The Four Most Instructive Management Shake-ups
21 September 2017 -
From Infosys to Uber, management reshuffles are often the go-to move for companies looking to find a new direction
Over the past 30 years, Infosys has earned a strong reputation for stability and reliability internationally as one of the leading Indian IT outsourcing companies responsible for maintaining the computer systems of major American and European corporations.
However, recent infighting among the Bangalore-based multinational’s executives has led to a sudden management shake-up, which could be disruptive to both long-standing clients and employees.
On August 18th, the company’s chief executive Vishal Sikka, the company’s first leader who wasn’t a co-founder, resigned unexpectedly after a three-year tenure. The news sparked a 15% drop in the company’s share price.
Leaving a vacuum behind, there is now reportedly a battle between several Infosys executives to take control, including the chairman, the interim chief executive and a retired founder.
According to reports, Sikka’s decision to quit as leader followed months of “continuous distractions and disruptions disagreements” impeding his efforts to transform the 36-year-old company.
Infosys sources have reportedly stated that the company lost Sikka because the board took too long to take a strong public stand against the firm’s principal founder, Narayana Murthy, a pioneer of the outsourcing model that has since become a major industry in India.
In a leaked e-mail, Murthy had reportedly said Vishal Sikka was more chief technology officer material than chief executive officer material. Murthy had also criticised the board of Infosys for what he described as a "concerning drop in governance standards".
U.B Pravin Rao has been installed as the interim chief executive, until a long term answer can be found. The appointment of a new CEO is likely to be one of the important in the company’s history, as Infosys embarks on a vital and urgent transformation of its business model and operations.
Indian IT outsourcing companies are increasingly under threat from changes in the marketplace, politics and new technologies.
On one hand, Infosys must be ready to adapt to any restrictions on trading in progressively more inward-looking economic powerhouses such as the US and the UK, and be ahead of the curve in implementing automation and more sophisticated software and hardware services into its offerings, such as apps and cloud-computing support.
While at the helm, Sikka proposed to invest in more innovative services for clients and to use automation to become more productive, offering workers training in machine learning. While this is still likely to go ahead, instability and disputes among its most senior managers and investors risks upsetting clients, who have held long-standing mainframe-maintenance contracts, and losing its most talented staff to rivals such as Tata Consultancy Services and Wipro.
Uber drives ahead
While Infosys are still looking for their new leader, Uber has picked theirs, in another example of a significant management shake-up to transform a company’s fortunes.
On August 27, Uber confirmed Dara Khosrowshahi as its new chief executive, who came from online travel company Expedia. The former banker succeeds Travis Kalanick, who remains on the company’s board, as Uber CEO after more than doubling Expedia’s pre-tax earnings during his 12-year spell in charge.
For many journalists, commentators and analysts, the introduction of a new CEO was necessary for the rapidly growing San Francisco-based company, as the company looks to bolster its earnings, rebuild its public reputation and resolve a series of disputes from the previous administration.
Reportedly valued at around $68bn (£50bn), Khosrowshahi must prepare the firm for an upcoming IPO, which he has suggested may be only 18 months away. In doing so, Khosrowshahi will have to produce a robust strategy to turning around its $1.4bn (£1.03bn) losses recorded in the first half of 2017.
The firm faces a criminal probe by America’s Department of Justice into a covert software feature that showed regulators different versions of its app, as well as a new investigation into whether it may have violated America’s Foreign Corrupt Practices Act by bribing officials abroad.
It must also contend with multiple lawsuits and allegations that it encouraged a sexist culture.
The lawsuit from early investor and Uber board members Benchmark Capital will be a particularly tricky challenge for the new Uber chief, as the case surrounds allegations made against former CEO and founder Kalanick. And with both parties still key parts on the company’s board, an amicable solution is necessary to prevent further disruption to the firm.
Shake-Ups That Led To Profits
Successful organisations rely on more than just one person or group of people at the top, but a top-quality CEO can ensure that the right people spend the right amount of time driving the necessary changes.
