If you were operating at or connected to the senior levels in the technology industry, the news of Sikka’s exit from Infosys would neither be shocking nor unexpected. It was a question of when – not whether – Sikka would be out of Infosys. So what went wrong ?
When Sikka took charge, Infosys was in doldrums. Once an industry bellwether, Infosys stood still as industry peers like HCL and TCS grew quicker and delivered better returns. Its efforts at moving up the value chain through Infosys 3.0 came a cropper. Murthy’s second stint as CEO under those tumultuous conditions was a largely forgettable one The only positive event were Murthy’s efforts to bring in a new CEO.
The CEO search
The Infosys board envisaged what it needed in a new CEO: a successful technology executive with a global perspective and proven track record. Sikka’s academic success and credentials at SAP looked impressive: additionally, he seemed to have the depth of strategic skills and the right vision for an organization Infosys’ size. He took charge as the first non-founder CEO in 2014. All good? Not quite. Two areas simmered in the background right from beginning:
1. The very first clue comes from Infosys’s tagline: “Powered by Intellect, Driven by Values”. While Sikka’s Stanford PhD and SAP HANA success ensured his intellect stood out, his values’ fitment is unlikely to have ticked all boxes. Sikka was a global executive schooled in liberal values – diametrically opposite to te values of a traditional Infosys. Sikka’s masterful strategic skills and intelligence were an unlikely replacement for his mismatch of cultural values, especially for the top job at an organization that prided itself precisely on these very values,.
2. Sikka’s due diligence about the role of Infosys’ powerful and domineering founders presented an important potential fault line. There is a likelihood that Sikka mistook his experience in the West – where executive freedom is nearly guaranteed – as a benchmark for what to expect at Infosys. Little did he understand the true meaning of Murthy’s line “Infosys is my middle child”: Sikka, like others, might have laughed it off as parting words from a genius – not as literal words from a very possessive strong personality.
In the battle of nature vs nurture, Infosys founders expected Sikka to get nurtured by existing values whereas Sikka expected his nature to turn Infosys around. That dichotomy – as time would tell – made all the difference.
However, difference in such subtle yet vital areas rarely manifest themselves overnight: they build up overtime and blow over soon.
Sikka scored some early successes:
1. Sikka loosened the office dress code, promoted 500 employees, gave away iphones, strengthened grassroot communication and did everything to engage employees.
2. Sikka next wooed the investor fraternity and the stock markets by presenting a grand and aggressive vision of a $20 billion organization by 2020. For an organization known to under-promise and over-deliver, this was a cultural shock. The tall talk raised expectations drastically and while that enthused the stock markets in the short run, the expectations – as we now know – made it difficult for Sikka to live upto them.
3. Last, for a conservative organization known to harp on its brand but never known to pay top-of-the-line salaries, Sikka raised the salaries of his top reports to unheard-of levels.
Seen from the perspective of Infosys’ founders, these initial “successes” were not success at all: they were cultural failures, disturbing enough to lead to uneasy relationship with Sikka, but yet not alarming enough to cause a blast.
Meanwhile, Sikka brought an army of top people from SAP to change the culture and help him transition Infosys from a lumbering elephant to nimble cheetah. Unfortunately, Sikka misjudged what it would take to bring about a cultural change: if a culture of a 30 year old, hundred-thousand employee traditional organization could be changed with a handful of imported top-managers, Drucker’s powerful line “Culture eats strategy for breakfast everyday” would not have stood the test of line.
All of the above would still have sustained but for a few areas where Sikka and the board crossed Murthy’s red line.
1. Awarding CFO Ravi Bansal a huge severance pay package raised question marks on corporate governance. Infosys prided itself on its disclosure standards. The board’s decision of not disclosing the contents of reports from an external law firm – especially when all was deemed “fine” – gave an already disenchanted founders’ team a stick to beat Sikka and the board with.
2. Within months of the Bansal episode, the board raised Sikka’s already high salary by 55%. The stick in the disturbed founders’ hands now got a poison tipping and became a lot more potent with Murthy incessantly and publicly lynching the board.
3. After some initial success, Sikka’s turnaround strategy missed its target by an embarrassing $5 billion: finally in June 2017, the board scrapped the $20 billion target.
For an organization that consistently beat investor expectations for years, this was a strategic Freudian slip and the Infosys stock – and Sikka – lost support of some of the vital institutional investors.
And for Sikka – long dismissed as a cultural misfit – who had strategic results as the last armory in his toolkit, a slipup in strategy, positioned his rhetoric as “all bark, no bite”. This was the last straw on the camel’s back.
With a frustrated founding team led by combative Murthy, allegations of corporate governance, a failed turnaround strategy questioning the very competence of Sikka and missing investor support, Sikka had nothing to fall back on and nothing to look forward to – except a good nights sleep and the much needed peace of mind. Exiting Infosys provided him precisely those benefits – and Sikka cut his losses.
There are some really valuable lessons:
1. With the infamous Tata episode still fresh in memory, Indian founders and family business heads would do well to rethink if they really want to let go in the true sense when they hang up their boots. If all they want is to remote-control a strategically minded executive – who is tasked with the responsibilities of a CEO without the requisite authority, they should stop searching the market and instead stick to the comforts of loyal insider.
You can have loyalty or results – rarely both.
2. For prospective CEO choosing a top job at any organization – specially with powerful founders or families, it is well worth developing a thorough understanding of the cultural factors and sensitivities involved. Raw Intelligence is a necessary but not a sufficient condition to succeed – emotional intelligence provides the much-needed sufficiency. And that involves recognizing stakeholders interest before picking up the top job.
There is no point in diving in deep oceans and complaining about sharks.
The forces of nature are so strong that in the battle of nature vs nurture, nature often wins hands down. As Sikka learns that lesson and walks into the sunset, he would do well to recall Peter Drucker’s golden lines that Cyrus Mistry at TATA group learnt equally painfully:
“Culture eats strategy for breakfast everyday”.
Source: WhatsApp Forwards and long-time Infoscions