KPMG Audit Committee report of 2010, 73% of Chief Audit Executives’ jobs are at risk if they hold a contrary view than the board. The attitude of the management is  that ”we don’t need someone on our board who doesn’t appreciate our views.” In such a situation the CRO has a choice between the devil and the deep blue sea.

Auditing and advising are two sides of the same coin and CROs needed to fulfill both of them diligently to ensure organization risks are managed effectively. CROs can learn from Hazare and Tendulkar on how to lead senior management without holding formal authority. They need to develop a reputation of a “guy who can be counted on to give the right advice and support.” To do so they need to work towards changing the image of bean counters and focus on developing strategic perspectives at macro level.

2.       Busybody to Watchdog

The employees of the organization sometimes view GRC staff as tale tattlers. According to the negative perceptions of business employees, the sole purpose of risk managers is to report to the management everything nasty to satisfy personal agendas and play political games. Generally, the image is formed when CRO is perceived as using audit and other risk management reports to gain political power and  uses them negatively. With an image of Dr. Jackal and Dr. Hyde, there is significant trust deficit at all levels of the organization. The downside is that business teams instead of developing risk aversion, develop an aversion to risk managers. Here, the CRO fails to establish a reputation as a genuine business advisor willing to hand hold business teams to improve risk management.

 CROs need to take a leaf out of Anna Hazare’s life. Anna Hazare gathered political support and led from the front in the Lokpal Bill protest. He garnered support as public understood that he was sacrificing himself for the greater good of the community. He showed he had the moral authority to lead others and protest against corruption on their behalf. The CROs should aspire to have a similar reputation where management and employees trust him/her to work for the benefit of the organization and be above petty politics.

3.           Scholarly to Acerbic

Frequently business managers view a CRO as “S/he is theoretical, is woefully obtuse about the practical aspects of business.” Or worse, “S/he thinks the job is to criticize, is always thumbing his/her nose at business managers.” The problem results as CROs and their teams are unable to cut ice with senior management and business teams when their reputations are that they are paper pushers, paid critics, think others as lesser mortals or are amusingly ridiculous in their ideas. S/he is never on the guest list of the business managers meetings. Here, the CROs fail in establishing their expertise and domain knowledge; hence lack credibility.

Taking a lesson from Sachin’s case, would he enjoy team respect and fan following if he lacked domain knowledge and expertise.  He has earned respect with his humble attitude and willingness to share his knowledge with teammates. The CRO needs to make their internal brand one of an enabler rather than a critic. The risk management technical expertise can be successful only if applied in addressing business challenges. Hence, a balance needs to be maintained between risk management and business issues. The willingness to train and mentor business managers on risk management aspects will go a long way.

In nutshell, risk managers should focus on their internal branding within the organization. We may rely on facts but perceptions matter. If senior management and business managers develop negative perceptions of the CRO, the organization and risk management teams suffer. People generally do not listen to people whom they do not respect and trust. Hence, CROs first task should be to develop a reputation of impeccable integrity, and being a good mentor and a domain expert.  

Welcome your opinion.

The Negative Impact of CEO Pay & Power on Corporate Culture and Governance

A recent study conducted by Economic Times of India showed that in 2009-2010 fiscal year, CEOs of top companies earned 68 times the average pay of employees. This has increased around 9 times in just one year. In 2008-2009 fiscal year, CEOs earned 59 times the average pay of employees. Naveen Jindal, Managing Director and Executive Vice-Chairman of Jindal Steel & Power has the dubious honor of receiving the highest salary in India. He earned Rs. 48.98 crores (USD 10.75 million), an income 2000 times the average salary of employees of his company.

Similar studies of top executives’ income in UK and US have shown extreme disparity of income. In US and UK top executives pay is 263 and 115 times the average worker salary respectively. After the financial crises, US and UK governments are working on curtailing CEO salaries. Is the astronomical increase in CEO salary a good trend for India? If not, what are the negative impacts?

Psychology of CEO’s and Top Executives

In the present society, a CXO designation commands respect. A common person attributes a CXO’s success to attitude, skill, intelligence and brilliance. The automatic assumption is that CXOs are better human beings than an average person. Are these assumptions right, does power and money make a human being better? 

 A research paper titled “When Executives Rake in Millions: Meanness in Organizations” discusses the impact of high executive pay. The research shows that high executive pay brings out the mean nature of top executives. It states, “Higher income inequality between executives and ordinary workers results in executives perceiving themselves as being all-powerful and this perception of power leads them to maltreat rank and file workers.” This sounds terrible. Is human nature such that more successful a person is, the less likely he/she is going to be compassionate and empathic to others?

