Leadership

A leader is an agent of change, and progress is about change. In the words of Robert F
Kennedy, 'Progress is a nice word; but change is its motivator.'
Leadership is about raising the aspirations of followers and enthusing people with a
desire to reach for the stars. For instance, Mahatma Gandhi created a vision for
independence in India and raised the aspirations of our people.
Leadership is about making people say, 'I will walk on water for you.' It is about creating
a worthy dream and helping people achieve it.
Robert Kennedy, summed up leadership best when he said, 'Others see things as they
are and wonder why; I see them as they are not and say why not?'
Adversity
A leader has to raise the confidence of followers. He should make them understand that
tough times are part of life and that they will come out better at the end of it. He has to
sustain their hope, and their energy levels to handle the difficult days.
There is no better example of this than Winston Churchill. His courageous leadership as
prime minister for Great Britain successfully led the British people from the brink of
defeat during World War II. He raised his people's hopes with the words, 'These are not
dark days; these are great days -- the greatest days our country has ever lived.'
Never is strong leadership more needed than in a crisis. In the words of Seneca, the
Greek philosopher, 'Fire is the test of gold; adversity, of strong men.'
Values
The leader has to create hope. He has to create a plausible story about a better future
for the organisation: everyone should be able to see the rainbow and catch a part of it.
This requires creating trust in people. And to create trust, the leader has to subscribe to
a value system: a protocol for behavior that enhances the confidence, commitment and
enthusiasm of the people.
Compliance to a value system creates the environment for people to have high
aspirations, self esteem, belief in fundamental values, confidence in the future and the
enthusiasm necessary to take up apparently difficult tasks. Leaders have to walk the
talk and demonstrate their commitment to a value system.

As Mahatma Gandhi said, 'We must become the change we want to see in the world.'
Leaders have to prove their belief in sacrifice and hard work. Such behavior will enthuse
the employees to make bigger sacrifices. It will help win the team's confidence, help
leaders become credible, and help create trust in their ideas.
Enhancing trust
Trust and confidence can only exist where there is a premium on transparency. The
leader has to create an environment where each person feels secure enough to be able
to disclose his or her mistakes, and resolves to improve.
Investors respect such organisations. Investors understand that the business will have
good times and bad times. What they want you to do is to level with them at all times.
They want you to disclose bad news on a proactive basis. At Infosys, our philosophy
has always been, 'When in doubt, disclose.'
Governance
Good corporate governance is about maximising shareholder value on a sustainable
basis while ensuring fairness to all stakeholders: customers, vendor-partners, investors,
employees, government and society.
A successful organisation tides over many downturns. The best index of success is its
longevity. This is predicated on adhering to the finest levels of corporate governance.
At Infosys, we have consistently adopted transparency and disclosure standards even
before law mandated it. In 1995, Infosys suffered losses in the secondary market. Under
Indian GAAP (generally accepted accounting principles), we were not required to make
this information public. Nevertheless, we published this information in our annual report.
Fearless environment
Transparency about the organisation's operations should be accompanied by an open
environment inside the organisation. You have to create an environment where any
employee can disagree with you without fear of reprisal.
In such a case, everyone makes suggestions for the common good. In the end
everyone will be better off.
On the other hand, at Enron, the CFO was running an empire where people were afraid
to speak. In some other cases, the whistle blowers have been harassed and thrown out
of the company.
Managerial remuneration

We have gone towards excessive salaries and options for senior management staff. At
one company, the CEO's employment contract not only set out the model of the
Mercedes the company would buy him, but also promised a monthly first-class air ticket
for his mother, along with a cash bonus of $10 million and other benefits.
Not surprisingly, this company has already filed for bankruptcy.
Managerial remuneration should be based on three principles:

Fairness with respect to the compensation of other employees;

Transparency with respect to shareholders and employees;

Accountability with respect to linking compensation with corporate performance.

Thus, the compensation should have a fixed component and a variable component. The
variable component should be linked to achieving long-term objectives of the firm.
Senior management should swim or sink with the fortunes of the company.
Senior management compensation should be reviewed by the compensation committee
of the board, which should consist only of independent directors. Further, this should be
approved by the shareholders.
I've been asked, 'How can I ask for limits on senior management compensation when I
have made millions myself?' A fair question with a straightforward answer: two systems
are at play here. One is that of the promoter, the risk taker and the capital markets; and
the other is that of professional management and compensation structures.
One cannot mix these two distinct systems, otherwise entrepreneurship will be stifled,
and no new companies will come up, no progress can take place. At the same time,
there has to be fairness in compensation: there cannot be huge differences between the
top most and the bottom rung of the ladder within an organisation.
PSPD model
A well run organisation embraces and practices a sound Predictability-SustainabilityProfitability-Derisking (we call this the PSPD model at Infosys) model. Indeed, the longterm success of an organisation depends on having a model that scales up profitably.
Further, every organisation must have a good derisking approach that recognises,
measures and mitigates risk along every dimension.
Integrity

Strong leadership in adverse times helps win the trust of the stakeholders, making it
more likely that they will stand by you in your hour of need. As leaders who dream of
growth and progress, integrity is your most wanted attribute.
Lead your teams to fight for the truth and never compromise on your values. I am
confident that our corporate leaders, through honest and desirable behaviour, will reap
long-term benefits for their stakeholders.
N R Narayana Murthy | January 04, 2005