Strategic Disengagement

When Mohandas Pai quit Infosys in April last year, it came as a shocker to many. Mohandas Pai had a long stint at Infosys and as the CFO, he played a strategic role in transforming Infosys into one of the world’s most respected and widely known software services companies. Mohan was an integral part of the Infosys team that enabled the first listing of an India-registered company on NASDAQ and the first sponsored secondary offering of American Depositary Shares by an Indian company. He was voted ‘CFO of the Year’ in 2001 by IMA India. He won the ‘Best CFO in India’ award from Finance Asia in 2002, and ‘Best Chief Financial Officer in India’ in the Best Managed Companies poll conducted by AsiaMoney in 2004. Hence when Pai left Infosys, many rumors were floated. Although both Pai and the Infosys management denied any differences, Pai’s decision was largely seen as a discontent over the company’s strategy in choosing the CEO of the company. The idea of musical chair for the top post open only to the founders of the company, saw other deserving aspirants like Pai losig hope. “Pai should have been in line for the COO's post but the prospect of waiting out Shibulal's term with no guarantee that he would be elevated in his mid-50s to the CEO's post might have been the trigger for the decision.” Losing a seasoned player like Pai was definitely ‘no gain’ for the company.

Something similar is now blowing over HUL. The exit of three of the eight executive directors in the last 18 months, as well as managerial-exits at other levels has begun to ring alarm for the company. The FMCG giant once considered the ‘impregnable vault of top-notch talent, is now beginning to look vulnerable’. The exodus of top executives of HUL is being linked to the strategic changes affected by the Unilever CEO Paul Polman. Paul, the first outsider to assume the company’s CEO position in the last 77 years, besides consolidating the HUL business into our divisions, has brought about some changes like –

• Centralizing much of the decision-making globally.

• Forcing company to consider outside talent for every senior management role.

• Roles have become fewer, more functional, and narrower.

• Longer tenures for managers, at every level including CEO.

The impact of such changes have been reportedly –

• Lesser operational freedom for managers.

• Managers feeling stifled with paucity of growth options.

• Internal candidates unsure of their career progression.

• Global posting no longer attractive.

The company on its part claims such changes to be a part of their talent management strategy and an effort to invest in young, diverse and high-potential individuals. But even that does not explain the curbing of managerial freedom in decision-making, decline in growth opportunities even though the company is growing and career opportunities losing their panache. A competitor is reportedly netting many HUL executives.

Many years back when Indian public sector banks rolled-out VRS (voluntary retirement scheme) to allow the mediocre to have an honorable and attractive exit route, it ended-up losing its most talented employees, instead. The loss of the PSU banks, was the gain of many foreign and private banks entering the Indian scene at that time. The proposed ‘golden handshake’ turned out to be a ‘thorny-handcuff’ for the banks that were left grappling with loss of intellectual capital, high customer discontent and a stronger competition from the new players (whom they help unknowingly).

Does this mean strategic changes are not required? No, at times changes have to be affected at a strategic level, however a good strategy shall never lose its connect and sight with its people (especially talent) and with its priorities. Besides such changes should never lead to an advantage for the competitor, when in the first place that was meant to be a competitive advantage for the company itself.

Cases for Strategic Disengagement?