Thursday, February 21, 2013



“I would describe myself as stubborn. As an entrepreneur and as a leader, I have always believed in starting small business enterprise, creating a strong foothold and growing gradually to meet the evolving needs of the people living in rural areas. Frankly, I do not believe in starting big business enterprises and reach a stage where I am not able to manage even one efficiently the way I want to.” – Muhammad Yunus, January 12, 2013, in an interview with my office

Prof. Muhammad Yunus, whose brainchild Grameen Bank won the Nobel Peace Prize
in 2006 for its attempt to uplift the poor economically and socially, through his idea
of microcredit and microfi nance
It was fifteen years ago when I met Muhammad Yunus for the first time in New Delhi. We had decided to have lunch together with a few of my colleagues after an education seminar in the morning. During our conversation, the blue kurta pajama-clad gentleman didn’t come across to me as a madefor- profit-making businessman. He was just another nice individual, pleasant to talk to. Yet, he wasn’t conservative either in his approach. Everything he spoke to me to explain his entrepreneurial work and motive of travel kept resonating with two words – poverty and unemployment. Clearly, at that time, I had quite a shallow understanding of what Yunus’ model for mitigating poverty and unemployment could do globally. And then again, Yunus wasn’t a celebrity star people, or I, would wish to know deeply about.

The world during those times centred around Fioravanti adorning alphamale CEOs, hyperactive about profits, cash flows and growth. Why would this commonly dressed man chatting with me matter anyway? And why would anyone wish to discuss poverty and unemployment over a nice, sunny lunch? Yet, there clearly were signs even then... signs which I should have seen, but missed.

Then, his fifteen year-old Grameen Bank-tagged microcredit facility had spread to 21 nations including India, China and others across Asia and Africa. The Grameen Bank he had founded employed 12,628 people. It had disbursed loans amounting to $2.22 billion to 2.3 million borrowers. And the number of branches had already crossed the 1,100 mark. But, the world still didn’t know him well. I didn’t know him... actually, not well enough.

Much had changed when we connected again ten years later in the fall of 2008 for a formal interview I wished to take of him. By then, Prof. Muhammad Yunus had become a Nobel laureate, and replicas of the Grameen Bank model had started operating in more than 100 countries. His Grameen Bank had grown into a time-tested model, with 2,500 branches spread around the world (including US, where the first Grameen Bank branch opened in New York), having disbursed loans amounting to $7.6 billion to 7.7 million individuals! And to talk of his limitless vision as a social entrepreneur, by 2008, his brainchild had grown from being a tool for those in need of personal financial credit to a not-for-profit family of enterprises that included entities like Grameen Trust, Grameen Fund, Grameen Communications, Grameen Energy (Shakti), Grameen Education (Shikkha), Grameen Telecom, Grameen Knitwear and Grameen Cybernet. Not hard to imagine, if the forprofit business tycoon Li Ka-shing Li had found a match in Asia, it was Muhammad Yunus. What the Hutchison Whampoa Group was to Hong Kong, the Grameen Group had become to Bangladesh. [To quote two examples: Grameen Cybernet is Bangladesh’s largest Internet Service Provider (ISP) and Grameen Telecom has over 100 million subscribers across 68,000 villages in Bangladesh therefore reaching out to over 66% of the country’s population!]

But by January 2013, when he again gave an interview to my office, he was no longer the operational head of Grameen Bank. He had been forced to resign as the CEO by the government of Bangladesh in March 2011, which did not even grant him the position of a non-executive Chairman (as Yunus had requested). He however continues to carry on work as a social entrepreneur, and is an active participant in Grameen ventures around the world.