The study indicates that some powerful people perceive those with lesser power as sub-human. Such a person feels reduced empathy, has lesser understanding of emotions and feelings of others, is inclined to objectify and dehumanize others, and sexually harass and degrade workers in lower positions. This person becomes morally disengaged; and tends towards unethical and corrupt behavior.

An article published by The Economist titled “The psychology of power: Absolutely” states the well-known, power tends to corrupt people. Secondly, it states that powerful people are full of hypocrisy. They expect others to behave better, and do not hold their own behavior and actions to similar high standards. On the other hand, they conceive they are entitled to abuse others and break the law. Powerful people disregard law since they consider themselves privileged and believe different rules apply to them. These studies force me to think – does one have to pay the price of power by losing one’s humanity?

There is a reverse rationalization here. When CXOs consider their juniors as less human, the psychology of use and discard sets in. CXOs believe they can deny the employees basic human rights and dignity. Hence, the false sense of superiority of CXOs makes them insensitive to juniors’ pain resulting from their actions. Hence, CXOs terminate employees, deny decent working conditions and harass employees without any sense of remorse. This is illustrated by the fact that CEOs who fired the maximum number of employees during recession in US, received the biggest pay packets. A CXOs false sense of entitlement makes them happy about the disparities. A psychologically normal person would feel guilty at benefitting from another humans tragedy.

In my view, majority of the CXOs are of boomer generation and the probability of Gen X & Y being a CXO is low. Gen X & Y is more likely to be in the lower ranks. Hence, should we consider it destined that boomers will mistreat Gen X and Gen X will mistreat Gen Y. Each generation as they age will become more inhuman towards others. This raises a number of social issues. As we have seen in the last two decades in US, CXOs salaries have increased around 300%. As the social and psychological consequences of income disparity are borne by the society, this is a big concern for India.

Impact on Corporate Culture & Governance

Jeff Skilling, Kenneth Lay, Bernie Ebbers and Bernard Madoff are examples of the CEO psychology gone wrong. From heroes they became villains. Their moral disengagement caused them to break the law without considering the legal consequences of their actions. Their narcissistic sense of entitlement and superiority damaged the corporate culture significantly. This behavior was even transmitted in personal relationships. In an interview, Madoff’s sons had said, “he never thought us as good enough.” A man responsible for stealing billions held his own sons in contempt.

The question that comes up is why do the employees agree and cater to this false sense of entitlement?  Why do they not break the grandiose self-image of the CXO and make him/her see reality?

When employees see the power and sense of entitlement of the CXO, they start believing it to be the truth. Employees concede that the CXO is superior, group consensus and thinking develops on those lines, and the CXO behavior becomes socially acceptable. It is a vicious cycle, when CXOs see employees accepting their negative behavior and attitude, they start believing that they are all powerful and superior human beings. Hence, the whole organization is caught in a psychic trap.

Disconnect with reality results in a harmful organization culture and deteriorating corporate governance norms. CXOs select employees to bully, harass and humiliate to demonstrate their power. The employee’s incapability to fight back caters to the CXOs egos, and they further degrade employees. The other employees from fear of being chosen for same inhuman treatment keep quiet and cater to the CXOs ego. The seeds sown by this behavior grow into a destructive organization culture.

 The study titled “The CEO Pay Slice” shows that there is negative correlation between high CEO pays and profitability of the organization. In comparison to the competitors, companies having higher pay for CEOs showed lower profitability for investors. CEOs with higher pay do not automatically perform better. Results indicate that they make worse acquisition decisions and show weaker accountability for poor performance than other CEOs. Sometimes CEO compensation increases when industry and economic factors are favorable. Hence, the increase in pay maybe attributed to luck instead of better decisions and performance.

This does not augur well for the risk managers in the organization. CXOs with a false sense of privileged status are more likely to disregard business ethics and laws while making decisions. Hence, the organization is at a high risk for legal cases and reputation damage.  In the long run, the lack of focus on organization culture and governmance may cause major corporate disasters.

