February 2004

Leadership — Some ethical challenges

R Gopalakrishnan, executive director, Tata Sons, explores what it means to don the mantle of leadership, the responsibilities and pitfalls

R. Gopalakrishnan
In Jonathan Swift's Gulliver's Travels, a ship surgeon, Dr Lemuel Gulliver, describes his fantastic adventures in distant lands. One such land is Laputa,a flying island inhabited by scientific quacks. Here dreamy philosophers are so absorbed in their speculations that they have what are known as 'flappers' to flap them on their mouth and ears whenever their attention has to be drawn from high to mundane matters. My recollection of Laputa happened as I reflected on observing 35 years of business and civic leadership.

India's economic policies of the last 50 years have had as their basis a suspicion and mistrust of business people by the ruling elite of politicians and bureaucrats. But experience has shown that this ruling elite, too, cannot be trusted by society. James Buchanan, who won the Nobel Prize for his public choice theory, took the standard assumption of the rational egoist into political science and attempted to predict the behaviour of players in the political space. Thus developed the notion of politicians as primarily interested in reelection and bureaucrats in budgets.

And herein lies today's dilemma about leadership. Who can the people trust to lead society? Every leadership institution that works also seems to fail. As Ralph Waldo Emerson said, "Every sweet hath its sour, every evil its good. For everything you have missed, you have gained something else; and for everything you gain, you lose something." Like human happiness, leadership is easy to recognise but difficult to grasp. I would like to use the 'Panchathantra approach' – four personal learnings, with stories and anecdotes – to illustrate my view.

Great leadership has a sustained impact on people
Leadership has increasingly become a perception game, increasingly influenced by how recent and newsy the images accompanying it are. Consider the case of Enron, the most spectacular collapse in 50 years of business history. Ken Lay, its chairman, was once lauded as a pioneer and visionary who transformed a sleepy gas-pipeline company into an energy behemoth. Not anymore. There are companies in all countries, India no exception, which are perceived much like Enron once was – successful but crooked. There is admiration for their dynamism and leadership, but there is also a deep and unproven suspicion about their methods.

Leadership is like an iceberg. The media, analysts and the general public see only its tip, that which rises above the water. If this part looks shapely and interesting, they put it on a pedestal. Great leaders, on the other hand, go to work at the base of the iceberg – a cold, dark and uncomfortable place – chipping away at and blasting the foundation in an attempt to renew or modify the structural framework of the organisation. To outside observers it might well appear that nothing much is happening, but great leaders do what they have to without regard to appearances, because they genuinely believe that theirs is but one lap in a relay race. Outstanding leaders are anointed long after their work is done, not three months after they become CEOs.

True leadership is institutionalised, not personalised
Genuine leaders see their role as part of a larger process, not as the process itself. They get to run with the baton for a few laps of what is a long race. Think of Henry Singleton1, who, armed with a PhD from MIT, founded Teledyne in the 1960s. He created, inside 10 years, a far-flung enterprise with 130 profit centres in everything from exotic metals to insurance. He himself acted as the glue that kept all of Teledyne's diverse parts together. In 1985, as Singleton stepped away from day-to-day management, Teledyne began to crumble.

Contrast Teledyne with Hindustan Lever. When I joined the company, in 1967, its Rs 10 share was quoted at Rs 12.50. It was a good company but by no means a great one. But look at how HLL's leaders took the company to new heights. I emphasise that these are my perspectives, and flawed insofar as I was quite removed from its leadership, especially in the earlier years.

In 1968, Vasant Rajadhyaksha became chairman and faced up to reality. Most of the company's sales were under price control and he could not wish away the public perception of consumer products being low technology. Rajadhyaksha ran his laps in the leadership relay with outstanding ability. Five years later T. Thomas grasped the baton and scored his share of wins. His successor, Ashok Ganguly, did likewise before setting the stage for Susim Datta, who rode the tide of liberalisation and energised an aggressive and enthusiastic team.