The legal battle that led to the ousting of Yunus isn’t important. Knowing why eleven years back, at the age of 60, when Yunus had volunteered to resign as CEO of Grameen Bank, the government asked him to stay on isn’t too. What is important is what makes Yunus a cult entrepreneur, which he will always be. He may not be a common name in the corporate rumour mill. He does not command a strong identity amongst stock traders. And he may not have raked in millions of dollars as most entrepreneurs deservedly have over the decades. But you could take his name in the same breath as of those successful entrepreneurs who have changed the lives of millions of underprivileged individuals. And it all began on a humid summer morning of 1976...

After receiving his PhD in Economics from Vanderbilt University in 1969, Yunus started teaching at the Middle Tennessee State University. In 1972, when Bangladesh was declared an independent state, Yunus decided it was time to fly 10,000 miles eastwards and rebuild what was a nation torn by revolution and starving for education. Within months of his homecoming, he found himself heading the faculty of economics at Chittagong University. The struggle that led to his becoming a social entrepreneur is well documented in his book Banker to the Poor. In 1974, during a time when he was teaching advanced lessons in economics, he found that his paper theories had not a single solution to alleviate the pain and sufferings gifted to thousands by the famine that struck Bangladesh. Economics gave him no answer to why thousands starved to death. He tried to ignore the emaciated people who moved about on the streets of Dhaka, but the more he did, the more their numbers grew. And the famine worsened, making him feel all the more hopeless about what he taught within the four walls of the university!

“Old people looked like children, and children looked like old people. Nothing in the economic theories I taught reflected the life around me. How could I go on telling my students make believe stories in the name of economics? I needed to run away from these theories and from my textbooks and discover the real-life economics of a poor person’s existence,” he writes in his book. Mismatch between economics and poverty grew over time, and in 1976, it called for the first move from Yunus that kindled the fire of social entrepreneurship in Bangladesh. Call it divine intervention or whatever, but that famine actually brought good news for 40 million people (the count of Grameen’s microcredit borrowers today) at the cost of a few thousand lives. It gave birth to the Muhammad Yunus I write about.

In the summer of 1976, Yunus started visiting villages near the university to understand more about poverty, and how he could actually use economics to help the underprivileged. During one of his visits, he came by Sufia Khatun (who shared her name with Yunus’ deceased mother), a poor widow who had two little daughters. She sold baskets that she weaved during the day. To buy raw materials for the bamboo baskets, she had to borrow money at interest rates that were as high as 45% a month! And what was her daily average earnings after selling all her produce? 5 taka, equal to 2 cents ($0.02). Yunus lent her $4, enough for her to pay back the moneylenders and buy some material for a day’s produce. Her daily earnings immediately rose to $2, and her manufacturing business became selfsustainable. Yunus identified 41 other such villagers in Jobra and lent them $27. All of their earnings increased many times over. Even better – all borrowers returned the sums they owed to Yunus. This surprised the man. It encouraged him too. He continued lending more money to other needy villagers – mostly women – and yet, after months of having begun the practice, got back every penny that he had lent out to the poor. Confident of his pilot tests, Yunus appealed to the local banks to make similar loans to the poor. The suggestion was rejected time and again, because for those bank managers – whose jaws would drop each time Yunus advocated his social plan – those with no collateral were not in their list of creditworthy customers. Finally, a branch manager of Janata Bank lent Yunus to be distributed to the poor on personal guarantee.

Yunus’ story is about a Bangladeshi boy, educated in a village primary school,
but one who earned respect and fame for being an entrepreneur
who has saved millions of underprivileged lives
The loans were distributed and the poor maintained their zero default record. Yunus went back to the banks with the proof, and they put forward a challenge before him. They claimed that his zero bad loan record in Jabra village was due to the fact that he was a lecturer at the nearby Chittagong University and therefore was influential. They asked him to show them that his model of microcredit would work in the Tangali district (north of Dhaka) where he was a stranger. He replicated his Grameen Project in Tangali, worked in that district for a couple of years and returned to the bankers with success on record. The bankers were not moved. So wasn’t Yunus. He next threw up a very difficult challenge for himself to take one last shot at his effort to help the poor and convince the banks. He asked them to choose five different districts. He started the Grameen Project in all five areas with great success. The banks still had their excuses. While on the verge of giving up, an idea struck him. He decided to start his own bank!

