Monday, August 28, 2017

Infosys, NRN Murthy, and Vishal Sikka - No One's Smelling of Roses


C

orporate sagas seem to come in twos. The mega-fracas that erupted in 2016 between Cyrus Mistry, then Chairman of Tata Sons, and the iconic Ratan Tata, Chairman Emeritus at Tata Sons,  was starting to come to a close by the second half of 2017 (though I fear the last words have yet to be written). Ratan Tata had annointed N Chandrasekaran, CEO of TCS, as thew Chairman of Tata Sons, and re-asserted his complete control over the sprawling Tata empire. Now comes the rather unexpected news that Vishal Sikka (@vsikka), CEO and MD of Indian IT behemoth Infosys, had tendered in his resignation, apparently unable to tolerate any longer the constant "drumbeat of distractions" from co-founder Mr. NRN Murthy, and, some speculated, a lack of support from some members of the Infosys Board itself.
In particular, this is what Vishal Sikka wrote in his letter to the Board:
"Over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks. Allegations that have been repeatedly proven false and baseless by multiple, independent investigations. But despite this, the attacks continue, and worse still, amplified by the very people from whom we all expected the most steadfast support in this great transformation." [link]
In this perhaps altogether avoidable saga, no one has come out smelling of roses - not the Infosys board, not Vishal Sikka, and not Mr Murthy.

A Retrospect for Vishal Sikka

image credit: pexels.com
Let me start off by revisiting what I had written in 2014 - "A 'Vishal' opportunity awaits Infosys" - at the time of Mr Sikka's appointment as CEO and MD of Infosys.To summarize, I had made the following points:

Was Sikka a "trophy CEO"? I had written, "There will be more than one voice heard whispering that Sikka's appointment is more of a publicity gimmick meant to save face for its iconic co-founder, Narayan Murthy, who has been unable to right the floundering ship of the software services giant." This is still a pertinent question. Once the excitement of the "trophy CEO" wore out, did Mr Murthy's interest in Vishal Sikka also wane? Conversely, once the excitement of the CEO's crown wore off for Mr Sikka, did the thorns of leading and growing a company, with close to two-hundred thousand employees, in a difficult business environment, start to prick?

Mr Murthy's return to Infosys had brought with it a controversy and questions of corporate governance as a result of his son Rohan Murthy's inclusion in the Chairman's office - "The presence of his son Rohan Murthy was seen to grate on several senior executives, and also did not go down too well with corporate governance experts." More on this later, because there is enough mud of poor corporate governance to be thrown at all parties here.

Products-vs-services. I wrote "...there is no company, with the arguable exception of IBM, that has achieved excellence in both services and products. Not Microsoft, not Oracle, not SAP." Infosys, under Vishal Sikka, had a decidedly uninspiring record in this area. Infosys, in early 2014, carved out EdgeVerve, a subsidiary, to focus on building "products and platforms." This continued with Vishal Sikka, and SAP veterans like Michael Reh, Anirban (Andy) Dey, Venkatesh Vaidyanathan, and others were brought in to. Even though EdgeVerve claimed to pay salaries on par with Google (and this link), it was however staffed at the middle-management layers mostly with veterans from the services side of its parent company, Infosys. The results were unsurprising - Michael Reh resigned in March 2016, Andy quit in July 2017, Venky in August 2017. EdgeVerve is rumoured to have cut its staff by as much as a fourth. Clearly, this was an area where Vishal Sikka was expected to make a substantial impact, but failed.

Vishal Sikka also had a tough time retaining talent. His record was decidedly mixed in this regard also. First, he hired as many as sixteen executives from SAP after joining Infosys. Several of them were hired at million-dollar salaries, prompting a similar raise for some of the senior executives at Infosys. Second, several Infosys veterans left, or were asked to leave, during Sikka's tenure. Eventually, several of Sikka's hires from SAP also quit, whether for personal, performance-related, or cultural-misfit reasons is not clearly known. Wherever Vishal Sikka lands next - and it is clear he is too talented, too bright a star to fade away into semi-retirement at some marquee VC firm in Silicon Valley - he will find it at least somewhat difficult to get the best and brightest to follow him.

The Board Games

[image credit: pexels]
The Infosys board will go, sooner or later. It has failed its shareholders - utterly and completely. It failed to retain its CEO. It failed to address the concerns of an angry co-founder. It failed to adequately address in time the cloud of corporate governance hanging over the company.

If the board believed in Sikka, if they had investigated the corporate governance issues (more on this later) and found everything to be above board, then why were they unable to predict or prevent Vishal's resignation? Clearly, the Infosys board was a house divided against itself, with some members rooting for Mr Murthy, and some for Vishal Sikka.

