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Business News/ Companies / Should near-term poor outcomes cloud past gains?
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Should near-term poor outcomes cloud past gains?

After the Bangladesh ODI debacle, the clamour for captain M.S. Dhoni to retire grew louder. But should leaders step down when faced with pressure to step down? We ask experts

Photo: AFPPremium
Photo: AFP

A leader should never quit
Nikhil Nanda, managing director, Escorts

According to Nikhil Nanda, a leader should never quit. “If you are a leader and you quit, who will lead the team?" he asks.

Many companies have emerged stronger from a crisis because the leader has clarity in terms of strategy and goals, says Nanda, citing the example of Steve Jobs who was asked to step down from Apple Inc. once. “We all know what happened to the company thereafter. They then asked him to return. Thereafter, the world knows about the success that he brought to the world," he says and adds that a leader has to understand all practices that are an important pivot to success. To get to a successful point, people only look at outcome.

“Of course, every company has to meet its financial goals. But there is a lot of work behind the stage—the clarity, the purpose, the understanding of who am I? What value am I adding? How am I different from other companies?" says Nanda.

“We are in the dot-com age where we expect things to happen at the click of a button," he says. “That is dangerous as much as technology is a wonderful innovation." Expectations of what makes a good leader or a company are built up over a period of time. “There are no shortcuts," he adds.

Nanda says while people have the right to judge, “it’s unfair if you don’t appreciate what it takes for a team or a company. I think it evolves over a period of time. The results eventually do come, but it takes lot of work."

“Stepping down means you are stopping to learn from your mistakes. If the leader fails, who has the formulae to success? It’s not that easy. Had it been so, there would have been no leaders who would fail," says Nanda.

“You have to have leadership traits that earn you the title. The leader needs to have the confidence in himself and his team when in an unfortunate situation the team loses the confidence in itself. It’s the leader’s responsibility to ignite confidence within each individual," he says.

—Shally Seth Mohile

It is important to be just and fair
S. Raghunath, professor (corporate strategy and policy), Indian Institute of Management Bangalore

Forcing a chief executive officer (CEO) to leave because of poor performance will have a negative impact on the team, and stakeholders who demand his resignation should make sure it is fair and justified.

“Reasons for a captain or CEO’s departure all point to a failure in the monitoring role of the board or the stakeholders responsible for oversight in allowing such underperformance," says Raghunath. If the CEO leaves for reasons of disagreement with the board or stakeholders, it would have a less negative impact on them.

According to him, directly involved stakeholders that demand the resignation of a CEO or captain generally are seen to be paying a substantial price in terms of their own continuity of service.

For instance, if the CEO or captain is replaced, the new CEO may wish to replace board members or stakeholders who have oversight roles. From the strategic perspective of the new CEO, those who failed his predecessor, and failed the top management and the organization in terms of advice, facilitation and co-opting key stakeholders may not have sufficient reasons to continue.

Raghunath says he believes that forcing a captain or a CEO to step down has to be based on clear tenets of being just and fair. “One has to ask the question whether it is an act of retributive justice that punishes somebody for violating norms. One has to also consider distributive justice that concerns the allocation of resources and the hardships involved," he says.

It is very important to enforce procedural justice, namely the degree of fairness displayed in resolving contradictory views of omission and commission by various stakeholders in the system, he adds.

“The concept of fairness is essential for preserving the institutions, especially sports. Fair process is essential for establishing trust, commitment and harmony in sports teams as well as business," says Raghunath.

—Bidya Sapam

Long-term orientation culture must
Swaran Sehgal, partner, Grant Thornton India

There is no yes or no answer to whether a CEO should step down in such a situation, as the context is very important, says Swaran Sehgal.

If one draws a comparison with the M.S. Dhoni example, what emerges is a pattern of developing or Asian countries being very instant-gratification communities, he says.

“When Dhoni does well, he is our God and when he fails, we want to sack him. This is a very short-term oriented behaviour that does not lead to long-term team behaviour or performance," says Sehgal.

Further, he points out that in the corporate world, there can be a quarter that can go bad, there can also be a year that can go bad. “2008 and 2009 were bad years due to the financial crisis. If organizations are going to be short-term oriented, then they will always be going pillar to pillar," he says.

The answer to tide over such crisis situation is to develop a long-term orientation culture. “Companies need to ask if they are urgency driven, because when a team or organization is urgency driven, most of the times they burn out—they have high attrition rates, employees are not happy and customers are not happy," says Sehgal.

He points out to the example of taxi-hailing service Uber. “They have got into a lot of problems in the last 6-12 months, in India, France and elsewhere. But there is no widespread call for the Uber CEO to step down," says Sehgal.

It is also important to note who are the stakeholders asking for the resignation and if they have a vested interest, he says. “This is where the board plays an important role in deciding whether the decision is in the best interest of the organization and its employees," he adds.

“If the decision is in line with the common objective of the enterprise—profit and growth—then most of the self-aware CEOs will step down themselves," says Sehgal.

—Swaraj Singh Dhanjal

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Published: 01 Jul 2015, 12:18 AM IST
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