The HLL story exemplifies the point about leadership being institutionalised. I know all these people, and, believe me, they are entirely different personalities. But they ran their laps with distinction and in a way that made the running part of the longer race, the objective of which was the greater good of all HLL stakeholders.

Leadership is never proven; it is tested each day
There was a time not so long ago when we spoke about 'proven' CEOs. Life is tougher these days for this tribe. The archetype of the darting-eyed, square-jawed, tough-talking CEO has vanished. By 1998, the average CEO tenure had declined to four years and was falling further. In the recent past many a previously distinguished CEO has had to take the long walk.

CEOs lose their jobs for two broad clusters of reasons: governance and change. The governance cluster includes differences of opinion with assertive board members, botching up acquisitions, misjudging the line between self-confidence and arrogance, etc. The change cluster includes perceptions of the pace of change being too slow, not carrying people along, being too hard or too soft, and so on. What a bewildering array of reasons. I doubt whether there is anything called a 'proven' CEO in today's world. It seems that you have to prove yourself all over again – every day.

Broadly, there are two types of organisations. There is the command-and-control kind, where jurisdiction and lines of authority are fairly clear. In this category are the erstwhile Soviet Union, Singapore and China (among nations), and Unilever and General Electric (among companies). Then you have confederated entities, where there is an overlap in the jurisdiction and lines of authority. Here the number of interest groups is higher, and the means to resolve their problems more ambiguous. Falling in this group are the European Union and India (among nations), and family business groups (among companies).

Command-and-control experiences in transformation are not readily transplanted to the more complex situations involving confederated entities, where the external perception of change is intolerant and unmindful of the internal dynamics of multiple interest groups and consequent ways of working. India's road to liberalisation offers a telling example of this phenomenon.

The public-life flaws of leaders affect moral purpose
All leaders are flawed, but the point to consider is whether their flaws are acceptable. Excellent leadership is the two-fold ability to lead people morally and effectively2. But morality, though necessary, is not a sufficient condition. That is why we think of Jimmy Carter as the most moral of American presidents, but rather ineffective as a leader. On the other hand, if a person is thought to be effective then the inevitable morality test comes into play. If the flaws are in public life, they can be debilitating. That isn't necessarily the case if these flaws are in a person's private life, but the morality barometer reads differently in different societies.

George Washington's position as the predominant figure in establishing the United States as a nation is well deserved. His unique moral standard was that he had no ambition to hold power indefinitely. Many at that time assumed that in the time-honoured tradition of 'champions of the people', Washington too would make himself king, especially since he was known to have a weakness for pomp, high living and the luxuries of aristocratic life. But Washington did not succumb to the temptations that would shortly ensnare Napoleon in France.

My insights, and the stories that fashion them, are largely derived from the world of business, with a bit taken from the world of public affairs. In both arenas it appears today that the gap between the demands of leadership and the available supply of leadership is huge. All of us are part of this demand-supply gap, each one of us limited in his or her way. Meanwhile, the 'followers', if I may so refer to them, are waiting for breakthrough leadership – without flapping their leaders, as in Laputa.

The greatest mistake leaders can make is to assume that results alone matter, that morality and goodness do not count. On the contrary, as amorality becomes more rampant, as the heart of darkness expands, the natural human instinct is a craving towards light. We need results and we need them desperately – but with goodness and moral purpose.

Good to Great by Jim Collins
Leading Change by James O'Toole

R Gopalakrishnan delivered this speech at the Ghaziabad Management Association – Annual Convention in Ghaziabad on February 20, 2004.

More Speakers' Forum articles:

Do bigha zameen: R Gopalakrishnan, executive director, Tata Sons, traces the growth and progress of economies and the growing importance of agricultural marketing
Preparing for the future: Happiness is not a destination, it is in fact, a companion along the journey of life. In his speech on IIT-Mumbai's Foundation Day, R Gopalakrishnan shares some insights on how to build and sustain a successful career
Disruption and uncertainty: Knowing it is there but not knowing what it is: R Gopalakrishnan, executive director, Tata Sons, breaks down the concept of change in relation to today's business scenario