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Making business sense

By Anil Bhat

Udai Vir Singh's 7 Deadly Sins of Corporate Mismanagement, published soon after the Satyam scam - the largest in India's known economic history -exploded and at a time when recession is gnawing at well-established corporate empires in developed countries, might be an apt and timely warning to the entire business community.

While what happened at Satyam was outright massive fraud, the fact remains that mismanagement creates the ideal climate or circumstances not only for fraud to flourish but also for it to not get detected easily.

Based mainly on the author's own encounters with situations of mismanagement during his 40-plus years of experience in the corporate world, rather than getting into mere theoretical aspects, he writes about the methods he adopted to solve problems that he faced. And some of his unnerving observations are: (a) Almost all corporate work environments suffer from varied degrees of mismanagement, more often by design than by default; (b) Invariably, all non-performance leading to corporate bottomlines ending up in the red emerge from mismanagement, especially at the senior management and entrepreneurial levels; and (c) Management education institutions, for inexplicable reasons, consistently ignore throwing any light on this highly negative corporate affliction while preparing management students and executives for doing a good job when they enter the complex corporate world.

The master swindle of over Rs 7,000 crores by Satyam's chairman and CEO B. Ramalinga Raju made miserable the lives of over 50,000 of its employees, thousands of international customers and millions of investors both in India and overseas. Several of its bankers, financiers, suppliers, auditors, and senior managers too did not escape at least minor economic and psychological wounds. The basic issue thrown up by this disgraceful fall of one of India's internationally-known IT brands, besides frauds and financial malfunctioning, is that of corporate misgovernance.

Satyam is not the only culprit in the corporate forest of India. There are several Satyams in India's realty and infrastructure sectors, where those in the know say that top politicians are involved "fairly substantially". Exposure of this mess will require whistleblowers of exemplary courage and resourcefulness. According to the author, "minor Satyams" at a lesser level happen almost every day in the Indian business community.

The seven "deadly sins" that the author enumerates are mismanagement of human and financial resources, decisionmaking, talent and technology, markets and customers, communications and crises. The book's 16 chapters, in addition to these "sins", look at mismanagement in all aspects of corporate functioning, including men, material and numerous other details, including the processes of the genesis and the spread of mismanagement, primarily through interactions of the forces of negativity.

The theories of negativity and bio-lethargy elaborated upon by the author seem to have immense practical applications in modern management. Also quite interesting are the author's references to his earlier book, titled Management Wisdom of Lord Krishna, which are applicable in dealing with the inherent malaise of mismanagement in corporate work environments. This relevance comes into management owing to the very basic human factor: the emotions, ego and politics which often make many managers mismanage issues.

A glimpse at how mismanagement added to, if not entirely caused the recession might be relevant.

Arun Shourie, who was minister for communications and IT, disinvestment and commerce in the earlier NDA government at the Centre, had said at a press conference in April 2009: "The current bad situation in our country is not because of the global recession. The UPA government is covering up its mismanagement under the garb of recession. From 1986 to 1991, the average fiscal deficit of the country was 7.7 per cent of GDP. This year, after successive Budgets by the Congress-led UPA government, the deficit has risen to 11 per cent. If the government takes money from the market to cover its losses, then there is no liquidity and growth is choked."

Gerald Jackson, in a recent article "Recession, Depression and Monetary Mismanagement", observed: "Part of the current problem is that the US economy has accumulated masses of malinvestments that need to be liquidated. Pumping money into these failures will sabotage economic recovery, a lesson that President Obama and his economic advisers seem incapable of grasping. Of course they could argue - as some are now doing - that the fall in consumer spending combined with the rise in the personal savings rate is holding back recovery. On the contrary, more real savings is just what the economy needs, not less."

Two classic examples of mismanagement plaguing India are those in the defence and security sector and in public sector undertakings. It does not take much to figure out what the two key "factors" responsible for mismanaging these areas are.

Another permanent contribution by these two factors is corruption, which is a close cousin of mismanagement. While frauds bred by mismanagement can cause a collapse of the organisation, corruption can at least make it sick.

As a timely wakeup call, this book is a "must read" not only for senior corporate managers, management teachers and first- and second-generation entrepreneurs, but also those who have been managing, or rather, mismanaging India. Because even if Corporate India succeeds to sail through the turbulence of recession, good governance will be required all the more in the coming decades to meaningfully manage a crazy paradox of a country like India - bursting at its seams with human resources, but many sections of which are suffering owing to a gross mismanagement of the distribution of material resources.