Recently, I came across two sets of articles in two different publications, which I felt imposed on me a moral & intellectual duty to juxtapose, summarise and analyse .
One article was in Sunday Economic Times which compared leaders of start-up companies like Flipkart, Snapdeal, Ola, PayTM with leaders of established companies like Reliance, Airtel, HDFC Bank, ICICI Bank, Infosys, Tata Group. The other article was an HBR article which had tracked CEOs of S&P 1200 companies on various financial measures and ESG metrics (Environmental, Social, Governance), in a bid to identify common factors behind winning companies.
Being 43+ yrs of age, having worked in Airtel and Reliance, and now working in the decision-making layer of an online start-up, I would like to think of myself being in a coveted position to at least pontificate on these comparisons .
THE KEY HIGHLIGHTS OF COMPARING THE OLD SCHOOL CEOs VS NEW AGE CEOs in India are :
• The median age of “Old school” CEOs in India was 58 yrs vs 37 for New Age ones (a bit surprising for me – I expected it to be in early thirties).
• Over-arching common emotions linked with Old Age CEOs was Inspiration and Leadership. Vs “Success and Pride” for the Newbies.
• Old Age CEOs acknowledged for being Visionaries vs Newbies for being Innovators
• In People Management, the Visionaries (term used henceforth in this piece for old-age CEOs) had a positive vibe of 1.30 (1 being neutral) to a negative vibe of 0.46 of the Newbies. Hiring and firing at frequent intervals in start-ups has not made them dear to people. (please read my 2012 blog on Responsible Capitalism on same / similar topic http://www.sunilmishra.in/2012/03/07/responsible-capitalism-taking-care-of-employees-partners-clients-in-tough-times/ )
• 64% of conversations on start-ups originate in metros, 46% for Older leaders start in Metros.
MY TWO BITS ON TOP OF THE ABOVE :
• It’s a bit unfair to compare the two sets of people, because of change in environmental situation. The emergence of Mobile Internet is itself a game-changer. The best way for a fair comparison would be to imagine a young Sunil Mittal or Dhirubhai Ambani or Mukesh Ambani or Uday Kotak starting a business TODAY. That thought itself is “entrepreneurially romantic”. These people were huge visionaries with very high level of risk appetite. They could have used the Mobile Internet as the proverbial Archimedes’ Lever…to move the Earth!
• Most of the Old Age leaders put in their own money, borrowed through banks by collateralising their homes & property. Easy Finance through Venture Capitalists has made jobs of Newbies much easier.
• A flip side of VC funding is that most Newbie leaders may own single to low double digit %age stakes in their own companies. Hence, personal wealth building will always be capped for them. They may end up making some VCs really wealthy though (that most VCs are foreign funded is another topic for another day).
• India itself has become richer in past twenty years and safety net is becoming easier to build for entrepreneurs. Hence, they can “play on the front foot” with greater panache.
• However, on the other hand, most of the Newbies are running “ethically clean” businesses with no rent being paid to any Govt functionaries. Morals and Values of all employees in such companies will be better than in older companies who were forced to operate in semi-licence raaj, and hence took the easy (read sleazy) way out.
• (Thanks to the Internet), chances are very high for Newbie companies to become Globally competitive and globally relevant in terms of size, something which not many of the Old-Age companies could successfully do.
Of course, I should end this part by revealing that the Methodology for the survey above was to crunch Big Data on Internet – i.e., by analysing conversations happening on social media sites, and gleaning information from this. This is called Conversational Methodology by the firm, MavenMagnet. They analysed 7000 conversations among 6500 individuals around the 20 leaders (top 10 leaders from each camp) to arrive at the above conclusions. To that extent, the findings may be a bit biased in that people being online and talking about such leaders may naturally be more inclined towards the start-up companies, won’t they ?
Moving onto the HBR ARTICLE ON BEST LEADERS OF TODAY, HBR used non-financial metrics for the first time in such a ranking. 80% weightage was given to financial metrics – industry-adjusted ROCE, country-adjusted ROCE and absolute $mn change in market capitalisation (equal weightage to these three within the financial block). And 20% to ESG – environmental, social and governance.
Amazon was 6th ranked on Financial metrics, but went to 87 when ESG ratings were included. Novo Nordisk, a Danish-American company, in the field of Diabetes cure, turned out to be No. 1 on weighted rankings.
When I double-clicked on Causal factors (or at least common factors) behind the rankings of the 100 companies, I could glean a few factors :
• 18 CEOs out of the Top 25 CEOs were NOT MBAs!! So much so for the much-touted business degree, supposed to be necessary but not sufficient for some time.
• 19 of the CEOs in top 25 companies rose from within (could be from the ranks or at least from 1-2 levels below the CEO). Only 6 were parachuted into the company.
• CEOs in 9 out of top 25 companies have been CEOs since pre-2000, ie for more than 15 years now! Only 2 of the top 25 CEOs have joined in past 5 years (after 2010). Hence, there is no short-cut to success . 14 joined in 2000-2010.
• Only 8 out of top 25 companies are from USA; 2 each from UK, France, Spain & Belgium, 3 from Germany, 4 from Scandinavian countries, one each from Japan, Brazil. S&P 1200 being the base, Chinese and Indian companies were conspicuous by their absence. Might be interesting to see ESG rankings of those though.
• Novo Nordsik, the No. 1 company was 6th in financial metrics and 15th on ESG rankings.
• Cisco at No. 2 was 7th in financial metrics and 69th on ESG rankings
• 5 out of the top 25 companies are in each Financial Services & Consumer Goods/Services, 3 each in IT, Automobile & Retail, 2 each in Health Care & Industrials and one each in Telecoms and Materials.
• “Big brands” among top 25 are : Cisco (2), Seagate (6th), Telenor (7th), Canon (10th), Starbucks, Henkel, Volkswagen, Nike.
So, SCANNING ACROSS THE TWO STUDIES, looks like “Being Visionary, entering into uncharted spaces, having stable leadership at the top, being consistent, worrying about ESG factors” are some things that Start-ups can learn from Old-age companies – in India and abroad. To be able to last the long haul of survival and then onto excellence.