He approached the Central Bank of Bangladesh in 1982, and within a year, received the permission to launch the Grameen Bank. He was allowed to serve in rural areas, distributing loans and collecting savings in areas outside Dhaka. But that was only the beginning of new challenges for this social entrepreneur. Setting up of new Grameen Bank centres, procuring hardware and developing training centres, deciding on borrower groups, procuring capital for faster growth from agencies like the International Fund for Agricultural Development (IFAD), the Norwegian Agency for Development Cooperation (NORAD), the Canadian International Development Agency (CIDA) and others, keeping a check on repayment rates (that has remained at around 97% at Grameen Bank, as per a Stanford Graduate School of Business paper), handling pressures from political groups, averting negative impacts of unionisation within the bank, creating a cushion to cater to the unseen troubles that borrowers might face (that ultimately led to formation of the Grameen Disaster Relief Program), were some of the unique challenges Yunus faced. But what made him successful was his strategy of being shockingly transparent about his operations, effective handling of conflicts within the organisation, and most critically, of doing things different as compared to the large banks, despite popular disbelief and many-a-failure in the initial stages of his entrepreneurial career. Talking about failures during his attempt to kickstart the Grameen Project, Yunus says, “Every entrepreneur learns lessons from his failures and I am no different. When my company faced difficult situations in terms of project failures, I worked and reworked on the plans. I began with small goals, small projects and small business in the beginning. The moment you start thinking about setting up big enterprises at the very start, you lose focus of your core audience and ability to serve the society.”

Be it his idea of setting up moneychasing entities or the Five Star targets given to each center or even his belief in the community of women being better borrowers (consider how challenging it would have been to give out loans to women in a Muslim country – it took him six years to reach the 50-50 gender mark), each served the entrepreneur well. From setting up the first centre (set up at Jabra village) to over 2600 today, from lending out the first taka to over 684.13 billion taka ($11.35 billion; source: Grameen Bank) as of December 31, 2012, Yunus has come through as a true champion of social causes.

Today, the Grameen group of enterprises has nine businesses – all of which are not-for-profit, and whose working models are replicated across 100 nations. So trusted has his model of social entrepreneurship become that he has succeeded to attract even private capital to fund his social dreams. For instance, GrameenPhone (which is a for-profit business) that works together with the not-for-profit Grameen Telecom is 51% owned by Norway’s Telenor. The two entities today provide low-priced airtime and solar-powered handsets to villagers in Bangladesh.

Out as the operational head of Grameen Bank’s lending and savings business, Yunus is still in there, enjoying his fourth decade as a social entrepreneur. And there are many new projects in the pipeline that will only add to the Grameen conglomerate. The Grameen-Danone Food Company is a new 50-50 partnership with France’s Group Danone that sells low-priced baby food, fortified butter and fresh yoghurt in rural areas across Bangladesh. He is working on several new joint ventures around the world.

In Columbia, work is on to initiate a business enterprise that can supply red pepper in rural areas (and export to US) at low prices while providing for employment to rural dwellers (who have lost their jobs after the collapse of the coffee bean production industry). He wants to make Columbia an export hub for red peppers. In Haiti, work is on to put in place two poultry farms, a bakery and a plantation of jatropha plants that can be utilised for bio-diesel, and in the process provide livelihood to 200 farmers. For this purpose, funds are being mobilised by the Germany-based Yunus Social Business Fund (formerly the Grameen Creative Lab), that opened an office in Haiti after the 2010 earthquake. In another effort, a tie-up of Grameen Krishi Foundation and Yukiguni Maitake of Japan is being worked on to establish a new social business in the field of agriculture, that would produce and supply high quality moong beans in Bangladesh. The beans would be means for both domestic consumption (30- 40% of the produce) and exports to Japan (60-70%). There is another upcoming healthcare project on his list (for which he is still on the lookout for a partner) that includes setting up of lowcost eye care units and rural hospitals with video-conferencing facilities in rural areas around Dhaka. India too is on his map. “For the Indian market, I intend to start a JV with an Indian multinational company to supply sanitary napkins in bulk for Indian village women in the very near future. Besides, I also plan to start a JV with a waste water management company in India to provide clean drinking water and water for farming to villages across the country,” shares Yunus.

