Appraisal of a CEO and the President who have lost their way….

submitted
to the Chairman of the Board, of Over-C Inc. (By Raju Swamy)

A Wake-up Call… to save Over-C Inc. (A Real Life Advisory Note, but
with names changed)
In today's optimistic business scene, where business in general is thriving, and where IT
and ITES companies in particular are thriving, one likes to hear in Over-C Inc. the sound of
galloping horses, of the sound of engines being revved up, and of the sound of heated
debates on strategy and action. Unfortunately, I hear only the ominous silence of the
lambs... On the second floor, people hardly smile and crack jokes anymore, and others
elsewhere always wonder…and keep wondering…

I am writing this because I find demotivation and degrees of frustration creeping even into
employees considered ‘stable’. On a one-to-one, for quite some time, many have asked me
why I do not send Sales Bulletins anymore, why Executive Meetings are not productive,
why the company always seems to be in a financial mess, why Raymond and Stanley have
no time to address issues other than some issues concerning only Business X, that also
only when pressurized, etc., etc. I have always responded as to why you don't raise these
issues directly when you have an opportunity, atleast when an Executive Committee
Meeting is held. The reply often, and almost unanimously is, “Why should I get into
trouble…I might as well quietly get out.... and in any case till then I will get paid, whatever
the results”. It is the Stockholm syndrome where you begin to enjoy the freedom of
indiscipline, even while you get paid for it, which is a bonus.

One of the reasons for this cynicism is also because of total avoidance on answering any
question with a clear answer by the ‘Top Management’ (we will refer to this as ‘TM’ in the
rest of this note. TM of course refers only to Ray and Stanley). Most of these questions
were also asked – and not answered - during the Annual Management Conference: Anne
has the list.

Let me try and answer some questions:

