Building Great Organizations

The IT Industry in India is clearly reaching an inflection

point. There are the large and successful software exporters reaching the much

admired Billion Dollar status, employing tens of thousands of professionals, and

winning acclaim and business from global corporations. And then the hundreds of

smaller companies, in every sector of the industry, from software and BPO to

hardware to Networking and even Consulting, all looking for their place in the

sun and an opportunity to develop a differentiated value proposition for their

customers.

While the challenge for the smaller firms is more obvious, CEOs

of larger firms are also worried-not just about the stock markets or getting

more business, but to do what the legendary General Electric Company says in its

1995 Annual report: "shape a global enterprise that preserved the classic

big company advantages while eliminating the classic big-company drawbacks. What

we wanted to build was a hybrid, an enterprise with the reach and resources of a

big company but the thirst to learn, the compulsion to share and the bias for

action-the soul-of a small company." And while the Annual Report goes

on to describe the various steps GE took-de-layering the organization, setting

stretch goals, compensating people with stock options, annihilating bureaucracy

and providing high quality leadership-to deliver on its promise, this

inflection point can well be the key to sustaining success in this industry.

One of the key challenges that CEOs in any successful industry

always face is the ability to deal with rising inequalities. At Harvard, we were

exposed to the shocking reality of an American CEO pay sometimes being as high

as 250 times the pay of the junior most employee; and if one compares the

compensation of the chairman of Nike Corporation with that of the lowest paid

full-time NIKE employee, in the factories of Indonesia where maximum economic

value is actually added, we are faced with the shocking statistic that the NIKE

chairman is paid as much as seventy thousand of his Indonesian factory workers

put together. There is no doubt that the compensation and opportunity divide

that exists everywhere and becomes accentuated in large organizations can sow

the seeds of discontent and low morale in a any fledgling industry.

On a larger scale, the issues of "digital divide"

which many of us talk about are real issues that the industry, led by the front

runners, will have to deal with all the time-the recent Gowda-Infosys argument

has shown how a disgruntled set of politicians can attempt to divert attention

from real value add by successful companies. It is not reassuring to say that

inequality in India is a milder problem than in China, where millions of rural

peasants feel compelled to leave their children for months at a time, going in

search of higher wages in cities.

Finally, back to the very successful GE, and to one more pearl

of wisdom from their annual report-the four types of managers that grow in

organizations and the ways in which GE deals with them. Type I are people who

share the values and meet the targets-for them the sky's the limit; Type II

are those who neither share the values nor meet the numbers-they're dead

meat; Type III are those who share the values but miss the numbers-they

deserve one more chance, maybe two; and, finally, there are the Type IV-managers

who don't share the values but deliver the numbers-and this is where GE

makes its strongest statement: "We made our leap forward when we began

removing our Type IV managers and making it clear to the entire company why they

were being asked to leave, for not sharing our values." How many CEOs in

our young industry have developed the courage of conviction and the ability to

act this way?