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Could Raghuram Rajan’s Exit Have Been Managed Better?

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Could Raghuram Rajan’s Exit Have Been Managed Better?

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Raghuram Rajan, Governor of India’s Reserve Bank of India, has quit towards the end of his 3-year term. The problem is not with Rajan going. It is the manner in which Rajan was hounded out that has revulsed many.

 

Raghuram Rajan, Governor of India’s Reserve Bank of India, has quit towards the end of his 3-year term in September, leaving financial markets and players rattled and most pro-Indian economy watchers worried.

 

The general expectation was that the Government would give Rajan a two-year extension as it did with most governors in the last 25 years. But that either did not happen in time or Rajan announced his departure first. You can read my post here asking if he should choose pride or country in a situation like this.

 

The problem is not with Rajan going. The Government of the day is entitled to retain or appoint who it wants. However it is the manner in which Rajan was hounded out that has revulsed many – by tacitly supporting bitter personal attacks on him by a member of it’s party. As the newspaper Mint rightly points out, the blame for this must rest on Prime Minister Narendra Modi and Finance Minister Arun Jaitley.

 

While this unsavoury episode throws up many lessons, we should use it to introspect or think about how badly handed exits can have long term repercussions on our individual and business reputations.

 

Asking People To Go

 

One of my earliest tasks in a managerial role was to cut back on staff. It was upsetting because I felt my seniors had failed to forewarn me about the company’s condition. Which in turn would have helped me prepare my colleagues. It was as if everything was fine one day and the next day we were in deep trouble. Eventually, I deferred to the only other senior person around to do it.

 

It was a mistake.

 

I realised right away that I should have steered the effort and not expected someone else to do it, even if that person was appropriate in the chain of command. I also realised those asked to leave would always wonder why I had not been forthcoming, upfront and taken responsibility, even if it was not my fault.

 

My immediate and shortsighted victory was this: you guys (my seniors) knew when the company’s financial situation took a nosedive but you didn’t tell me, so you fix it.

 

Managing An Exit

 

Which brings me to the point, Rajan’s exit is not a regular lay-off. Let’s look at it from both sides. There is a certain employee you don’t like. The reason does not matter – you have the moral right to ask him to go because he was appointed by your predecessor and you want a clean slate.

 

So how would you do that ?

 

Would you incite some colleagues in other parts of the organization to start complaining or better still, attacking him publicly and then play dumb ? Or would you have a one-on-one conversation pointing out your concerns, perceptions and the way forward ?

 

The answer is simple but that’s not the way it often happens. I have even seen or heard of entrepreneurs with complete control of their organisations resort to the Rajan method of forced exits.

 

What if you are on the other side ? It’s tough. Because your initial reaction is disgust. Then you accept that you have either not delivered to expectations or that you are a victim of a fall-out. You also conclude possibly this is a good time to leave and work with people you respect as opposed to those whose sight you cannot stand. Though you still wonder why your bosses are being so spineless and fighting proxy wars.

 

What are your options ? Well, the only way is to force the hand of your seniors, demand a frank conversation and insist on a dignified exit, particularly if you have done no wrong and your exit is because of a falling out and not triggered by a excel sheet-led cut back.

 

Why Do We Do This ?

 

Fundamentally, it is about fear. There is fear of confrontation with the individual and how that encounter might go, particularly if the moral ground is weak. There is fear that the external world will react badly if it is perceived that this person’s exit would be bad for business.

 

Then there is, perhaps, a bigger fear of someone who is gunning for this person, internal or external. This is the fear you just cannot afford to be associated with. For all these reasons, you also play dumb when matters come to head.

 

Fear leads to actions that try hard to skirt responsibility.

 

In politics, it is justified as politics and in business, it is said this is best for the company and its shareholders. But it still does not take away from the fact that this is very sad human behaviour and you would hate to be on the receiving end of such treatment.

 

At the end, you are reduced to praying the problem and the person would just walk out of the door as soon as possible so you can focus on the fall-out. It is organisational weakness at its worst.

 

Credibility

 

Of course you can justify the Rajan method by a cursory reading of Sun Tzu’s Art of War. Or leaning on a larger philosophy of means not mattering as long as the right ends are achieved, for the good of country or company as the case might be.

 

But credibility suffers. Even if you are the shortest term political player, credibility matters, even in this age of short-memories. People will always remember how badly you managed a leadership situation. In many cases, the memories will remain permanently.

 

In politics, supply of manpower will always exceed demand, though the quality of the same is a different matter. Companies can never become great if they or the individuals who run them manage exits badly. Or create Rajan-like conditions to make life difficult for someone.

 

Eventually, word gets out and people start to shun such organisations. At least the talented people who have pride in their job and skills.
There is another angle to this. When you adopt techniques that are less than kosher to edge out people you don’t like, your actions sometimes come back to bite you.

 

I have seen this happen in one of India’s largest conglomerates, in a space of about 15 years. You would know the person I am referring to.

But that is a story for another day.

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