Recommendations

 The CEO and top executives set the tone at the top. If they are morally disengaged and disconnected from employees, the organization faces some severe challenges. Hence, some solutions are required to address this problem. Here are my recommendations:

i)     The Indian Company Law Schedule XIII defines the method of calculation and limits of managerial remuneration. In my view, the calculation should involve number of times the average salary of workers. This will ensure that some balance is maintained between board, CXO and workers pay.

ii)    Studies have shown that some powerful people tend to hold themselves at higher standards and are lenient to others misdemeanors. Studies on emotional intelligence indicate that emotionally intelligent people are aware of their own and others emotions and drivers. This might sound bizarre, but maybe we should explore methods to keep CXOs emotionally connected.

iii)     The research paper reflected that women are less likely to feel a sense of entitlement or power if they can be mean to a less powerful person. It is a good idea to keep more women as CXOs to maintain a balance and keep senior management grounded.

iv)   Corporate governance norms should include independent board members in compensation committee. This will ensure that a realistic view is taken of CEO and other top executives’ salary. Basing salary structures on performance rather than favorable circumstances is required.

v)    Employees may be empowered by forming trade unions and using whistle blowing lines inside and outside the organization.

vi)   Last but not the least, public should play an active role in curtailing income disparities. The issues should be brought to government and media attention.

References:

1. CEOs of Top Companies Earn 68 Times of Average Employee
2. When Executives Rake in Millions: Meanness in Organizations {Authored by Sheeshadri Desai (Harvard University), Arthur Brief (University of Utah), Jennifer George (Rice University)} 
3. The CEO Pay Slice by Lucian Bebchuk, Martijn Cremers and Urs Peyer 
4. The Psychology of Power – The Economist

Share your opinion here.

Narcissistic Mindset in Financial Institutions

Financial institutions are again grabbing headlines for the wrong reasons. This time it is because of the foreclosure of mortgages without adequate due diligence.  As Senator Robert Menendez wrote to the heads of JPMorgan Chase and Co, Bank of America Corp and Ally Financial Inc- “It is simply inexcusable that proper oversight proceedings were not in place, especially when dealing with matters as monumental as the seizure of a family’s home.”  While receiving bailout from tax-payers money, the leadership teams in the banks had promised more responsible behavior. The question which needs an answer is –“Why are the US financial institutions blatantly contravening regulations again and did they not learn anything from the previous debacle?”

In contrast, in India, in the recently held round table forum organized by Economic Times, the chief players in financial institutions reiterated that regulation and growth can co-exist together. Extract from the Economic Times article – “State Bank of India chairman Om Prakash Bhatt and ICICI Bank non-executive chairman KV Kamath told the founder of the world’s biggest buyout firm, Stephen A Schwarzman of Blackstone Group, that regulation and growth are not mutually exclusive”. Indian financial institutions have always been heavily regulated and have simultaneously shown tremendous growth. This indicates that there is a significant difference in culture and approach in banking sector between USA and India.

In the financial institutions crises many thinkers had blamed the narcissistic mindset of the financial institutions. The thinkers stated that the banks management teams are arrogant and believe the banks –“is too big to fail”. With the recent foreclosure issue, the narcissistic thinking is again reflected.

I decided to do some research to determine what healthy narcissism is and what are the attributes of a narcissistic personality disorder (NPD)? Is it possible to analyze the attributes of NPD in respect to organization leaders, culture and society? I am providing here the results from my analysis after reading Sam Vaknin’s book “Malignant Self Love- Narcissism Revisited”   

In the book Sam Vaknin has stated nearly that “According to the DSM-IV-TR, between 2% and 16% of the population in clinical settings (between 0.5-1% of the general population) are diagnosed with Narcissistic Personality Disorder (NPD). Most narcissists (50-75%, according to the DSM-IV-TR) are men.” According to him the gender difference is because the narcissistic traits (aggression, ego, competition etc.) are generally appreciated in males. This indicates that actual number of employees suffering from NPD in an organization would be less than 1%. Hence, the organization may not be at risk because of individual behavior but may be at risk of narcissistic tendencies due to collective behavior and organization culture.

The second aspect is difference between healthy and unhealthy narcissism.  The definition as per the book is –“Healthy narcissism is a mature, balanced love of oneself coupled with a stable sense of self-worth and self-esteem. Healthy narcissism implies knowledge of one’s boundaries and a proportionate and realistic appraisal of one’s achievements and traits.” Unhealthy or NPD is defined as- “Pathological narcissism is a life-long pattern of traits and behaviors which signify infatuation and obsession with one’s self to the exclusion of all others and the egotistic and ruthless pursuit of one’s gratification, dominance and ambition.” Well, these are traits which we have seen in our present day leaders sometimes or the other. Interestingly, Sam Vaknin has stated that narcissists can hide themselves in a crowd and it is extremely difficult to identify a narcissist without a proper psychological evaluation and diagnosis. Hence a layperson can only say that he/she has a toxic leader or bad boss, at best. So is it possible for an organization to develop a culture of pathological narcissism?  

