“This is a time for leaders to make big sacrifices. Top management must take the biggest pay cuts so that others suffer as little as possible,” Murthy said.Narayana Murthy, Founder – Infosys, addressed CEOs, MDs and senior leaders from ET ILC in a webinar on the implications that Covid-19 will have on different areas of business and the steps that should be taken to ensure growth and revival of the economy. Deepak Lamba, President, TSSL and CEO, Worldwide Media steered the conversation, seeking views from the eminent leader on how businesses can adopt a collaborative approach in the current environment, the importance of corporate governance and the critical role of SMEs in the Indian economy, in addition to putting forth other queries that were brought in by the corporate leadership from India Inc.
The key areas of concern for business leaders in the current scenario revolve around the best cost-cutting measures, keeping employees motivated, balancing shareholder interests, reviving SMES and tracking emerging opportunities. The Infosys founder relayed experiences from his journey in business and navigating crises, to draw on insightful experiences that leaders can implement today.
There is no doubt that most businesses are in survival mode because the pandemic hit India at a time when the economy was already weakening. Some businesses have had to take severe measures and layoff employees as a part of cost cutting measures. Unemployment in the country is at 26% with 140mn jobs lost, most of them being in the unorganized sector. “Going ahead these job losses will become more severe because even the organized sector is suffering. But we have overcome many crises before and businesses can survive this. If businesses follow some of the lessons from the 2008 crisis, drastically reduce their fixed and indirect costs, they can get back on the path of revival,” says Narayana Murthy. Not a proponent of employee retrenchment, he believes that laying off people at the bottom of the pyramid does not solve the problem. “This is a time for leaders to make big sacrifices. Top management must take the biggest pay cuts so that others suffer as little as possible.”
Illustrating how this can be done by looking at all company expenses, Murthy narrates an incident that took place in the wake of the 2008 crisis. He was to attend a conference in Hyderabad and chose to stay at a three star hotel. During the conference, when he heard CEOs lamenting the crisis and their inability to pay salaries, he pointed out that if the situation was indeed so dire, there was no way anybody could justify their expenditure on five star accommodation, as many of the other attendees had done. “The room fell silent,” he says.
A strong believer in accountability and corporate governance, he says it must be used to create maximum shareholder value while ensuring fairness and transparency for all stakeholders especially customers, employees, investors and the government. Corporate governance cannot suddenly emerge during the crisis to save the day, it has to be embedded in the culture of a company, and remain a constant during all times.
In addition to all the steps that firms can take themselves to make their businesses viable again, the government of India is also doing its part in reviving the economy. It has already rolled out a stimulus package which is 10% of the country’s GDP and is supporting the poorest sections of society with direct benefit transfers. But the key to recovery will rest a great deal on SMEs since 10 million of them contribute close to 23% of India’s GDP. For them to bounce back, both short term and deeper policy level changes are required. “Indian SMEs have not advanced technologically, and nor has their quality matched global levels. I believe that the main reason for this is the way they are categorized. SMEs are classified on the basis of revenue and investments and thus to qualify for certain tax benefits they have refrained from making investments in technology,” says Narayana Murthy. He recommends specialized industrial parks, tax exemption for the first 6-7 years, representation on national industry associations and a detailed study and implementation of how China has succeeded with its SMEs.
With the geo-political situation changing post Covid-19, many countries and businesses want to de-risk their supply chains, reduce dependence on China and build alternatives. There is a strong belief that India could capitalize on this opportunity. According to Narayana Murthy, India can learn a great deal from China that will help it become more competitive in the global market place. “China has increased its GDP by a factor of 15 in a very short period of time. In 2019, they became the largest exporters in the world reaching a value of 2.5 trillion dollars. There is a need to study their businesses, understand how they have succeeded and then through our own innovation, succeed in the marketplace,” he says.
“In India, the government and business community have to learn to work in a more collaborative fashion.” He maintains that only a massive cultural shift, both in India’s bureaucracy and businesses can bring about a transformation and bring forth a culture of trust. He appreciates the moves taken by the government to spur growth and believes that India’s focus must be on increasing exports, competing at a global levels and thus, increasing quality and productivity.
The Infosys founder maintains that good cash management, effective leadership and a strategy to pivot to a growing market are key to growth. “It is far more rewarding to be a small player in a growing industry than be a large player in a segment that has stagnated. Also, you must analyze your market well and ensure that you have access to it,” he says. In order to keep employees motivated, just talk may not be enough. “Leaders must be change agents and must walk the talk.”
Source: indiatimes.com