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Indian companies have recently seen several top-level exits. Raj Jain’s tenure as the head of Bharti Walmart Pvt. Ltd came to an abrupt end on 27 June. So did the tenure of PepsiCo India head Manu Anand on 21 June and D. Shivakumar, operations head at Nokia India Pvt. Ltd, on 28 March. A 27 June report in Knowledge@Wharton Today, the Wharton Business School’s newsletter, suggests these departures are more due to the managers’ inability to deliver results than a conscious and strategic career move.

Dealing with stressful times

The trend of corporations using the perform-or-perish strategy has sharpened in recent times. Due to the challenging economic difficulties, there is pressure on both revenue and profit. The margin of failure has risen while tolerance has shrunk. Under such a depressed market scenario, which has not offered any comfort to anybody, organizations cannot tolerate failure in either the formulation of a strategy or in its execution. Today, we are seeing both importers and exporters are equally affected by the economic turmoil. Targets were set in a scenario where GDP forecasts were different but now sales are getting sluggish and input costs are increasing. In such a scenario, executives are finding it difficult to meet targets, especially considering the fact that there is an additional pressure to cut costs.

Now there is a trend across sectors where executives are getting very vigilant and responsive to various challenges which the economic scenario has posed. This is taking a toll on executives who are finding it very stressful. Even senior executives are finding it difficult to deal with a situation where there is a sword on somebody’s head.

Organizations themselves have various ways to deal with this issue and to keep employee’s morale high and align goals of employees and the company. For instance, performance-based bonus is one such tool. We can see an increase in the variable composition of compensation in the coming days. Also, in these times, when targets are difficult to meet, there would be an increase in conflict among executives who would try to play the blame game. Some companies use team-building activities and other destressing training programmes to bring together their employees.

We, at Mantri, put people in the same room and push them to work together and resolve their issues instead of exchanging emails, which would only lead to more conflict.

We also make sure that the hierarchy of indulgence is kept at bay and the top management does not get involved unnecessarily. This is because a few people have the tendency to abuse the formal channels, which instead of solving the problem complicates it. As told by Sanjay Kabra, chief financial officer, Mantri Realty to Sunil B.S.

Beyond performance targets

Futurist Joel Barker, in his famous speech “The Power of Vision", cautions that numbers (performance targets) are always a consequence of the vision achieved. In chasing sheer numbers, high achievers have a proclivity for unethical behaviour. This has to be moderated by the psychological contract, emphasizing performance and appropriate behaviour. Psychological contract is one of the nexus of contracts which Nobel laureate Oliver Williamson and colleagues considered the organization to be composed of—the commercial and the employment contracts are the other two contracts.

It is necessary, in my opinion, to pay equal emphasis on all these three contracts. Inordinate emphasis on only commercial contract produces mercenaries. Employment contract results in complacency, which can also be described as the Hindu undivided family syndrome, where one person works and all others enjoy. The psychological contract ensures people bond together, to go above and beyond the call of duty for the sake of the organization.

When an organization focuses on the short-term, tangible measures to gauge individual performance, it leads to a mercenary mindset. Whereas a long-term, intangible focus incorporating group performance ushers in the Hindu undivided family syndrome.

This makes it difficult for organizations to gauge performance of its employees as a low cohesive group not in agreement with organizational goals is composed of dog-eat-dog mercenaries. Whereas a highly cohesive group not in agreement with organizational goals results in dysfunctional behaviour such as trade union activities. The psychological contract ensures a highly cohesive group in complete agreement with organizational goals. As told by Lakshmanan Prasad, professor of organizational behaviour, Indian Institute of Management, Bangalore, to Sunil B.S.

The rising leadership deficit

The mother of all deficits is the leadership deficit," says V. K. Madhav Mohan, a mentor to various corporations and author of a book on leadership, titled “Lonely At The Top". Mohan, a former adviser to Rotary International, says the leadership of every organization is under pressure to deliver or perish. Many of them are unable to achieve targets on a grand scale since the economic slowdown started in 2008.

In June, a hastily called town hall meeting at Wal-MartIndia’s Gurgaon office, Walmart Asia president and chief executive officer Scott Priceannounced that India head Raj Jain “was no longer with the company". Wal-Mart did not officially state the reasons for Jain’s departure. Jain’s exit came at a time when the company is facing trouble in India over charges of bribery and lobbying. In June, PepsiCo India head Manu Anand quit without a succession plan in place.

“The economic collapse is less to do with markets and more to do with an absence of leadership. The root of the problem is greed. Big companies are under severe pressure and, therefore, leaders are looking for quick fixes," says Mohan, who has mentored companies including United Phosphorus Ltd. He says leaders are bypassing values, integrity, honesty and transparency to meet targets. “Leaders are tempted to succumb to window dressing because of the pressure and are many times taking ethical detours," he says.

He cautions that all the economic tinkering and fiscal adjustments can only provide incremental solutions to this leadership deficit issue since the basic problem lies at the foundation, which is an absence of leadership with values, honesty, integrity and transparency. He cites the example of Prime Minister Manmohan Singh, who as finance minister in 1991 unleashed economic reforms and opened up the economy with a grand vision.

Singh, however, failed to implement many of those radical reforms as prime minister because of a drought in leadership across the government and indeed all political parties. “India desperately needs the emergence of a set of leaders who are rooted in honesty, integrity, transparency and commitment to results based on ethical conduct," says Mohan. As told by V.K. Madhav Mohan, management mentor and author, to P.R. Sanjai

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