CAT 1997 Question Paper

When Deng Xiaoping died a few months ago, the Chinese leadership barely paused for a moment before getting on with the business of governing the country. Contrast that with the chaotic contortions on India's political stage during the past month, and it is easy to conclude that democracy and democratic freedoms are serious obstacles to economic progress.

When the Chinese leadership wants a power plant to be set up, it just goes ahead. No fears of protracted litigation, of environmental protests, or of lobbying by interested parties. It — or the economy — is not held to ransom by striking truckers or air traffic controllers. Certainly, there is much that is alluring about an enlightened dictatorship.

But there the trouble begins. First, there is no guarantee that a dictatorship will be an enlightened one. Myanmar has been ruled by a dictator for decades, and no one would claim that it is better off than even Bangladesh which has itself suffered long stretches of dictatorship. Nor can Mobuto Sese Seko, much in the news these days, be described as enlightened by any reckoning. The people of Israel, almost the only democracy in a region where dictatorships (unenlightened ones) are the norm, are much better off than their neighbours.

Second, dictatorships can easily reverse policies. China was socialist as long as Mao Zedong was around. When Deng Xiaoping took over in what was essentially a palace coup, he took the country in the opposite direction. There is little to ensure that the process will not be repeated. In India such drastic reversals are unlikely.

Six years ago Indian politicians agreed that industries should be de-licensed, that imports should be freed or that investment decisions should be based on economic considerations. Now few think otherwise. Almost all politicians are convinced of the merits of liberalisation though they may occasionally lose sight of the big picture in pandering to their constituencies. India has moved slower than China on liberalisation, but whatever moves it has made are more permanent.

Democracies are also less likely to get embroiled in destructive wars. Had Saddam Hussain been under the obligation of facing free elections every five years, he would have thought ten times before entangling his people in a long confrontation with the West. Germany, Italy and Japan were all dictatorships when they launched the World War II. The price was paid by the economies. Democracies make many small mistakes. But dictatorships are more susceptible to making huge ones and risking everything on one decision — like going to war. Democracies are the political equivalent of free markets, Companies know they can't fool the consumer too often; he will simply switch to the competition. The same goes for political parties. When they fail to live up to their promises in government, the political consumer opts for the competition.

Democratic freedoms too are important for the economy, especially now that information is supreme. Few doubt that the Internet will play an important part in the global economy in the decades to come. But China, by preventing free access to it, is already probably destroying its capabilities in this area. As service industries grow in importance, China may well be at a disadvantage though that may not be apparent today when its manufacturing juggernaut is rolling ahead.

India has stifled its entrepreneurs through its licensing policies. That was an example of how the absence of economic freedom can harm a country. But right-wing dictatorships like South Korea erred in the opposite direction. They forced their businesses to invest in industries, which they (the dictators) felt had a golden future. Now many of those firms are trying to retreat from those investments. Statism is bad, no matter what the direction in which it applies pressure. At this moment, China and other dictatorships may be making foolish investment decisions. But as industries are subsidized and contrary voices not heard, the errors will not be realised until the investments assume gargantuan proportions.

India's hesitant ways may seem inferior to China's confident moves. But at least we know what the costs are. That is not the case with China. It was only years after the Great Leap Forward and only such experiments that the cost in human lives (millions of them) became evident to the world. What the cost of China's present experiments is we may not know for several years more. A nine per cent rate of growth repeated year after year may seem compelling. But a seven per cent rate of growth that will not falter is more desirable. India seems to be on such a growth curve, whatever the shenanigans of our politicians.

Of each of the great leaders, it is said by his followers, long after he is gone, he made us do it. If leadership is the art of persuading your people to follow your bidding, without their realising your involvement, the archetype of its practice is N. R. Narayana Murthy, the chairman and managing director of the Rs. 143.81 crore Infosys Technologies (Infosys). For, the 52-year-old CEO of the globalised software corporation — which he founded with six friends, and a combined capital of Rs. 10,000 in 1981 and which now occupies the front ranks of the country's most admired corporations, leads with the subtlest of weapons: personal example.

Infosys ranks only 578th among the country's listed companies, and sixth in the software sector, in terms of its turnover. But it is setting new standards for India Inc. through its practices of inter alia awarding stock options to its employees, putting the value of its intellectual assets and its brands on its balancesheet, and conforming to the disclosure standards of the Securities and Exchange Commission (SEC:of the US. Behind all this is the stubborn personal subscription of its CEO to the underlying causes of wealthcreation- people-power and transparency. "What were choices earlier are compulsions now," asserts Murthy.

