A Choice in Tiger’s Clothing
From overseas, the Satyam Computer Services scandal looks a lot like Enron, at least that’s what our news articles and editorials have been telling us lately. More thoughtful scrutiny suggests that Satyam’s plight signifies something deeper than just another case of accounting fraud in a new location.
The massive fraud frames the fundamental choice for companies competing in one of the world’s most promising emerging economies: Do we repeat the costly mistakes U.S. and European companies have made or do we embrace the new dynamics of 21st-century business?
Satyam’s competitors have quickly communicated to the world that they are keen on avoiding costly mistakes. The CEO of India’s HCL Technologies recently sent an e-mail to customers and employees asserting that the company will “focus on creating value for our customers with the same passion we have demonstrated in the past while maintaining the highest ethical and governance standards.”
In The New York Times, a Gartner analyst described the scandal as a broader “crisis of trust” in India’s outsourcing sector, where reputation matters a lot. Yet, reputation matters a lot more in every country, industry and company today thanks hyper-connectivity and hyper-transparency.
Whether or not Satyam’s competitors and other Indian companies make good on their promises of ethical conduct — and whether or not they repeat the same missteps that have damaged Western companies — depends much more on how they do what they do than the goods and services they deliver. Sustainable organizations that thrive and endure, in both calm and turbulent times, do so because their cultures are rooted in timeless values, not temporary, accidental or situational success.
Human Conduct as Competitive Differentiator
The hows of human conduct are to the 21st century what process reengineering was to the last. When business leaders realized that the previously subjective aesthetic of quality was in fact quantifiable and resulted in products that were better, faster and cheaper than those before it, we began measuring inefficiencies at every level of production, and everyone excelled at quality. So good that it, too, became a commodity. To thrive today, we can no longer differentiate ourselves based on what we sell to the customer — or the processes we use. Instead, we need to differentiate based on the connections we establish and the experiences we create that engender trust and loyalty.
Human conduct — how we do what we do — represents the next frontier of powerful differentiation. The qualities that many once thought of as “soft” — trust, integrity, honesty — are now the hard currency of business success and the ultimate drivers of efficiency, productivity and profitability. Connections based on these values can reduce corporate governance risks and supply chain disruptions, enhance customer experience, help executives exert greater influence over a highly decentralized global workforce, and ultimately lower costs and boost revenues.
Why? The 21st-century dynamics of hyper-connectivity and hyper-transparency enable everyone to see easily and deeply into our companies. Competitors can see, study and copy what we do. Customers and employees can see whether we’re keeping our promises to them. And shareholders, community members and regulators can see how we’re achieving what we say we’re achieving.
We might fool stakeholders for a little while but never for very long. Satyam Chairman and CEO B. Ramalinga Raju realized as much when investors balked at his Maytas acquisition, which was (as Raju himself described) a “last attempt to fill the fictitious assets with real ones.”
Our 21st century world’s connectivity and transparency has placed a premium on conduct; as a result, the expectations we place on our conduct, as business people and human beings, are higher than ever.
Beyond Enron and Satyam
Like his counterparts at Enron, Raju’s behavior was shockingly disappointing. The Enron-Satyam comparisons help drive home the fact that inappropriate business conduct can occur just as easily in Hyderabad as it has in New York, Houston, Italy (Parmalat) or The Netherlands (Royal Ahold).
Otherwise, though, the difference between Satyam and Enron may prove more useful.
Unlike Enron’s top executives, who remained defiant until the end, Satyam’s leader exercised a belated form of self-governance in the wake of his billion-dollar accounting chicanery. Rather than “lawyering up,” as is customary among U.S. executives in the wake of disclosure of impropriety, Raju wrote a letter in which he exposed his fraudulent accounting, accepted responsibility for his actions and expressed an apology.
“It was like riding a tiger,” he acknowledged, “not knowing how to get off without being eaten.”
These actions in no way excuse his poor judgment, rules-breaking or the pain it is causing. However, his admission — a form whistle-blowing that will strike many in the U.S. as foreign — and the ensuing response from some Satyam employees suggests that the company fostered culture that was connected and united on values even as its leader was violating them.
A Bloomberg News article described the four large canvass sheets hung by loyal employees outside Satyam’s headquarters; the canvasses were adorned with employee handprints, signatures and messages, such as “Satyam will come back.”
By now, the world knows that Satyam means “truth” in Sanskrit. This lesson in language is not just an illustration of our more globalized and connected world of traditional and new media. It’s an example of the power that can be found when values are brought to life.
The employees who hung the four six-foot by eight-foot canvasses outside of Satyam headquarters did not print “The Business of Satyam” as a signal to the world that they are open for business. Nor did they paint “The Corporate Governance of Satyam” to celebrate their internal controls and governance structure — Satyam was the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues. The employees are connecting around “The Spirit of Satyam.” They are sharing their fundamental thoughts and feelings on the very core of who they are as individuals and an organization, including one employee going so far as setting up a blog to share these beliefs with the world. These employees aren’t letting go of what really matters — in fact, in the face of uncertainty and fear, they are reconnecting on what matters most: how it is they do what they do. They realize something profound that the rest of the world can learn from: In uncertain times, it’s our values where we can gain our greatest strength.
I have been more inspired by these employee actions and expressions of core values than anything that I’ve seen in a long time.
Of course, Raju waited too long to get off his tiger, and it remains to see how well Satyam will claw back from this outrage. However, I would stress the lessons that other companies can learn from Satyam about the importance of choosing to ride a 20th-century tiger that feeds exclusively on products, services and quarterly numbers (whats) or electing a 21st-century strategy that focuses equally on product or services and while stressing conduct (hows) as key to success.
Last 5 posts by Dov Seidman
• Why We Can't 'Motivate' Engagement - August 19th, 2010
• The Economy: Don't Hit the Reset Button - May 19th, 2010
• Is There 'Honest Tea' on Wall Street? - May 14th, 2010
• Inspirational Shame in the Era of Behavior - April 14th, 2010
• Philosophy Is Back in Business - January 13th, 2010
