Polished gems from Narayana Murthy

Excerpted from an interview with Vallabh Bhanshali at the ENAM 2020 conference

It doesn’t matter how bright a person is. How smart a person is. If they don’t understand the risk emanating from what they are doing, if they are not suitably regulated and if greed overtakes them it is inevitable that one sees disasters because in the end systems are much more powerful than individuals.

In the end it is always about ethics and all about personal values. That is why it is very important for every society to create checks and balances. That is why it is very important for every society not to create incentives for people to become greedier. That is why it is very important for all of us in the corporate world to create incentives for long-term performance rather than short-term performance. When you create systems that focus on short-term performance, when you create a system that reveres money rather than decency, honesty and respect, when you make it a fashion for youngsters to revel in the power of their wealth, it is inevitable.

For example, a month ago, I was on a flight from Frankfurt. I saw two young men in their late or mid-20s who were travelling by the first class, and I was slightly surprised. I had gone to attend a board meeting and it was a huge bank, and they pay. That is fine. But these were 25 or 26-year old people and they were travelling first class. What does it mean? It means we have created a value system that says you are a success if you travel by first class, you are a success if you own a flashy car, you are a success if you own a big house, etc. That is why, in fact, I suggested at Davos a few years ago that we need to create a system where we can rank world corporate leaders based on their respectability.

Today, we have the most powerful leaders, the best managed companies, companies by market capitalisation and all of that. But we have to move towards a regime which will rank corporate leaders based on their respectability and everybody must say that I want to become the most respected leader in the world.

Again I am a believer in the adage – performance leads to recognition, recognition leads to respect and respect leads to power. We are at this stage when we are focusing on performance and we have received some recognition. There is no doubt at all and we have also received some respect because we have insulated ourselves from what happened during the Asian financial crisis, currency crisis. We have insulated a little bit from what has happened in the global financial crisis now. The country is growing well, but I don’t know if we have reached a stage when what we do in India impacts what happens in the US.

There are two fundamental characteristics of Infosys. One; we are an engineering company. Two; we are a company founded by middleclass people. I will link the two. Being an engineering company, we discuss and debate, collect data, analyse, argue and then come to some conclusion. As we are middleclass people that founded the company – we don’t go by flats, we don’t go buy fashion and we don’t want to look good in a party just because we have spent a billion dollars to acquire a company.

When you combine these two powerful attributes, you end up being conservative. There is no doubt at all. Infosys is conservative, but there is a method in this conservative behaviour. We have clearly laid out rules for operation. We said our people will have to collect money because at the end of the day the real happiness is cash in the bank. We say profit is an opinion – the real happiness is cash in the bank. We created incentives for our sales and customer facing people which would ensure that they collect money.

Secondly, we hired pretty smart sales people in the industry and that’s why you will notice that we have anywhere from 500-600 basis point of higher operating margin than any of our competitors because we tell them that if the customer thinks that USD 100 is the price – your smartness is to sell it for USD 105 and give the customer USD 110 worth of value. Don’t cheat him, but sell it at USD 105 and provide value of USD 110. That is what we have focused on a lot.

Thirdly, there is tremendous cost consciousness in the company. We are not judged by how opulent our rooms are – we are not judged by whether we travel in this class or that class. So right from the beginning we focused on that. When you focus on middleclass values, when you focus on analytics – it is easy to have a lot of cash in the bank.

I have always said that a good leader simplifies business. It doesn’t matter what business he or she runs. So, I would suggest that we use simple business rules, not complex or compound ones. The good thing about simple business rules is that it is easy to understand, easy to practice, easy to communicate, and you cannot cheat anybody with simple business rules. And you can enthuse every one of your colleagues with simple business rules because there is transparency, there is fairness, and there is accountability.

As far as the youth of this country is concerned, I would say that for the first time in the last 300 years, this country has received recognition in the global markets, and received certain respect. This is the time for us to work hard, this is the time for us to work smart and consolidate on the gains. Indians are generally not known to have the killer instinct or not known to run the last mile. Yesterday was a wonderful exception when the Indian cricketers beat the Australians. But that is a rare one.

We have to make it a habit. We have to make it a habit of what Dhoni and others did yesterday. That is make sure that all the good things that they have achieved in the last 10 years becomes a habit. To do that, you need continued discipline, hard work, smartness, integrity and putting the interest of the country above your own personal interest. There are lots of things that are not good that we read in the papers every day. I don’t want to comment on them, we have all seen this morning’s paper.

But let those shameful incidents not be the beacons for our youngsters. So, that is what I would say.

I think people up there are much smarter than I am, and much more capable than I am in coming out with an estimate. So, I don’t want to hazard a guess because at the end of the day we have experts. We have a Finance Minister who is a fantastic person, we have an RBI Governor who is another highly knowledgeable person, we have lots of economists and we have people like you. You people should come out and give wisdom to rest of us who are in the trenches. You people have a 50,000 feet view of our economy.