One recent example is Martin Bennett, CEO of HomeServe’s UK business, which provides home assistance to millions of households for their water, electricity and gas utilities.
Leading the business since January 2014, following a year as group chief operating officer and three years as group chief financial officer, Bennett stepped in at an all-time low for the firm as it was fined £30.6m – the largest retail fine to date by City regulator the Financial Conduct Authority – for mis-selling insurance and mishandling customer complaints.
Incredibly damaging to its reputation as well as its bottom line, Bennett transformed the company’s fortunes, turning the firm into the most improved company in the UK for customer satisfaction in the services sector.
Bennett has credited the turnaround to refocusing on the needs of employees and rebuilding the brand from the inside out.
“The fall-out with the regulator gave us a chance to reassess how we were doing for customers,” Bennett has said. “At the heart of achieving our ambition is making a strong link between customer and employee expectation.”
Trusting his employees underpins Bennett’s leadership style at HomeServe. He has said: “You can only lead in the way that’s true to you or people will see through it. I’m surrounded by people who are much better at their job than I could ever be, so trusting people to get on is key.”
The company holds bi-annual ‘cascade’ sessions, gathering staff to hear the business’s plans and where they fit into it. Also every other Friday, Bennett holds a ‘Big Red Sofa’, broadcast live to the whole company, inviting people to give honest feedback on the company.
When Bennett became CEO in January 2014, employee engagement stood at just 56%. “We weren’t clear what we wanted from our people,” he said. “We had negative publicity and this reflected in our engagement score. Since then, we’ve tried to get clear about what we expect from people and their role in delivering strategy.”
Staff are encouraged to feedback using social platforms; of the 3,000 UK staff, 2,700 are active on Yammer, says Bennett, while there’s an ‘engineers’ venting lounge’ where employees can highlight what doesn’t work. HomeServe also runs biannual engagement surveys. “One showed staff didn’t feel there were enough learning opportunities, so we looked at that,” Bennett has said. “We’re growing our own people, including apprentices.”
Lewis saves the Tesco brand
On an even larger scale, the turnaround of UK retail giant Tesco orchestrated by chief executive David Lewis has provided an insightful illustration of how a change of management can save a company’s brand in times of trouble.
In April, Tesco reported its first annual increase in UK sales for seven years. Highlighting the supermarket's recovery under Lewis, like-for-like food sales in the UK were up 1.3% and its operating profits rose 30% to £1.28bn, while group sales increased 3.7% to £55.9bn.
It’s a major improvement on the billions of pounds lost in the previous year. Lewis was brought into the company after a successful stint as Unilever boss, after Tesco had suffered a massive knock to its sales, bottom line and public reputation.
At one point, the supermarket chain looked to be in freefall, faced with fierce competition at both ends of the market from Aldi, Lidl, Marks & Spencer and Waitrose, the failure of a series of over-ambitious acquisitions and the backlash from its multi-million pound accounting scandal.
Lewis’s recovery plan has seen Tesco ditch its loss-making businesses and foreign expansion plans to focus on selling groceries, and rebuild its relationship with suppliers, employees and customers.
In October 2015, Lewis pledged to speed up payments to small suppliers and simplified its commercial revenue streams. Furthermore in 2016, he slashed prices on goods to try to win back customers from discount operators Aldi and Lidl.
Some of the chain’s stores received a facelift, 12,000 extra staff were hired and Tesco store assistants were given a pristine uniform and instructions to serve Britain’s shoppers a little better every day.
Most importantly, the retailer has seemingly closed the book on the 2014 accounting scandal. After two-and-a-half years with a criminal investigation hanging over its head, Tesco agreed a deal with the Serious Fraud Office to pay a £129m fine in a Delayed Prosecution Agreement, and also to pay £85m in compensation to investors, who had lost out during the scandal.
Want to find out more about managing change? CMI’s online resource portal, Management Direct, has a range of guides and case studies to help you tune-up your change management skills
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