Yunus has won many an award from nations around the world – from Estonia to USA, from Sri Lanka to Jordan, from Sweden to Japan and many more. But the proudest moment for Yunus would have come during the winter of 2006. His Grameen Bank was awarded the Nobel Peace Prize in December that year. Taslima Begum, a housewifeturned- entrepreneur from Bangladesh, who had taken a $15 loan from Grameen Bank to buy a goat in 1992 and is today on the Board of Directors of the bank received the award on Yunus’ behalf and said, “My parents gave me birth, but Grameen Bank gave me a life.” This statement holds true for the millions of souls around the world who have been saved by the cult entrepreneur Yunus, and millions more who would be saved going forward.

People credit Yunus for being the father of microfinance. Actually he deserves more credit for being the father of ‘impossible economics’ – one who proved how demand is possible with zero propensity to consume! [Isn’t that the reason why traditional banking outfits refused to fund Yunus’ plan – because the poor had no money or collateral as guarantee for the loans?]

I leave you with a thought from the man who has defined what social entrepreneurship is, and according to me is a true cult entrepreneur. “An entrepreneur should have an urge inside him and a firm belief in terms of taking his business enterprise forward with positive thoughts and imagination. He should possess the quality of being a fighter till the end, no matter how many difficulties he may have to face in the path of achieving his set business targets for the benefit of the society. If an entrepreneur does not give up, and with goodwill continues to work endlessly and tackle difficult situations with maturity and peace of mind, then that entrepreneur will surely achieve his long-term objectives.” May the world see many more kurta clad entrepreneurs for whom poverty and unemployment, rather than profits and turnovers, are the key issues to address. As for me, I’ll wait for our next lunch together Mr. Yuns...

Where the road to social entrepreneurship started for a village boy named Muhammad Yunus

June 1940: Birth of Muhammad Yunus in the village of Bathua in Hathazari, Chittagong (the business centre of what was then East Pakistan). He was the third eldest of 14 children, five of whom died in infancy;

1940-1947: Childhood years spent in the village of Bathua. Since childhood, his mother influenced him greatly. Her name was Sufia Khatun and she would help the poor and needy on a daily basis;

July 1947: Yunus moved to the city of Chittagong with his father Hazi Dula Mia Shoudagar, who being a wealthy goldsmith in the village started a jewellery business in the city. Yunus joined the Lamabazar Primary School;

1955: Yunus passed the matriculation examination from Chittagong Collegiate School and secured the 16th rank amongst 39,000 students in East Pakistan. He was a Boy Scout during school and travelled to West Pakistan, India and Canada;

1961: Yunus completed his M.A. in Economics from Dhaka University. He joined the Bureau of Economics as a research assistant to Professor Islam and Sobhan. He also started delivering lectures in Economics at Chittagong College;

1965: He went to study economics [(a course called graduate program in Economic Development (GPED)] at Vanderbilt University in USA on a Fulbright scholarship;

1969: Yunus received his PhD in Economics from Vanderbilt University. He joined the Middle Tennessee State University (in Murfreesboro, Tennessee) as an Assistant Professor of Economics;

1972: He returned to Bangladesh and joined the government’s Planning Commission headed by Nurul Islam. Finding the job nonexciting, he joined the Chittagong University as the head of the economics department;

1974: After the famine that struck Bangladesh, he became involved with poverty reduction. He started a rural economic program as a research project without government aid;

1976: While on a field trip to the village of Jobra near Chittagong University, Yunus met a poor woman who made bamboo baskets. The woman told him that she had to borrow the equivalent of up to 25 cents to buy raw material for each basket. And after repaying high interests of about 45% a month to moneylenders, she was left with no profit. Yunus decided to give a “loan” of $27 to 42 such poor women. That marked the birth of “microcredit” and a revolution called Muhammad Yunus in the world of social entrepreneurship;

1983: Muhammad Yunus started Grameen Bank, the first microfinance bank in the world.