The next aspect is the analysis of the attributes in detail and determining how this impacts the organization culture and society. I am listing the nine criteria’s used to assessing NPD as given in Sam Vaknin and determining their applicability in our current business environment.

1. Feels grandiose and self-important (e.g., exaggerates accomplishments, talents, skills, contacts, and personality traits to the point of lying, demands to be recognized as superior without commensurate achievements);
2. Is obsessed with fantasies of unlimited success, fame, fearsome power or omnipotence, unequalled brilliance (the cerebral narcissist), bodily beauty or sexual performance (the somatic narcissist), or ideal, everlasting, all-conquering love or passion; 
3. Firmly convinced that he or she is unique and, being special, can only be understood by, should only be treated by, or associate with, other special or unique, or high-status people (or institutions);  
4. Requires excessive admiration, adulation, attention and affirmation – or, failing that, wishes to be feared and to be notorious (Narcissistic Supply);
5. Feels entitled. Demands automatic and full compliance with his or her unreasonable expectations for special and favorable priority treatment;  
6.  Is “interpersonally exploitative”, i.e., uses others to achieve his or her own ends;  
7. Devoid of empathy. Is unable or unwilling to identify with, acknowledge, or accept the feelings, needs, preferences, priorities, and choices of others; 
8. Constantly envious of others and seeks to hurt or destroy the objects of his or her frustration. Suffers from persecutory (paranoid) delusions as he or she believes that they feel the same about him or her and are likely to act similarly; 
9. Behaves arrogantly and haughtily. Feels superior, omnipotent, omniscient, invincible, immune, “above the law”, and omnipresent (magical thinking). Rages when frustrated, contradicted, or confronted by people he or she considers inferior to him or her and unworthy.

 Some of the examples which come to mind regarding the financial crises and corporate behavior are:

1.  The financial crises occurred because basic business ethics were compromised on the assumption that nothing will be detected and the products will sail through. Risk management guidelines were contravened as the banks considered themselves beyond failure. The senior management did not give much thought to the morality of their actions. The suffering caused to the general public, customers and employees was not considered relevant in decision making.
2. There number of cases post recession, where the CXO’s have allocated huge salary increments and bonuses to themselves from tax payers money after creating the financial crises, definitely indicates the sense of entitlement they feel. The senior management cut jobs of middle and junior employees, and retained their own. They also felt entitled to hiring planes for personal and business trips while the common folks were reeling under the crises. They did not hold themselves responsible and accountable for their poor decisions nor demonstrated remorse for damaging the economy.
3.  The foreclosure debacle shows that the employees and management of the banks did not feel any empathy for their customers when causing trauma to customers. A loss of one’s home is an extremely traumatic experience. It shows a significant level of ruthlessness and insensitivity to others circumstances for achieving one’s own objectives.
4.  Definitely, the employees below the CXO level have realized that syncopate behavior guarantees rewards and criticism is not without risks. Some organizations have become so dominant that employees do not have the freedom to voice their opinion and jobs have become a refined form of slavery. Anyone who is unwilling or objects to tow the management line is severely punished, as has been seen in various whistleblower cases.    
5.  Employees are working towards material objectives which are in dissonance with their inner beings. In this society, a person’s worth is being evaluated by material success and public appearances, the employees are developing and projecting a ‘false self’ image. Employees hide their true self and project a false self to obtain promotions, hikes and bonuses.
6.  The survey reports for workplace aggression, violence, bulling, and sexual harassment are showing an increasing trend. In most cases the percentages are ranging between 20-50% of the employees reporting experiencing such incidents. These reports indicate that organizations are turning exploitative and abusive in nature.
7.  Organization culture survey reports indicate that financial institutions have an aggressive and competitive culture. Ask a regular employee and he/she will respond- “It is a dog eat dog world, extremely competitive and cut throat”. The general opinion is that to succeed using some unfair practices to destroy internal and external competition is acceptable.

 Considering the above mentioned aspects and other media reports, it looks like there is a trend towards narcissistic behavior in organizations. The question which comes up is that can anything be done about it when top management may be showing narcissistic behavior? Who will give a reality check to the organization when employees themselves participate in the same behavior? Is the public going to witness one debacle after another as has been the case in the last decade? How will the breaks be put and the trend reversed?

