Until some years ago, RAM CHARAN was described as global management's best-kept secret. No longer. As his counsel started receiving heft from beverages #1 Coca-Cola Co. to fast-andupcoming Marico, from the venerable General Electric Co. to start-up Deccan 360, Charan's laser-sharp insights and his ability to cut straight to root of an issue have been sought out the world over.
In New Delhi to coach salespersons at India's largest foreign-owned business, Nokia, among other engagements, the 70-something Charan took time out for an interview with Business Today's JOSEY PULIYENTHURUTHEL AND SAUMYA BHATTACHARYA. The management guru, who started life in business in his pre-teens in a Bata shoe shop that his family ran in a small Uttar Pradesh town, talks about leadership challenges in a post-recession era, role of independent boards, traits of global leaders he's worked with and his forthcoming book focussed on doing business in India and China. Edited excerpts:
What are the lessons for leaders of global corporations from the trauma of the last 18-odd months?
The problem was not individual companies; the problem was a collection of behaviours of individual companies that seem to have caused a concentration of risk. And, no one seems to have said that the intent of the system was to diversify risk, not concentrate it. Most people, to this day, do not seem to understand that and how the global financial system works. All big companies, domestic or not, need to build an internal approach to learn how the global financial system is actually working.
What does the CEO in India take away from this?
He has got to go and meet with the people at the Reserve Bank of India (RBI), who are specialists in this system. They understand the complexities of the system, the intricacies and how things could pan out. They (RBI), in turn, do not need to violate any confidentiality but need to educate CEOS of companies in an effort to understand the global financial system.
Is there a broader leadership lesson as well?
Yes, if you don't understand the global financial system, you may be lucky to survive. The core lesson is that your strategy is not only in the context of your industry and in the context of your national economies. It is now in the context of the global financial system; don't lose sight of that.
How difficult is it going to be for the average CEO to understand that?
The intellectual capacity is there; it is a question of spending the time.
And, is there anything they need to do fundamentally differently at the companies they run?
I think the fundamentals have not changed. Every Indian company must figure out how it can be globally competitive. Number two, all Indian companies— and, some are doing it—they need to develop a pool of leaders; no longer does it work that they have one hero running the show. And, they have to recruit globally… You'll be amazed at how many Indian companies don't plan succession.
They will come to terms. They have to. Turning back to the global scene, how much of current mess comes from the mad rush to deliver quarter after quarter? In other words, is it time CEOs turned to Plato and away from Welch?
Well, if you are really (Charan emphasises really) investing for the long term and you deliver on it, you'll never have to worry about the short term. Simply because you'll change and condition the shareholders. You have companies like J&J that have demonstrated that. And, under Welch, don't forget GE delivered for 20 years—both short term and long term. In the American scene, more than 70 per cent of ownership is institutional; you don't really have to give such investors short-term earnings guidance. Not just that, much of the problem today has been of people giving stretched guidance. Contrast that with: "under-promise, over-deliver".