Tuesday, January 15, 2013


This article was featured as a part of the Tuck-IIPM-B&E Joint Study cover story on 'The Worst CEOs of 2012' that appeared in the January 2013 issue of Business & Economy magazine

The only thing that can perhaps be worse than hiring the wrong employee is hiring the wrong leader. In this incisive analysis, PROF. ARINDAM CHAUDHURI, HONORARY DIRECTOR, IIPM THINK TANK and PROF. A. SANDEEP, GROUP EDITORIAL DIRECTOR, PLANMAN MEDIA, identify 10 CEO traits that are an agglomeration of bad news for the companies that they lead.

It’s the position that makes the most bucks. But then, it is also the position where the buck stops rolling. The CEO is answerable to every stakeholder imaginable for the success or failure of any operation/division; be it marketing, HR, operations or finance. He takes decisions, sets the direction and sets the organisation up to execute on his strategy; and can be the critical difference between a company that ups the ante and one that falls of the cliff.

The traits that define a good CEO have been the subject of scrutiny and debate over several years, but it remains largely unresolved. That’s certainly bad news for corporate boards, who would want to go to any extent to ensure that they have the right man. Based on exhaustive research and industry interface over the years, we present an expansive primer of 10 typical traits of unsuccessful CEOs, which should act as red flags for any company.

To be true, multi-tasking is a way of life today, but one really wonders if it is the trait that should be associated with CEOs. If you look at expert analysis, CEOs looking to specialise in one area, with the belief that it leads to better efficiency and performance, need a very urgent reality check. Dr. Louis Csoka published a benchmark report titled ‘International Communications Research in December 2006, which proved that multi-taskers were not only more educated in comparison (78% more) but were also better paid (200% more!). It is also affirmed in a research by Dr. Levenson (University of Southern California), Dr. Gibbs (Chicago Graduate School of Business) and Professor Zoghi (Bureau of Labour Statistics) titled, ‘Why Are Jobs Designed The Way They Are?’, that in world leading organisations, ‘multi-tasking’ “leads to greater productivity” as compared to specialisation. One case in point is highlighted in the NHS Report from Institute for Innovation and Improvement, which wrote of Microsoft founder Bill Gates, “Gates is the original multi-tasking man...” In fact, Gates’ belief in multi-tasking is so supreme that “once, Gates hung a map of Africa in his garage, so he could have something to occupy his mind for the precious seconds spent turning on the engine of his Porsche.” In other words, there is a significantly high probability that single/limited tasking CEOs would easily find their way into the ignominious list of worst performing CEOs.

Does your organisation revolve heavily around one power figure, with his immediate deputies leading the rest in following his cue blindly on every occasion? If that be the case, you must delink from this organisation at the earliest opportunity. The right CEO is one who identifies potential insiders and grooms them relentlessly into leadership positions, and keeps a list of potential successors ready. The wrong CEO, simply put, is one who does not do that. Global HR consultancy Heidrick & Struggles reveals an interesting research finding, which states that “merely announcing who your next CEO will be, can move the market value of your company by 5% or more!” Centre for Economics & Business Research also proved in its benchmark research of 350 FTSE firms in 2005 that firms with unplanned succession planning for CEOs underperformed their counterparts, who had proper succession planning in place.