At the root of this corporate governance fracas is Infosys' decision to acquire Israeli startup, Panaya, in 2015, for $200 million (it paid $230 million, but Panaya had $30 million in cash; the net cost of the acquisition therefore was $200 million). Panaya is (or was) an Israeli start-up founded in 2010 as a cloud-based quality management service provider to enterprise applications. In the years leading to its acquisition, Panaya had "laid off more than 25% of the company. In 2016, Panaya shut down their Israeli-based sales development and moved them to Boston and the United Kingdom and replaced their CEO." [link] More pertinently, in 2013, Panaya's 4th funding round included an investment from HPV - Hasso Plattner Ventures. Hasso Plattner is a co-founder and currently Chairman of SAP. Hasso Plattner had been a friend and mentor to Vishal Sikka. This was most likely the reason for a whistleblower's letter in Feb 2017, which alleged that the deal was overpriced, that the then-CFO, Bansal, had walked out of the board meeting convened to vote on the acquisition, that there had been conflicts of interest since SAP owned a 7% stake in Panaya, and so on. The Infosys board got the allegations investigated by its internal Audit Committee as well as by Gibson Dunn and Control Risks and no issues were found. Yet the board did not make public this report.

Some basic questions remain unanswered. When Panaya emerged as a potential acquisition, the board should have asked Vishal Sikka to recuse himself from all further dealings on the matter. Neither the board nor Sikka did.

When Rajiv Bansal, then CFO of Infosys, allegedly walked out of the board meeting convened to vote on the Panaya acquisition, the board should immediately have convened a committee to look into the matter. It did not.

When co-founder Mr N.R.N. Murthy started to make allegations of corporate governance lapses at Infosys, the board should have engaged with him and put an end to the matter. It did not. The board allowed the matter to fester.

Even the letter the board released to the public after Vishal Sikka's resignation comes off as immature. It reads like a rant, a peevish outburst.

A substantial number of members of the Infosys board will go. They are on borrowed time. Who stays and who goes will be determined by who is the most astute politician.

How Do You Solve a Problem Like Mr. Murthy?

Having broken eggs, what is the omelette Mr Murthy has in mind
[image credit: Pexels.com]
Mr N.R.N. Murthy is a legend of the Indian software industry. He has been called one of India's most influentials, one of the 12-greatest entrepreneurs of our times, and a recipient of India's second-highest civilian honour, the Padma Vibhushan.

It was Mr Murthy who came out of retirement to head Infosys as its Chairman in 2013, and in an almost magical act lured Vishal Sikka to becomes Infosys' first non-founder CEO and MD, in 2014.

Mr Murthy's ire at Infosys has been directed mostly at the board, but also, indirectly, at Vishal Sikka also. It were partly his public criticisms that prompted the board to investigate the alleged lapses in the Panaya acquisition? What makes this saga curious is that, as per the Infosys board's letter, "Mr. Murthy was interviewed as part of the investigation by Gibson Dunn and Crutcher LLP in pursuance of the investigation in the Panaya acquisition, and was invited and welcomed to provide any information or evidence he believed would support the allegations being investigated. He did not provide any evidence since none exists."

Since corporate governance lapses are what have pained Mr Murthy, it would remiss to not remind people of two incidents where Mr Murthy's judgment in matters related to corporate governance seems to have erred.

First, Mr Murthy was an independent director at media house NDTV till Sep 2009. NDTV, as may be known to people, has been in the news on account of allegations of tax fraud. Most recently, in July 2017, the Income Tax Appellate Tribunal (ITAT) upheld the Income Tax department's finding that "NDTV used their own shell companies to round-trip investments of Rs 642 crore during 2009-10, making them liable for recovery of tax and penalty." [source] NDTV's founder, Prannoy Roy, and others, were charged by the Central Bureau of Investigation under the Prevention of Corruption Act as far back as 1998. It may be an inconvenient but certainly a pertinent question if Mr Murthy were to be asked what he did, or not do, as an independent director on the board of NDTV, around these allegations and issues of corporate governance.

Second, closer to home, when Mr Murthy came back to head Infosys a second time as Chairman, in June 2013, his son, Rohan Murthy joined his father in the newly-formed Chairman's office as Executive Assistant to the Chairman. At that point Mr Murthy had emphatically stated that his son would have no leadership role in the company. Less than three months later, Mr Rohan Murthy was designated Vice President, a title that few people usually earn, and that too after fifteen or more years in the industry.

Mr Murthy's concern over corporate governance seems to be somewhat newfound. It seems conveniently expedient.

A question that does need to be asked is this - has Mr Narayan Murthy become the obsessive mother-in-law that cannot bring herself to step back? After all, Mr Murthy's once described Infosys as his "middle child". Taking that analogy one step further, Vishal Sikka was like the bride he brought home for his child. Like the stereotypical "saas" (mother-in-law) in Indian movies, Mr Murthy however could not step back and allow the "child" and "bride" to find their own way.

Mr Murthy has a legion of admirers in the industry. This battle is far from over. In this battle between Mr Murthy and Infosys - its board and ex-CEO - it is only the Infosys brand that will suffer. It would be a tragedy if Mr Murthy lets his legacy end on this sour note.

This post first appeared in LinkedIn on Aug 22, 2017.


© 2017, Abhinav Agarwal. All rights reserved.

Friday, August 04, 2017

Six Plus One Types of Interviewers


R
emember Chuck Noland? The character in the movie Castaway, who has to use the blade of an ice-skate to extract his abscessed tooth, without anesthesia? The scene is painful to watch, yet you can't look away.

