N R Narayana Murthy quits Infosys: ‘Outsider’ in, founders step out
Infosys is, in every sense, the middle class dream. The company was built on a foundation of lofty principles, where only what was best for it would be taken into account. It was never geared to be a family business and the professionals who ran it stuck by that. Those who entered the company would do so purely on merit, wealth would be generated ethically and shared with stakeholders. These were the company’s standards for corporate governance.
The rules held good for some of the best brains in the industry, who came together in a formidable team. I don’t think we can have another Infosys. That said, there is a point when the company has to move on from its founders, who can’t be expected to stay there for life. You need a non-founder to take charge and also give him the space to take his own stand.
In the last few years, because of the company’s underperformance due to various reasons, they were forced to accelerate the process of finding a new CEO. Mr Murthy was asked to come back from retirement because of this and also because of the large number of stakeholders who depended on it. They needed someone to help the company back on its feet and be the anchor who could inspire confidence. This Mr Murthy did.
At the end of the day, a company as large as Infosys needs a whole team to ensure that things run smoothly. Things reached a head with the apparent exodus of junior staff and a spate of departures in the top leadership, making the arrival of a new CEO an immediate need, if worried stakeholders were to be placated. And, in this case, it meant bringing in someone from the outside. When that happens, the person who takes charge needs the space to operate and having a strong founder-chairman simply doesn’t leave the new leader with enough elbow room. This holds good even if the founder-chairman is present in a non–executive role.
I think this is a momentous occasion, because nowhere else in India has the founder of a company been able to let go and let someone else take the reins. Mr Murthy’s decision is comparable to a sale, even though the founder’s holding is only about 15%, not large enough to be called a controlling stake. Even so, the move is commendable, for the people who brought the company to its glory were able to leave it new hands. In most cases, the promoters’ shareholdings tend to be very large, so the company is driven purely by the generation of private wealth. Therefore, it is harder to cut the cord.
Infosys’ large option programme did dilute the founder’s stake, but it was in keeping with the principles of the company. Their philosophy has always been that if the company can be left in better hands, that should be allowed. The founders themselves were more trustees than owners. Big challenges lie ahead for the new CEO and MD Vishal Sikka. The first is that he comes from outside and isn’t accustomed yet to the company’s history and culture. The familiarisation process will take time and it definitely isn’t easy to do. Second, the emotional connect with the employees is crucial, for it is a service business. If the top leadership doesn’t achieve that bond with his employees, no progress can be made. This is a crucial juncture, for the founders have all made their exit in a single shot.
Sikka is making a transition from a product background to services, he has no experience running a large P&L in the public market and seeing to stakeholders. That will be one of his biggest challenges, although some products and services do convert in the long run. He also has to rebuild his entire team of 12 executive vice presidents. The waiting game begins once that has been done, for we will have to see how the rest of the organisation adapts to them. Of course, it will create a disturbance and the journey will be fraught with hurdles.
Sikka has to invest in innovations and products keeping long-term goals well within his view. His focus has to remain on future growth, while he juggles the fact that the company is in the public market and certain deliverables are expected of it, quarter after quarter. It is a huge task, no doubt, but it needs time, we have to wait and see how Sikka adjusts to this environment. Rohan Murty has stepped down as well, for Mr Murthy said from the start that Rohan's appointment would terminate with that of the executive chairman. Sikka has been left with an open playing field and all the freedom he needs to put his own strategy in place. Stakeholders, naturally, will be worried, for the financial markers are based on the trust which has been earned over a period of time.
It’s very important, therefore, for Sikka to communicate a good strategy, so these financial markers can adjust to him. Was this move inevitable? That, I think is totally contextual. When you are faced with a situation where there is no real internal leadership, you have no choice but to look for external parameters. The new leader cannot be consigned with the past and for that to be truly accomplished, having the founders bow out is the only way.
