Rescuing Infosys: Why Narayana Murthy had to break two of his own rules

Infosys often prides itself on sustainability, profitability and predictability. Very few observers would have predicted that Infosys would make an announcement early Saturday morning, saying that NR Narayana Murthy would be back in an executive position at a company he founded 32 years ago. (Even Narayana Murthy said in a press conference later that he didn’t imagine, even in his wildest dreams, that this would happen).

This was supposed not to happen for so many reasons. The foremost among those reasons was that Narayana Murthy himself set a rule that no founder hold an executive position past 60 and would step down from non-executive position after the age of 65. Mr Murthy is a kind of person who would say such things as a matter of principle, and people would believe him, with justification. (When Satyam scandal broke out and IT companies were looking to buy its assets at a cheap price, NRN said it was a tainted company and Infosys wouldn’t touch it. It never participated in the bids, even to get competitive information, a common strategy for rivals.)

[caption id=“attachment_833431” align=“alignleft” width=“380”]  Narayana Murthy. Reuters[/caption]

Yet, that surprise quickly sank in because everybody knows that Infosys is in a bad shape these days. Its revenues have been sagging, its profitability is getting hit, its attrition rates are high, its employees mood is down, analysts are flogging the firm, stock market has been giving its thumbs down to the stock for some time now, all these at a time when its rivals are doing better. It has lost its IT bellweather tag to TCS, and the second rank in the market to Cognizant in the last one year. The only excitement in the market is around the news of the next CEO, as if there is no hope from the current set of leaders.

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KV Kamath, non-executive chairman of Infosys, told in the press conference today that the board took feedback both within and outside the company before it approached Narayana Murthy in the beginning of May to ask him if he would take up the role of executive chairman. Mr Kamath told journalists later that Murthy said he was always a soldier of Infosys and he would accept the offer. Murthy is set to take on the role formally next Thursday. He would set up a team at executive chairman’s office and the team would include his son Rohan Murthy, a doctorate in computer sciences from Harvard University. Rohan would be his executive assistant. (And in this, he broke yet another long standing, and often articulated, principle - that the children of Infosys founders would never take up jobs at Infosys. That Rohan would be taking a salary of just Rs1 is unlikely to silence the critics.)

What would silence the critics though if Infosys suddenly turns around, gets past Cognizant and breathes down the neck of N Chandrasekaran, CEO of TCS. Will that happen? That’s an important question, but not exactly the right question at this point of time. The right question is what exactly can we expect NR Narayana Murthy to do in his new role.

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During the press conference and later during the interviews to television channels, Narayana Murthy resisted answering any question about his diagnosis of Infosys problems or the solutions he has in mind. For the first, his response has been that he was away from Infosys during the last few years and out of executive role even longer. For the second, he said humility demanded that he spends time to understand what exactly was happening before coming up with any idea.

He himself kept saying that he sees his role as adding value to Shibulal and Infosys. Adding value, he explained, would come in terms of ideas in discussion and debates in arriving at optimal decision; in helping the CEO implement those decisions with a sense of alacrity; and generally in enhancing excellence.

That’s a broad definition of adding value. We believe it will come in three ways.

Articulate and tweak Infosys 3.0 strategy:

While Infosys has designed a good strategy in Infosys 3.0, the big problem was in communicating the strategy across the layers of the company. While reporting on a recent Forbes India story on Infosys 3.0, we found that several people both within and outside Infosys had only a vague or partial understanding of what exactly Infosys 3.0 was. The most common misperception was that Infosys 3.0 was all about products and platforms business. Narayana Murthy’s big contribution would be articulate this vision better. Narayana Murthy is very good at setting vision. While there are leaders who are good at communication and even persuasion, Murthy’s talent goes beyond salesmanship. His strength is in articulating a vision in such a way that makes people realise it’s enormous and achievable at the same time.

But, Infosys 3.0 also needs some tweaking. It’s a much more complex strategy - that led the second level leadership to drop the ball on the core 65% of Infosys business - of application development & maintenance, software testing, infrastructure management, business process outsourcing - and focus too much on transformational business. One can bet on Narayana Murthy to cut down the complexity and make it easier. (He often forces journalists to repeat the question in a more simple fashion - and the resulting clarity can be revealing. It’s an important tool in boardrooms)

Turn the mood upbeat

It’s no secret that morale within Infosys is bad, not because there was a drastic change in HR policies. There were some, but the primary cause of unhappiness is financial under-performance. Studies point out that it’s good financial performance that leads to happy employees and not the other way down. In case of IT, low growth directly results in bigger bench. Its growth has been slower than the industry growth and its peers, it is getting beaten by the analysts and the stock market. That is reflected on the way the company looks at its leadership. According to Glassdoor, Shibulal’s approval rating is the lowest among its peers. Even so, a charismatic leader can turn the mood upbeat - by changing the lens people use to see the events. Given Narayana Murthy’s reputation, he might just be able to do that.

Give back growth focus to Infosys

The clearest sign that Infosys was falling very much behind came when Cognizant overtook Infosys. And the clearest sign that Infosys got its mojo back will happen when Infosys overtakes Cognizant. Right now, Infosys is growing slower than the industry. Even if it equals industry growth, it cannot beat Cognizant, because Cognizant has bigger base and is growing at a faster rate. The only way Infosys can beat Cognizant is through inorganic route - that is by making an acquisition. While KV Kamath would have done a great job here, Narayana Murthy comes in with two badges that Kamath never had - that of a founder, and more importantly the position as executive chairman. Murthy could well be at the helm of the next big acquisition that Infosys does. (At a recent analysts’ meet, Infosys said it is willing to make acquisitions to the extent of 10% of topline). If Murthy pushes the right levers for growth, on the top of a couple of acquisitions, before anyone knows the perception of Infosys would have changed.

A journalist remembers Murthy telling a young Infosys executive several years ago that ‘perception is as important as reality’.

It’s not perception from a public relations angle. It’s perception as Luc de Brabandere defines it. In an interview to Economic Times in 2009, he said, “We believe that to really make change happen, changing the reality is of course necessary - this involves developing novel ideas for change, and the implementation of those ideas via project management and measurement, templates and the like. But changing reality is not sufficient - we must also change peoples’ perceptions .

This happens on much more of an individual basis; each stakeholder’s needs and biases must be taken into account. This can only be done through careful preparation and communication . So to really make change happen, we must change twice - reality and perception.”

Murthy’s most important contribution to Infosys will come from that.

NS Ramnath writes for Forbes India