In fact, the mirror images of Murthy, the Man, can be found all over Infosys, his company. His egalitarianism — which finds expression in such habits as using the same table and chair as anyone else in the organization — is practised firmly when it comes to charting a course for the company's future: everyone has a voice. "We have no hierarchy just for the sake of control.

" Brimming with the conviction that customer satisfaction is the key to success, Murthy has built a fleetfooted human resource management system that treats employees as customers, using the resources of the organisation to meet their professional and personal needs. His instruments are not just top-of-themarket salaries, but also operational empowerment as well as every facility that an employee needs to focus on the job.

Just what methods does Murthy use to ensure that his DNA is replicated in his company? Not for him are the classical leadership genre — transactional or transformational, situational or visionary. His chosen style, instead, is to lead by example, ensuring that the CEO's actions set the template for all Infoscions.

Murthy believes that the betterment of man can be brought about through the ‘creation of wealth, legally and ethically’. The personal example that he has set enabled his company to mirror those beliefs, tying his own rewards, and measuring his value to the company, to his ability to create wealth, and erecting systems for the company's wealth to be shared by its people. Sums up Nandan Nilekani, 41, deputy managing director, Infosys: "This is the future model of the corporation. Run an excellent company, and let the market increase its value to create wealth." Although Murthy is one of the prime beneficiaries of the philosophy — his 10 per cent stake in Infosys is worth Rs. 130 crore today — in his book, the leader leads not by grabbing the booty but by teaching others to take what they deserve. That's why, on the Infosys' balancesheet, the value of Murthy's intellectual capital is nowhere near the top, on the rationale, that the CEO, at 52, is worth far less to his company than, say, a bright young programmer of 26. To spread the company's wealth, Murthy has instituted stock options — the first to do so in the country — for employees, creating 300 millionaires already. By 2000, he wants the number to climb to 1000.

To act as a beacon for his version of the learning organisation, Murthy not only spends an hour a day surfing the Internet to learn about new technological developments in his field, he also makes as many luncheon appointments as he can with technical people and academicians — dons from the Indian Institutes of Technology for instance — systematically plumbing their depths for an understanding of new developments in infotech. Murthy's objective is not just to stay abreast of the state-of-the-art, but also to find a way to use that knowledge for the company.

Following Murthy's example, Infosys has set up a technology advancement unit, whose mandate is to track, evaluate, and assimilate new techniques and methodologies. In fact, Murthy views learning not just as amassing data, but as a process that enables him to use the lessons from failure to achieve success. This self-corrective loop is what he demonstrates through his leadership during a crisis.

In 1995, for example, Infosys lost a Rs. 15 crore account — then 20 per cent of its revenues — when the $69 billion GE yanked its business from it. Instead of recriminations, Murthy activated Infosys' machinery to understand why the business was taken away and to leverage the learning for getting new clients instead. Feeling determined instead of guilty, his employees went on to sign up high profile customers like the $20 billion Xerox, the $7 billion Levi Strauss, and the $14 billion Nynex.

"You must have a multi-dimensional view of paradigms," says the multi-tasking leader. The objective is obvious: ensure that Infosys' perspective on its business and the world comes from as many vantage points as possible so that corporate strategy can be synthesised not from a narrow vision, but from a wide angle lens. In fact, Murthy still regrets that, in its initial years, Infosys didn't distil a multi-pronged understanding of the environment into its strategies, which forced it onto an incremental path that led revenues to snake up from Rs. 0.02 crore to just Rs. 5 crore in the first 10 years.

It was after looking around itself instead of focusing on its initial business of banking software, that Infosys managed to accelerate. Today the company operates with stretch targets setting distant goals and working backwards to get to them. The crucial pillar on which Murthy bases his ethical leadership is openness. Transparency, he reckons, is the clearest signal that one has nothing to hide. The personal manifestations of that are inter alia the practice of always giving complete information whenever any employee, customer, or investor asks for it: the loudly proclaimed insistence that every Infoscion pay taxes and file returns: and a perpetually open office into which anyone can walk.

But even as he tries to lead Infosys into cloning his own approach to enterprise, is Murthy choosing the best future for it? If Infosys grows with the same lack of ambition, the same softness of style, and the same absence of aggression, is it not cutting off avenues of growth that others may seize? As Infosys approaches the 21st century it is obvious that Murthy's leadership will have to set ever-improving role models for his ever-learning company. After all, men grow old; companies shouldn't.