Sir Li-ka Shing, Chairman, Hutchison Whampoa has built a
multi-billion dollar empire that’s over $90 billion in mcap.
Interestingly, he started off as a watch salesman at the age of 14
Additionally, though it is bad news for head hunters, the best candidate to succeed you is most likely within your organisation. Hay Group has concluded from a 2007 research that around 80% of Fortune Most Admired Companies prefer internal candidates. Even Booz Allen concluded in 2008 that 80-83% of new CEO hires are normally insiders. In another study titled Crest of the wave, they found, after processing data from 2500 of the world’s largest firms that almost 30% of firms that showed negative performance outcomes roped in external CEOs, but the figure was only 6% for positively performing ones.

Just like more risk is assumed to be better, one is tempted to believe that CEOs who demand higher pay packets are greater achievers. But both premises are structurally faulted. Profs. Michael Jensen (HBS) & K. Murphy (University of Rochester) analysed the paychecks of 2,505 CEOs of 1400 companies over a span of 15 years and concluded, “The compensation of top executives is virtually independent of performance.” In fact, one can even observe a negative correlation between CEO entry and exit packages and corporate destinies. The revealing Forbes report on CEO compensation acknowledges that the top 100 earning CEOs over a five year period were nowhere in the top 10 ranks on the efficiency index. In fact, the top 10 on efficiency didn’t even make it to the top 130 in terms of compensation! A Booz Allen Hamilton report titled, “Reining in the Overpaid (and Underperforming) Chief Executive” quotes corporate governance expert Nell Minnow, who is severely critical of the CEO compensation approach adopted by boards of Citigroup, Merrill Lynch, et al, thus, “These CEOs were guaranteed outsized exit and separation packages, regardless of how their firms performed. All CEOs who failed got paid very well.” The Corporate Library published a report, “Pay for Failure: The Compensation Committees Responsible”, in May that revealed that eleven publicly listed companies – AT&T, BellSouth, HP, Home Depot, Lucent, Merck, Pfizer, Safeway, Time Warner, Verizon and Walmart – gave a total compensation of $865 million to their shareholders between 2001 and 2006. And these CEOs led a total shareholder wealth erosion of $640 billion during the same period.

We instantly associate Henry Ford with Ford Motors, Bill Gates with Microsoft, Steve Jobs with Apple, Mark Zuckerberg with Facebook and Michael Dell with Dell Computers (and vice versa). CEOs who can’t be the ‘face’ their company needs to project to the outside world must bail out at the earliest. Prof. Nicholas O. Rule and Prof. Nalini Ambady of Tufts University did a benchmark analysis of the top 25 and bottom 25 companies on the Fortune 1000 list. They concluded, “Participants’ naive perceptions of leadership ability from CEOs’ faces are significantly related to how much profit those CEOs’ companies make... CEOs from more versus less successful companies could be distinguished via naive judgments based solely on perceptions of the CEOs’ facial appearance.” You know so many American CEOs by face and name, but few can recall any Japanese CEOs apart from, perhaps, Akio Toyoda. Is that why the Japanese economy refuses to revive even after so many years? In other words, CEOs who refuse to become the positive face of their companies might ensure that investors’ perceptions of their companies are negative, thus reducing stockholders’ wealth significantly.

CEOs who fail to consistently communicate with their employees will soon find themselves leading a team of headless chickens guided by myriad unofficial grapevines and sans direction. Boston Consulting Group reiterates in its report Creating People Advantage In Times Of Crisis that clear communication is the key trait of outstanding leaders when the times are bad. In a May 2009 research publication titled “Formal and Real Authority in Organizations: An Empirical Assessment”, Feng Li, Venky Nagar & Michael Minnis (University of Michigan) and Madhav Rajan (Stanford) concluded that CEOs who communicate more consistently had more of “real authority”. Charles Coffin, ex-CEO, General Electric, was ranked #1 by Fortune in its list of “10 Greatest CEOs of all times”. He consistently communicated with sub-par employees with overwhelming success. Jim Collins wrote that Coffin “created a system of genius that did not depend on him – he created the idea of systematic management development.” Even Steve Jobs believed that marathon meetings with employees were a must for superlative performance, sans exceptions.

