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Leadership: Vinit Nayer and Employees First, Customers Second

The future of organisations really is with the employees, which does call into question again those huge salaries paid to CEOs. Amongst other things.

Recently, the attention of people interested in business has shifted to India and to China. On the BBC radio program (available on line and, if you hurry, downloadable to your mp3) ‘Peter Day’s World of Business‘ two programs addressed the question ‘Are CEO’s up to the job?’. (The answer by and large was no!).

In the second program (26 October 2010), Peter Day interviewed two remarkable people. The second was Suhas Gobinath, entrepreneur, founder, CEO and Chairman of Globals, Inc a multinational IT company, now 21 years old. When he founded the company, at age 14, he was the world’s youngest CEO. He is recipient of numerous awards including in 2007 a “Young Achiever Award” from the European Parliament and the International Association for Human Values: he was invited to address the Parliament and businessmen assembled there. He was announced as a “Young Global Leader” for 2008-2009 by the World Economic Forum in Davos. In that position he would be involved in development programs across the world.

Two tweets from Gopinath: “I have not failed. I’ve just found 10,000 ways that won’t work. – Thomas Edison”

“my friend Vinit was quoting today “Success introduces you to the world. Failure introduces the world to you!” – awesome”.

In part two of the series, Peter Day first conducted a longer interview with Vineet Nayar, CEO of HCL Technologies, a computer services outsourcing company which he took over in 2005, 20 years after he joined the company. (HCL achieved growth of 17% in year 1 of the recession and 24% in year 2.) Nayer is the author of a book, Employees First, Customers Second. An extract and a review are available on the web. (Peter Day’s interview is much more informative I think.)

Peter Day queried the contrarian viewpoint expressed in the title of the book noting that the accepted wisdom was surely that customers come first.

Nayer responded that the rationale was the response to the following questions.

What is the main purpose of the business? To create value for the customer which is competitive.

Where is that value created? At the interface of the customer and the employees.

Who creates the value? The employees.

It follows that the business of the manager is to enthuse, enable, encourage the employees to create value so the business will grow.

Therefore employees come first and only then will customers come first.

Nayer talked of learning form mistakes, by using the collective wisdom of the organisation which resides in the employees.

Day pressed Nayer about the seeming uniformity of the employees in this perception.

Nayer responded by saying that there were three groups of employees: a few “transformers” who were enthusiastic about adopting change, a large group of “fence sitters” who were largely uncommitted, who would laugh at failures but jump over the fence if there was success. The third group were “lost souls”, people wjho believed they were entitled to the benefits but were not necessarily prepared to work hard to achieve the benefits; these are people who take energy out of the system. They should be ignored: the transformers will gradually recruit the fence sitters and in the long run those two groups will carry the organisation including the lost souls, forward.

Asked about achieving this, Nayer responded emphasising the importance of giving attention to meeting people – employees – on social media such as Facebook and physically, listening to them. And he made three points:

1, Understanding that as CEO he knew less than the employees, indeed he had no answers;

2, Transparently sharing that and all other relevant information;

3, Putting employees first: emphasising that change is in the hands of the employees, transferring ownership back to the employees by inverting the pyramid of the organisation, making managers as accountable to their employees as employees are to them. Doing this, not as a PR exercise, but showing a willingness to act.

In the company the 360degree appraisals of all 3,500 senior staff are posted on the company’s website. The question is asked, “have I as a manager added value to what you do?” The comments forming these appraisals are anonymous. They are a development imitative, not a judgement. This emphasises commitment to transparency.

Nayer also emphasised that time has to be made available by the board for new experiments. One can only gain by being different and one can only be different by experimenting.

Nayer closed by mentioning that more than 50% of the population was under 25 years old and that this is the group from which organisations will be recruiting. These “GenY” people believe in collaboration, in working with others. It is unreasonable to tell them when they join that 5% of them wold be promoted, 10% will be sacked and the rest will have to scrabble around “fighting to get into the corner office”. They aren’t used to that environment.

Is it reasonable to assume that these people have to suffer the traditional structure and style? Or should organisations seek to change, to adapt to the preferences of the new employees? If we don’t then organisations will not get the best employees and will not solve the problems of the world, let alone the organisation.

In the excerpt from his book, Nayer says, “I believed that one of the ways we could release this talent was to make our culture participative. To get our people to participate more, we had to create a culture of trust and to do that we needed much more transparency. There are five main ways in which transparency builds trust.

“First, transparency ensures that every stakeholder knows the company’s vision and understands exactly how his or her contribution assists the organization in achieving its goals. Working in an environment without transparency is like trying to solve a jigsaw puzzle without knowing what the finished picture is supposed to look like.

“Second, transparency helps to ensure that every stakeholder has a deep, personal commitment to the aims of the organization.

“Third, for the Gen Y members of our workforce transparency is a given. They post their life stories in public domains; they expect nothing less in their workplaces.

“Fourth, in a knowledge economy, we want customers to be transparent with us, to share their ideas, their visions for the future, and their strategies for solving core problems. Without such transparency, how can we create the technology solutions that will accelerate their growth and strengthen their businesses?”

He continues: “Getting started, I knew that we must not deal in half measures. We had to do more than crack open a small window of transparency. We had to throw it wide open-do things we had never done before and attempt things that other companies had not tried.

“Looking back, the solutions we came up with seem quite obvious. But at the time, I had no easy answers. I appealed to our bright sparks for ideas and asked my managers to reach out and listen, as well. We got a lot of responses. Many of the ideas, although provocative, were too far out, too difficult to implement. One idea, however, made a great deal of sense.

“The idea was to open the window of financial information.

“At the time, our people had access to the financial information that pertained to their own projects, but they had no way of knowing how their business unit and the whole organization were doing. Nor could they compare the performance of their team to that of others in the company. What if we allowed everybody to see all the business units’ and the company’s financial data? Wouldn’t that be an important step toward greater transparency? Wouldn’t it help build a culture of trust-showing that we had nothing to hide and were willing to share both the good and the bad?”

There are lessons here which reinforce many other lessons. But many of these lessons are ignored, most especially in organisations in thrall to the managerialism which many business schools have been teaching. These are points I have made before.

The unfortunate point is that many senior people and others just don’t read: there is a great deal of intellectual laziness around. Standing on the sidelines complaining whilst executives committed to views of the world which bear little or no relationship to the reality discovered by social research and prepared to adopt neoclassical economic solutions to financial problems isn’t going to get anyone very far.

For most museums associated with government it is absolutely appropriate to tell the people from the departments of Treasury and Finance that they are wrong: they should go away and return only when they have solutions grounded in what we can reasonably conclude we know, not some set of myths.

Barry Jones (former Minister for Science and many other things and the only person to be elected to all three Academies) tells the story of his chairmanship of the Schools Innovation Commission in the 1990′s:

“I asked one of the highest ranking bureaucrats in the Department: ˜In the Department who will be interested in ideas after the Commission ends?’ The response was immediate, and brutal, delivered, literally, head to head: ˜Wrong question! We’re not into ideas around here. We’re into Program Delivery’”

Barry Jones,”The Thinking Reed”, p 468