Well your guess is as good as mine. What do you think is going to happen? Please drop in a comment and share your opinion with me.

I bet you will lose your ethics in 5 minutes!

You think you are morally correct and an ethical person. Right! Most of the people have that opinion about themselves. If I say I can make you lose your ethics in 5 minutes, you will think I have lost my mind. If you are angry at my statement, you will think “over my dead body”.

Well, I will reiterate that you can lose your ethics within 5 minutes and not even realize that you have compromised them. Let me present two situations, and you chose how you will react to them. Take the polls below.

Situation 1: Your boss is really mean and nasty. He is perpetually bullying, harassing and shouting at the team including you. The team has been taking this behavior for over 6 months, and all attempts to talk to the boss for better behavior have failed. The team is thinking of collectively filing a complaint against the boss to the human resource department.

It is your birthday, and the boss calls you into his room. He presents you with an expensive IPod. You are kind of surprised and thank him for it. After this you staright away go to the  meeting with team members to decide on the draft of the complaint against the boss to human resources department. Choose which of the options listed below you will consider:

  

Situation 2: Your date is a real bore and you are thinking that talking to ants will be a better option. You are sitting in this expensive restaurant and console yourself that at least the food tastes good. And, the date is paying for it!

Suddenly, Brad Pitt walks past your dinner table and talks to your date. He appears to know your date, and is comfortable chatting with him/her. Your date introduces you to Brad Pitt in a nice manner and he includes you in the conversation. He leaves after 5 minutes and you are back in the company of your date. Choose which of the options listed below you will consider when your date invites you for a second date:

If you have not chosen the first option in either of the situations described above, you have compromised your ethics. Are you saying “No way” or “How come?”

The psychology study “Cognitive Consequences of Forced Compliance” conducted by Leon Festinger & James M. Carlsmith explains the same.  

This is called cognitive dissonance when a person makes a public statement contrary to the initial personal opinion. If a person has a personal opinion, say “X”,an offer for reward or threat of punishment can make a person say “Not X”. The difference between “X” and “Not X” statements is called dissonance. If rewards or threats are given or implied, the difference between the two statements reduces as a person mentally changes his/her internal opinion to align with the external statement.

Well, the study shows how susceptible human psychology is in evaluating two opinions which are contradictory in nature. If the internal opinion is something else, a person reconciles his/her internal opinion to the external statement being made. As given in the two situations described above, the internal opinions were that the boss is a bully and the date is a bore. However, on being offered a reward in the first case, and indicated an implied benefit in the second case, the opinion changed. The boss and date were not that bad after all.

Well, would you not think that you are deceiving yourself in some way because the reward looks appealing? Is it the ethical thing to do?

I did say that ethics can be lost within 5 minutes. Think hard how many times you were in a similar situation and got lured by the reward.

Be wiser next time when a similar situation presents itself. Have fun

We All Have A Bad Boss

I was going through the various groups of Linkedin and seeing the updates of my connections. The one thing which hit me hard was the number of topics about bad bosses and how to manage them. Every person had some experience on how CXO’s/ bosses behave negatively and how to deal with the situation.

I did not see any comment from a CXO saying- “I am a bad CXO and this is my suggestion on how not to do the same mistake”. I didn’t see any message from a regular boss (senior/middle) saying that “Hey, these are the mistakes which I made while being a boss”. Or any person saying “Hey, my boss is nice but I am a bad subordinate”.

With my tongue firmly in cheek, I kind of wondered. Except for fresh employees all of us are someone’s boss and have some subordinates. So how come we have a bad boss and are such good subordinates. And the surprising thing is our juniors are saying the same “My boss is bad, I am a good subordinate”.

I think most of us haven’t reached the CXO level nor are likely to reach. Hence the HR industry is focusing on the rest by showing empathy and sympathy for dealing with the bad boss. This is a good branding exercise by the HR industry to rope in new customers for coaching and mentoring. Nobody likes someone else having authority over them, as kids we didn’t like our parents telling us what to do, and as adults we don’t like our bosses telling us what to do. It is a universal emotional thought process which HR industry is exploiting by giving us a shoulder to cry on.

I am not going to give you 10 steps of how to manage a bad boss. I would recommend reading Scott Adam’s book – Dilbert The Joy Of Work -Guide to finding Happiness at the Expense of your Co-workers. It is one of the books which give profound meaning to working as a subordinate. 

Watch the clip to understand the true meaning of a hardworking employee who has a really bad boss. My heart goes out to him.