Interviews have this habit of turning up a Chuck Noland - in the interviewee or the interviewer. You willingly agree to subject yourself to the wanton abuse by random strangers who you may have to end up working for or with. Apart from the talented few whom companies are more eager to hire than they are to get hired, most are in less enviable positions.

What about interviewers? Not all are cut from the same cloth. But there are at least six types that I think we have all met in our lives, and a seventh one.

1. The Interview As an End In Itself - Hyper-excited newbie

You know this guy. You have been this person, most likely. You have a team now. You expect your team to grow. You have to build a team. You believe that you, and you alone, know what it takes to hire the absolutely best person for the opening you have.
You sit down and explain to the harried hiring HR person what the role is, what qualifications you are looking for, why the job is special, why just ordinary programming skills in ordinary programming languages will simply not cut it, why you as the hiring manager are special, and how you will, with the new hire, change the product, the company, and eventually the whole wide world. The HR executive therefore needs to spend every waking minute of her time in the pursuance of this nobler than noble objective. You badger your hiring rep incessantly, by phone, by IM, by email, in person, several times a day, asking for better resumes if you are getting many, and more if you aren't getting enough.
You read every single resume you get, several times over. You redline the points you don't like. You redline the points you like. You make notes on the resumes. You still talk to every single candidate. You continue interviewing, never selecting, till the economic climate changes and the vacancy is no longer available.
Yes, we all know this person.

2. Knows what he is looking for and knows when he finds it

This person is a somewhat rare commodity. This person does not suffer from buyer's remorse, knows that there is no such thing as a perfect candidate, and that the best he can hope to get is a person who comes off as reasonably intelligent, hard-working, ethical, and is going to be a team player.

This person will however also suffer from blind spots. Specifically, two kinds of blindspots. The first is that he will look for and evaluate a person only on those criteria that he can assess best. The second is that he is more likely to hire candidates that are similar to other successful employees in his team, and will probably become less likely to take chances on a different type of a candidate. On the other hand, this manager also knows that conceptual skills are more important to test than specific knowledge of some arcane syntax in a geeky programming language - if you are talking of the world of software for instance.
This person is a rare commodity.

3. Hire for Empire

Like our previous type of hiring manager, this hiring manager is also very clear-headed.  But, here the interviewer is hiring to add headcount to his team. Grow the empire. More people equates to more perceived power. This person understands three things, and understands them perfectly.
First, that if he is slow in hiring, then a hiring freeze may come in, and the headcount may no longer stay open.
Second, he (or she) is also unable and equally unwilling to evaluate a candidate, so just about anyone will do.
Third, and most importantly, this manager knows that every additional person reporting to him on the organization chart elevates him in importance vis-a-vis his peers, and therefore hiring is a goal noble enough to be pursued in its own right.
It's a win-win situation for everyone - except the customers, the company, and the team.

4. I have other work to do. What am I doing here? What is he doing here?

This person has little skin in the game. He has no dog in the fight. Pick your metaphor. He is there to take the interview because of someone's absence, or because in the charade of the interview "process" that exists at many companies, there exists a need to do this interview. The interviewer agrees because it is a tax that needs to be paid. You don't want to be labeled a non-team-player. Who knows when this Scarlet Letter may come to haunt you. So our interviewer sets aside half an hour or more, preferably less, of his time, and comes back wondering where thirty minutes of his life just went. That question remains unanswered.

5. Know-it-all and desperate to show it

This person perceived himself as an overachiever. This is the sort of person who will tell you with casual nonchalance that he had predicted the rise of Google in 1999  - just so you can get to know that he had heard of Google in 1999. This person knows he knows everything that there is to know, that it is his beholden duty to make you know it too, and it is your beholden duty to acknowledge this crushing sacerdotal burden he carries. This is the person who will begin the interview with a smirk, sustain a a wry smile, transform into a frown, and end with an exaggerated sense of self-importance.
Do not get fooled.
This person is as desperate, if not more, to interview you as you are to do well on the interview. He will in all likelihood end up talking more than the interviewee.
In every group in every department of every company there exists at least one such person. The successful companies have no more than one.

6. The rubber-stamp

The boss has decided the person who needs to be hired. The charade needs to be completed. The requisite number of people have to interview the candidate so that HR can dot the "I"s and cross the "T"s. Our interviewer here has to speak with this person. With an air of deference. He will ask all the right questions, but the answers do not matter. You sign off with a heartfelt, "Great talking to you. Thanks a ton for your time. Take care, and we really look forward to working with/for you." No, don't belittle this rubber-stamp. He could be you.

These are not mutually exclusive sets. There are overlaps that exist, sometimes in combinations that would warm Stephen King's heart.

Oh, what about the seventh type of interviewer? He is the Interviewer as Saboteur.  I will talk about him in a separate post.

This post appeared on LinkedIn on July 31st, 2017.
This is an edited version of a post I wrote on April 23rd, 2013.

© 2017, Abhinav Agarwal. All rights reserved.