1. Sales information on ‘Exports’ is not sent anymore because nobody is really in charge
of Marketing and Sales. No organized team meetings for Performance Review are
held anymore. These Weekly Performance Review Meetings were discontinued
because I asked accountable questions, and others heard them, and were
influenced by it. Targets have no meaning…nobody knows or cares. In 2005-06, new
business targets were not met. In existing business, targets and actuals did not
match. Nobody really cared. Stan was accountable for Domestic and Overseas
Sales. The results for Q1 & Q2 this year are transparently bad. No new business,
and if something goes wrong with our one most loyal customer, that would almost be
the end.
2. People within Over-C know that Marketing and Business Development are weak in
the company. During the July Training Session on Brand Equity, one of the
questions raised was “do we have a Business Development Team?”
3. There is also another side to this debacle: sheer non-performance inspite of almost
$1million being spent over the last three plus years directly and indirectly through
travel and other costs primarily for business development abroad. No accountable
reporting whatsoever, within, or to the Board.
4. A major reason for the above is also because TM targeted Business X as the only pot
of gold at the end of the rainbow and everything else was not important.
Consequently the overseas business went for a toss with no encouragement and
poor leadership. The consequences of this profound policy are being felt now on the
cash flow front with Business X projects execution delayed and incurring losses
because of inadequate planning, management and logistics jams. Over-C has now
become dependent on Business X without a planned back-up policy. Having a ‘Plan
B’ is unheard of in Over-C.
5. With our dependence on Business X, and overseas business declining, just for the
first four months of this year, cash losses can be estimated to be very significant. It is
also important to extract Rev/Empl. and Cost/Empl. to show the stark imbalance
between revenue and expenditure and the extent of unproductive employment.
6. If one were to seriously track the company’s record on Business X, you will find there
have been significant write-offs and irrecoverables totaling many millions. It would
not be surprising to discover that we have never made profits on Business X! If one
probed further, on other businesses too, Over-C’s track record on write-offs is pretty
bad. Remember the Portal Business? There may be other examples, particularly
during the merger process.
7. Frankly, if people are accountable for results, there is nothing wrong with pursuing
one’s strengths, including Business X. Unfortunately, Accountability is the weakest of
Over-C’s management traits and is most in evidence at the level of TM. The TM
culture is strange: Get a project at any cost, ROI is not important. Generating profit
for shareholders, meeting other critical financial commitments is not important.
Expenditure is the source of management power, not profit and results. Expenditure,
using vendor overdues, employee overdues, delaying statutory obligations, and
using ‘adjustments’ all around, is the secret of business, and of power. Expenditure
is Power. A dangerous management philosophy where you also develop contempt
for people you owe money to!
8. Today, one meets expenses of A by depriving B. Or use credit card X to pay credit
card Y. Or, even while building a structure, sell the bricks from within to keep going
‘up the down escalator’. Or, use one loan to pay off the other. This is the reason
there is a perpetual financial jam: we do not generate surpluses to grow. This is
plain arithmetic, and can be verified. Whatever profit is being shown is negligible and
even that is dressed up.
9. When performance is not based on accountability, and power to govern is driven by
the power to spend and not by the power to earn, there will be many decisions that
go wrong and results that will be negative, because unbridled and untrained
leadership ‘power’ overrides business logic and management skills. And the more
negatives there are, the more facts get hidden. There is more silence and avoidance,
and more claims to be ‘busy’. ‘Busy’ with what? ‘Busy’ running away from
responsibility? Who will run the organization and make it grow positively?
10. And in this atmosphere of secrecy, of uncertainty, nobody talks of knowledge
acquisition, innovation, disruptive technology, and of the future. You not only have a
 stagnant management, you also stagnate on technology. People complain of not
getting exciting new projects.
11. Vision, Goals, KRAs…what do they mean? And why do we need them?? Ignore.
Silence.
12. It is a strange coincidence: both the members of TM are obsessed only with ‘Self’
and do not understand an Organization, and its Management. They are caught in a
trap of their own making: perpetually ‘busy’, silent, secretive, and unproductive. They
function like little children chasing their favourite toys, and then breaking them, and
hiding the broken pieces under the pillow.
13. How do we then get out of this quicksand?
13.1. Ray is the founder of Over-C and the largest single investor/shareholder. However,
his role as CEO is that of the Key Manager, and distinct from that of an investor, and
for which he is paid a substantial salary. He also gives himself increments,
irrespective of performance. There is no appraisal. Stan is also an investor but also
draws a substantial salary. He also gives himself increments, irrespective of
performance. Again, there is no appraisal. Both of them as managers are self-
appointed, as an extension of them being investors.
13.2. As managers they must deliver to themselves as ‘investors’. But, they are paid
salaries and their expenses are met irrespective of whether they deliver results
against performance targets or whether the company makes a profit or not. Why
should they bother about generating profits and dividends for other investors? This
is the contradiction of Governance and Governance Ethics.
13.3. Unfortunately, TM’s lack of accountability has rubbed off on the entire organization
and therefore today nobody is accountable in Over-C! Increments are given just to
hold on to people and rarely for performance. People in the company are aware of
this. And as I have stated earlier, many of them are happy making themselves
comfortable amidst indiscipline.
13.4. Unfortunately, our TM is unlikely to change their work habits and culture. They are
experts in putting a black lining to a silver cloud: converting a good situation to bad
by overconfidence, overtrading, exaggeration, poor judgment and poor arithmetic,
and believing all that they do as ‘hard work’!
13.5. What we need now is an Accountable independent CEO who can run Over-C
exploiting all the market strengths and opportunities that can carry the company to
productive growth. Ray can continue to be in the statutory position of Managing
Director. Good governance structures allow for the MD and CEO being different
individuals.
13.6. We also need Chief Operating Officers for Business X and for Overseas Sales, all
accountable positions.
13.7. We need a genuine Marketing and Sales Manager. We need a genuine HR
Manager.
13.8. The other functions can then be suitably structured using the current managers,
many of whom are good provided they get good leaders who enforce accountability,
through personal example.
13.9. I am not clear on where Stan fits in. His primary qualification for the job he
currently holds in Over-C is because he is Ray’s friend and confidante. Other than
that, if you go by results, in relation to the money spent on him, and what he draws
as salary and perks, he has not added value to the company either by way of
 increasing business or by way of improving management and work culture. If he has
done something, it is a well-kept secret, even by Ray.
13.10. It is difficult to justify Stanley’s trip to China at this juncture to attend the Blue Fish
Conference at a few thousand dollars or more of scarce money. Stan’s personal
goals seem to far outweigh his interest in the well-being of the organization. The
value of last year’s Blue Fish listing is debatable considering that Blue Fish’s
comments on Over-C’s concentration on Business X was not complimentary, and
would have put off any investor. Stan is aware of this. On hindsight, their
observation was not off the mark.
14. The Board needs to be immediately strengthened to hold the top and senior
management accountable. So far, the current Board has never been kept informed
correctly.
15. Ray, and Stan, as investors, have to play the role of investor-directors in their own
interest and leave management to better-experienced and qualified professionals
who have run better organizations successfully and believe in accountability.

I am aware that finally, my note may break the silence, and provoke an answer.
Unfortunately, by habit, it could still be evasive and not factual, and may in fact divert
attention to me personally in some manner, as an escape route. This will of course not
solve the very serious and urgent issues confronting the company.

Finally, should I have kept quiet even as I was aware about the developing crisis?
Unfortunately, both the ‘TMs’ have become so thick-skinned and obsessed with their own
self-importance that there was no alternative. After all, I have tried many times, and in many
ways, over the years, to get their attention on issues requiring correction, but they always
knew best. Also, incidentally, apart from my professional association with Over-C, I am also
a shareholder and I and many others including employees will be adversely affected if
corrective action is not taken immediately.

The most urgent step required till the organization can be restructured is for Ray to
immediately form a Management Committee to run the company instead of just the two of
them. The company needs to be ‘controlled’, stabilized, and put on the right track of
management and performance integrity. For this, the Board will also have to be taken into
confidence, and will also have to be strengthened.

Time is rapidly running out. If there is delay, Ray and Stan will be solely responsible for
even more damage that could then become irreparable.

On a more personal note, Ray, please come out into the open and help save the institution
of which you are the founder. ‘Coming clean’ at this point would be the best strategy to take
the right steps to recovery. ‘Coming clean’ would also help people to help you, and
themselves, and Over-C. I do hope that you will succeed with getting VC money but that will
not change the need for total management reform within the company. There is just too
much baggage and damage to take care of first.

An emergency meeting of the Board needs to be called to start the process of saving the
company.
Raju Swamy
Principal Consultant
& Advisor to Entrepreneurs & Family Business
PROMAG Consultancy Services
Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore - 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email: rajupromag@hotmail.com
Promoting Management Action for Growth…. since 1985