Who Blunders and How? is a book that is hard to stop reading and is written by a man at the top of a company, Robin Banerjee, who has experience working in some of the best companies such as Hindustan Unilever, Thomas Cook, Suzlon Energy and Essar Steel, besides Caprihans India, which he currently heads. He builds his narrative on various stylised blunders made by firms that can be traced to those in power, like CEOs, founders and other members of the top management. It is, hence, a first-hand analysis of how things go wrong in organisations and how companies should avoid these traps.
The book is in various sections or chapters, with each one talking of a blunder that is committed. Quality failure is his first take, where several companies fall or lose credibility on this score. This is backed by extensive research and analysis, which the author draws from across the world and showcases how companies have fallen in this trap.
The Toyota story is well known and he adds such tales from India and the world to make the essay really engaging. In fact, this trait can be traced to cultures of the organisation and the leadership as it all starts from the top. As Banerjee takes us through this maze, he quite rightly points out that one common reason for failure in owner-driven companies is the inherent tendency to hand over the reins to family members, who can be siblings or children and may just not be made for running an organisation. Professional leadership is required and while some founders understand this, others don't. This is why several empires have collapsed or degenerated over the years. This is a tough call for any head of the family, as it's always assumed that the baton will be passed on to a family member. The examples given here are quite relevant and the reader would be able to relate to several of these cases.
Being a managing director of a company, Banerjee is able to clearly talk of the roles of the CEO and the governance structures when building or destroying an organisation. Errors will always be made by CEOs, but the way we react to them and counter the perception is important. Here, he rightly points out that the three most difficult words for any leader to say are, "I am sorry". By just uttering these words, the world becomes forgiving and the intensity of criticism comes down. This is rarely admitted and either companies tend to push the problem under the carpet (as Indigo has done) or even ridicule customers (Ryan Air). When publicity goes awry, it is largely damaging for any company and the reputation hit is severe.
Banerjee takes us through all kinds of blunders where human beings are involved, which tells us a lot about the personality of the CEOs or owners. Certain corporate actions like those involving M&A activity have also been highlighted by the author on why companies decay. Globally, too, it is accepted that merger activity has had more misses than hits and, hence, should be done very carefully. Times Warner and AOL is the best-known large M&A that went bust. We have seen that, often, the savings in cost don't work and that the logic of one plus one being greater than two can become less than one. Yet there have been several cases of bold acquisitions by Indian companies in other countries that have destroyed value. And when mergers fail, it is hard for companies to revive because, often, this gets related to another corporate activity that presages a downfall, which is debt.
Over-leveraged companies have had a history, albeit a negative one, with the bankers and shareholders and this has led to their collapse. There is evidently a need to get the right mix of debt, in terms of quantum, if the project (which could be a merger) does not work, as it can bring down the main business too.
There are, hence, a series of such blunders that are discussed in detail by the author and it is quite amazing that most of them seem so obvious that the reader can probably say, 'How could the management not have seen it coming?' This is especially true when the author talks of the importance of innovation for growth, which companies seem to miss.
Often, one feels that Kodak or Nokia should have seen the change in technology taking place and prepared for it. These changes in a competitive arena rarely happen at a particular point of time, but take a couple of years. In such a situation, it seems logical that anyone can see it happening, but firms do not. The reason is that often they are in denial of such changes affecting them.
The author believes that the CEO or MD or someone at the top is responsible for these bloopers because most corporate cultures discourage dissent and naysayers, and the heads like to surround themselves with sycophants who say what they want to hear. Having contrary views is normally brushed aside, if not punished.
That's why companies fail. The author does argue that organisations need to be flexible, have diversity in workforce, chalk out a career path for thinkers, inspire creativity, institutionalise innovation and, more importantly, be prepared for failure. While everyone likes to say that they pursue these tenets, few actually do so in practice.
Banerjee has a knack of writing with panache and is quite direct in his approach. Never mincing words or using innuendo, he has provided appropriate examples for each blunder, which make the book worth keeping on the shelf.
Madan Sabnavis is chief economist, CARE Ratings
Who Blunders and How? The Dumb Side of the Corporate World
Pp 263, Rs 550