Building trust is a process...

In this last column of 2019, I explore the reality that public scrutiny is tough but valuable. A CEO in a listed company bears this as an additional responsibility compared to an unlisted company CEO. Start-ups are relearning an eternal wisdom — that revenue minus costs must generate a cash flow within some reasonable time. After the WeWork IPO fiasco in early October, investors woke up. It beats me why it took so much time and torture to implement expensive alternatives to be able to build an entrepreneurial business. I reckon wisdom arrives after trying all alternatives!


On October 7, one media columnist rhetorically wrote about Indian start-ups: “...These start-ups, with boards that are useless, cut corners to rise to the top and bomb at the public market litmus test.. Are we looking at a world better off without Softbank and the unicorns?” On the same date, another columnist wrote: “Many Indian unicorns have pursued a growth-at-all cost strategy... and are nowhere near attaining profitability... many of these unicorns are not exitable.” On November 10, the Business Standard, in an editorial commented: “...It is important for the survival of the ecosystem that more and more start-ups become profitable... it will make the start-up ecosystem a real driver of economic growth.” After the WeWork debacle, pundits even wondered whether Masayoshi Son is losing his magic touch. 


Truth be told, Masa is not the point; abdication of common sense is the point. Pakistani poet, Maulana Tariq Jameel, wisely wrote, “Tu idhar udhar ki baat na kar/Yeh bata ki qafila kyun luta/Mujhe rehzanon se gila nahin/Teri rehbari ka sawal hai”. (Loosely translated, it goes, "Don’t try to obfuscate/Tell me why the caravan was looted/I do not hold a grudge against the robber/But it is a question of your your guardianship”.) 


An HBR article (Building a start-up that will last, July 8, 2019, Hemant Taneja and Ken Chenault) recognised four foundational values for start-ups to build sustainable companies: (i) articulate a value framework based on societal impact; (ii) demonstrate the ability to execute repeatedly; (iii) move beyond founder-driven decisions to scalable leadership; and (iv) design the company for endurance. If we could imagine a panel discussion on how to create a sustainable business among Jamsetji Tata, Ghanshyamdas Birla, Jamnalal Bajaj, Andrew Carnegie and William Hesketh Lever, would they not say the same things?


IPO-worthiness is a litmus test for any company. The most successful Indian start-up during this millennium is Tata Consultancy Services. In 2004, its IPO valued TCS at an enterprise valuation of about $2 billion. Looking to the company’s present valuation of about $110 billion, it must represent the very best. The then CEO, S. Ramadorai, recounts in his book, The TCS Story, how complex and difficult it was to design TCS to be IPO-worthy: “At that time TCS was still an unsung story... faced the challenge of how to overcome perceptions compared to competitors... we faced the task of revealing the real TCS to the world... later it appeared that a beautiful girl had unveiled herself... we were proud that Infosys was considered a benchmark in governance and transparency”.


The greatest of business wisdom is encapsulated in this example — an inherent humility, admiration for a competitor, facing up to the reality of the public market, recognising that execution is the key and, finally, redesigning the entire organisation to be responsive and transparent. India and the world need listed companies with public accountability. It is true that some listed companies fail the tests of disclosure and governance, but that is all the more reason for governance and transparency.


The toughness of transparency and scrutiny applies also in public governance because perception determines credibility and trust. Recently, Indian leaders appealed to the people to trust them about the Citizenship (Amendment) Bill (CAB). Many citizens are confounded and bewildered by the backstory of the events. Every event had a logic, perhaps even a sensible one, but consider that past events have serially caused disturbance or despair, one after the other. That is what the public recalls.


On the political front — lynchings, Ayodhya, Kashmir and now the CAB. On the economic front — hazy outcomes of demonetisation, the continuous amendments to GST (over 100 in the last two years), shifting rules in IBC... Even the announcements on electric vehicles and the implementation of FASTag have caused confusion and anguish. 


Without doubt such complex tasks take time, but then, credibility and trust also takes time: It emanates from within people, not by external blandishments.


A very happy 2020 to readers.



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