You have to join a promoter’s company to know the genetic disrespect that promoters have for professionals.
But then consider their background. They were original founders of the company, most of them entered a virgin market on the upswing in less competitive times, enjoyed more than average profit margins compared to the margins of today and as the company expanded and achieved scale, they were advised to bring in professional managers. So there was a twinge of regret in relinquishing their operational positions at the company. The professional manager, unfortunately, joined at a time when the competition was hectic, profit margins were under pressure and the more unfortunate just joined when the business cycle was heading for a trough.
When I first joined I was shocked to hear the conversations between promoters. At quarterly financial reviews the oft-repeated comment was, “When I was running the company, we made huge profits, but then we were told that we have to hire professional managers. Now see how our professional managers are ruining our company”.
I once was privy to a conversation between two family members of a promoter family.
Promoter 1: Have you fixed that meeting with ‘X’ Entertainment Group?
Promoter 2: Yes I have fixed a meeting with their CEO for next Wednesday.
Promoter 1: Hey no, not the CEO. You know how CEOs are. They will never take a decision. They don’t have the guts. They will just sit on it. You should have fixed a meeting with their promoters. Why are we wasting our time meeting useless CEOs? It will never work.
Every conversation I heard, since that first conversation, told me how deep-rooted was the disrespect that promoters have for CEOs. Unfortunately, as companies grow, promoters are advised to hire professional CEOs and other professionals and they have very little choice if the company has to move forward.
There are many reasons for the way promoters behave.
The company is still their baby
And they are not going to let go. Often promoters behave like doting parents looking after an only child. They think that the best advice for the baby is the one they can give. CEOs and other senior managers are often seen as babysitters. They will be there for now but will ultimately leave to babysit another company. So CEOs are not entirely trusted. Sometimes I used to jest when I was asked to do something that I thought was wrong for the company. I would say ‘I am only the babysitter. I wouldn’t give the baby whiskey, but if the parent is insistent maybe I have no choice.’
Handling legacy baggage
Most promoters have an emotional link with the past. They have some pet likings for a part of the business, which they would not like to give up, even if it doesn’t make any sense ( Ratan Tata and Nano or Corus ). Its a matter of ego for them. They don’t like CEOs discarding their pet projects. In my case, I had some useless clients which took more time servicing them, than what they were paying us, but I could never give them up because my promoters were emotionally attached to them.
Promoters work on trust. Often there will be someone who has stayed in the company for a long time, risen up the ranks and promoters will have a special affection for them, even if they have outlived their time and are inefficient according to the new CEO. If you mention that this person is inefficient, you are likely to provoke their ire.
People who leave are seen as disloyal
When people resign from the company, promoters don’t believe they should be treated fairly. If a person has left, he likely to be no longer useful to the company in their view. Therefore they will never be too nice to people who leave. For example, the severance payment to previous CFO Rajiv Bansal is a bone of contention between the founders and the board if Infosys.
They never lose their attachment to the company
A really great entrepreneur who showed that he was ready to get detached from his company was Stan Shih, the Founder, President, and Chairman of ACER. Employing a strategy he calls “global brand, local touch,” Mr. Shih turned Acer into a decentralized conglomerate of autonomous businesses by selling off majority stakes to local investors in more than 20 countries. In comparison, Indian promoters find it more difficult to give up their attachment.
Promoters like to meet only promoters
If it is necessary to meet the CEO of a company purely for business purposes, most promoters will think it is below their dignity to meet a CEO. Their first option will always be to meet the promoter of the company. This is because most promoters tend to think of themselves as a clan. Meeting a CEO some of them find demeaning.
The Challenge for Professionals
But most professional managers, unfortunately, have only 2 choices while working with promoters.
- Manage the company giving due respect to the sensitivities of the promoters and giving in to their pet whims.
- Manage the company professionally, doing whatever you believe is best for the interest of the company.
The downside of option 1 is that you will never be able to lift the company beyond its current capabilities. Because the promoters pet theories are what is really keeping the company back. What most promoters won’t understand is that sometimes things have to fall apart to make way for better things.
The downside of option 2 is that you risk getting sacked. So working for promoter companies is a little like choosing between the devil and the deep blue sea and often a lose-lose game.
The best attitude to have if you are CEO of a promoter led company is that you never lose.
You can either win or you can learn.
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