LEADERSHIP: Difficult Times, Difficult Decisions

By M H Ahssan

Boom and bust are part of the business cycle. But it is the leader who can make all the difference — between success and failure.

Last year around this time, the only things corporate leaders in India and abroad had to worry about had to do with rapid growth or with the growth opportunities. In some cases, figuring out how to meet the ever-rising demand for their products or services was the big issue. In others, what to do with the extra cash sloshing around in the balance sheet was the problem.

It was the same across sectors as the good times continued unabated. Metal and mineral companies were trying to figure out how to move the stuff out of the ground fast enough to meet the insatiable appetites of their customers. Software services companies were trying their level best to hire tens of thousands of people and train them up to meet the ever increasing business coming their way. Hotels had to turn away guests because they were overbooked. Real estate companies couldn’t put up houses fast enough to satisfy buyers.

Chief financial officers (CFOs) were inundated with bankers trying to lend them money. HR managers spent all their days and nights worrying about how to increase salaries and offer more goodies to attract new talent. Retailers were trying to set up shops as quickly as possible to meet the demands of the middle-class consumers. It was boom time in the mergers and acquisitions space too. it was boom time in almost every sector.

And then came September 2008. the Lehman Brothers bankruptcy suddenly turned the world of finance and business upside down. Liquidity dried up completely. The crisis that started in the US quickly spread to all parts of the world. Demand in everything from apparel to metals and minerals plunged across the globe. Dozens of banks, even the biggest of them, looked to go bankrupt. Borrowers started defaulting on loans. Customers stopped buying. And if they bought anything, they demanded price cuts to do so. Suddenly, instead of hiring more people, HR managers had to figure out how to shed people with minimum pain. And finance managers suddenly had to worry about dwindling cash flows and high cost of funds — something that had not been a problem for many, many years.

In other words, the rules of the game changed completely. And so did the issues that corporate leaders needed to address.

In current leadership research, a lot of store is set by the contingency or situational leadership models. While this is not one single theory but different variations of the same theme, the essential premise of this leadership model is that the situation defines the leadership that is required. A leader is successful only if he or she can change behaviour and style in accordance with the needs of the situation. Quite often, a leader who is superbly successful in one situation completely fails when the situation undergoes a radical change.

Even the people who do not agree with this model of leadership agree on one point. Crises require a very different sort of leadership than normal times. And the current economic crisis is testing the leadership skills to the maximum. Sure, in pure macro-economic terms, India has not been affected as badly as the rest of the world. Sure, the political leaders are still talking of 6 per cent plus growth rates — which is way above the Hindu rate of growth the country experienced for decades. But in corporate India, the real pain is being felt. The fact is that practically every big business in the country is intricately linked with the global economy either through customers, partners, bankers or suppliers. And when the global economy melted, Indian businesses too felt the heat of the meltdown.

It is not as if corporate leaders in India and around the world have not faced any crisis before this one. Indeed, there have been several recessions in the past. There have been busts that have followed booms in the past too. What is different this time is the scale and magnitude of the problem. This is testing leadership skills to the maximum.

HNN decided to talk to 10 corporate leaders on how they are managing specific problems being faced by their companies because of the current crisis. We talked to Kumar Mangalam Birla, chairman of Aditya Birla Group, on how he is riding the commodity downturn. We asked Kishore Biyani, founder and CEO of Future Group, about retaining customers in the retail sector in a slowdown. We discussed the issue of managing expectations in a downturn with S. ‘Kris’ Gopalakrishnan, managing director and CEo of Infosys Technologies. We talked about managing acquisition with Vineet Nayar, CEO of HCL Technologies, and about managing a transition with Chanda Kochhar, managing director and CEO-designate of ICICI Bank. Adi Godrej, chairman of Godrej Industries, shared his insights on corporate governance, while Pramod Bhasin, president and CEo of Genpact, discussed people management. And we had conversations with D. Shivakumar, managing director-markets of Nokia, Peter Kronschnabl, president of BMW-India, and Shinzo Nakanishi, managing director of Maruti Suzuki on the different issues that require dealing in the present situation.