Alan Mulally, President & CEO, Ford Motors: Mulally has been unabashedly autocratic with Ford’s employees, but he has also been exceptionally successful
Professors Raffaella Sadun (Harvard Business School), Luigi Guiso (European University Institute), and Oriana Bandiera & Andrea Prat (London School of Economics) studied the daily time tables of 94 top European CEOs and concluded, “The vast majority of a CEO’s time, some 85%, was spent working with other people through meetings… while only 15% was spent working alone.” That, in itself, should rule out a leader who spends most of his time leading himself.

Do MBAs necessarily make better CEOs? There are numerous arguments to the contrary, but they couldn’t be further from the truth. Spencer Stuart’s Route To The Top survey, 2008, affirms that an overwhelming 62% of S&P 500 CEOs have a minimum of one advanced degree (MBA, Master’s, Doctorate etc). At the Bachelor’s level, BBA was the second most common qualification for S&P 500 CEOs after engineering. Dr. Stephen Long, who is a popular leadership coach to Fortune 500 companies and NFL teams, joins many industry leading voices in favour of MBA education for CEOs when he asserts, “Management education teaches CEOs the ultimate there is in managing a company and managing employees. It is not important. It is necessary.” Jack Welch, one of the most outstanding shareholder wealth creators in corporate history, steadfastly supports hiring MBAs, even though he isn’t an MBA himself! In other words, choose MBA CEOs over non-MBA CEOs – a non-MBA CEO could end up not creating as much shareholders’ wealth as an MBA CEO. In the path-breaking research titled Managing With Style, MIT Professors Marianne Bertrand and Antoinette Schoar – after undertaking a most massive research over 7,500 of the world’s leading corporations – proved most conclusively how companies with MBA CEOs perform better than those having non-MBA CEOs. The report statistically shows how “the most interesting finding is the positive relationship between MBA graduation and corporate performance.”

Nobody loves authoritarian leaders who invite comparisons with Hitler and the Third Reich. But the cookie crumbles differently now, and you should be hating the gentle, indecisive ones instead! Harvard Business School, in its report titled “Harley’s Leadership U-turn”, deliberated on the authoritarian tendencies of Harley Davidson CEO Rich Teerlink, who rescued the company from near extinction. It surmises that in critical situations, authoritarian leaders are the right choice.

(Left) Lakshmi Mittal, Chairman & CEO, ArcelorMittal and (Right) Late Steve Jobs, ex-CEO, Apple: Their grand visions and passion for excellence have been the driving force that has propelled their respective companies to industry leadership
The same was reiterated by Dr. J. Howard Baker of University of Louisiana, who said that authoritarian leadership was a must for “stopping something, destroying something, or conquering something...” in his paper, “Is Servant Leadership Part of Your Worldview?” The commanding natures of Jack Welch (GE), Alan Mullaly (Ford Motors), Lou Gertsner (IBM) and Steve Jobs (Apple), were a key aspect of their success.

Combined with this is the issue of narcissism. Everyone would love a CEO who cares for other’s opinions and engages in participative decision making. However, if research has to be considered, investors shouldn’t touch companies that are led by such CEOs with a barge pole! A 2004 report released by Harvard Business Review titled, ‘Narcissistic Leaders – The Incredible Pros...,’ states, “Many leaders dominating business today have what psychoanalysts call a narcissistic personality. That’s good news for companies that need passion and daring to break new ground.”

The report highlights that if narcissistic CEOs like Jack Welch and George Soros are at the helm, organisations can look forward to transformative changes led by “compelling, even gripping visions...” On the other hand, CEOs who are overtly participative and opinion seeking will fail at bringing in such changes, especially when organisations need them most. Prof. Chatterjee and Prof. Hambrick of Penn University also asserted in a May 2006 study titled ‘Narcissistic CEOs...’, that narcissism in CEOs “is significantly positively related to several (desirable) company outcomes, including strategy dynamism.

How true is the adage “Nothing ventured, nothing gained” in the real world? Indeed, a number of successful CEOs take important business decisions from ‘gut feel’ rather than relying on actual data and future projections. And they are not necessarily wrong. Prof. William Duggan, Senior Lecturer, Business & Management, Columbia Business School, writes, “Analysis & creativity work together in the whole brain to give you a creative idea that makes analytical sense in a flash of insight. This is what we call intuition - gut feeling.” Professor Smith (Surrey) and Erella Shely (Academy of Management Executive) have concluded from their research that executives view intuitive decisions as actually being “expertise that has been built up... and influences conscious thought and behaviour.”

Moreover, accuracy of data is always debatable. The PwC Global Data Management Survey 2004 illustrates that companies are increasingly tentative for their own data and even more skeptical when they get data from external sources. But this does not mean that higher risks necessarily mean higher returns. Professor T. J. Kamalanabhan (Universiti Telekom, Malaysia) and Dr. D. L. Sunder (IIT Madras) affirm in their 1999 paper, ‘Managerial Risk Taking: An Empirical Study’, “Considering that managers are aware of their organisations’ resource constraints, moderate risk taking is eminently rational.” CEOs interviewed in a 2005 global survey conducted by KPMG titled, ‘Risk Taker, Profit Maker?’ admitted that ‘Poor Forecasting’ and ‘Poor Risk Identification’ were the leading culprits behind falling margins. So both extremes – CEOs relying too much on gut feel and CEOs waiting too long to have data in their favour – are bad bets for organisational leadership.

Not having a vision is bad enough, but having one that is vague and utopian is worse. Further still, a failure to clearly articulate the vision to the organisation’s employees means that your current CEO turned into a debilitating liability yesterday. Vision is the power that can propel people like Sir Li Ka-shing, who started his career at the age of 14 as a watch salesman, to towering heights. He is the richest man in Hong Kong today (net worth of $27.5 billion as per Bloomberg Billionaires Index, 2012), who oversees an empire that’s over $90 billion in mcap.

Iconic management guru Jim Collins has concluded from his world class research (from his bestseller Built to Last) that the stock returns accrued from visionary companies were 700% more than their not-so-visionary counterparts. The Ken Blanchard group surveyed over 2000 respondents between 2003 and 2006 and found that the worst mistake ever for a CEO was the inability to communicate a vision in a “meaningful way”.

What worth is a CEO who hates to part with the status quo and keeps most modest and achievable goals for his organisation? Well worth a replacement, we would say! The right CEO has to be immodestly entrepreneurial and ready to keep pushing the envelope intelligently. Peter Drucker asserted that no organisation can stay ahead on the innovation curve, unless it is filled with die-hard entrepreneurs who find the prospect of creation too good to resist. And passion is the key trait that distinguishes an entrepreneur/intrapreneur from the conventional manager. Renowned research firm Harrison Group has proved in a research paper (published in a Microsoft research release in May 2007 titled ‘The Rich Have Money – And Passion’) that around 70% of America’s big family fortunes were created less than 13 years ago (which means they are not inherited) and “the people who amassed those fortunes are primarily entrepreneurs – risk takers for whom wealth is a by product of pursuing their passion!” When Dr. Jonathan Byrnes from MIT took upon himself the task of highlighting the eight essential characteristics of transformational leaders, he put “capacity for passion” at the top, after a detailed international research. Renowned management guru Guy Kawasaki believes that true entrepreneurs can get the best people by just communicating their passion, rather than committing hefty pay packages. Passion has been one of the greatest strengths of the likes of Bill Gates, Michael Dell, Larry Ellison & Jack Welch.