Misgovernance at World Bank

We all know how a pathetic institution World Bank is. While it claims to reduce poverty in the World, it has done little to reduce poverty of the beggars in front of its main posh offices at Washington, DC. This institution is a embodiment of incompetence, mis-governance, corruption, advancement of selfish & personal motives in the shroud of poverty reduction and what not?..

Harvard Business School has come out with its research on Mis-Governance at the World Bank. The draft of the paper can be found here and an interview with the authors here. While it is a very interesting paper, I also hope & believe that this is just the icing on the cake and one of the first to appear..

It is time that the World stops and rethinks & redefines the purpose, mission and operating procedure of this mammoth irrelevant institution. The least that we can do is to cut down the $1.5B in Op-Ex!!

Leadership Vacuum

Steve Hamm of BusinessWeek wrote

It has been a remarkable couple of weeks in New York. First, the financial system meltdown. Now, Meltdown Part II. Meanwhile, many of the world’s political, business, academic, and civil society leaders are in the city this week attending the UN General Assembly meeting, the Clinton Global Initiative conference and a smattering of smaller big-think events. It seems to be the end of the world as we knew it. And being on the edge of big and painful changes has put people on edge. There’s a sense of urgency. Also, anger.

I talked to Craig Barrett of Intel and Pramod Bhasin of India’s Genpact on Monday and Tuesday, and it was remarkable how frustrated they are—and how willing to express it. Barrett lamented that the US government has not responded to industry’s calls for long term planning and investing in national competitiveness. Instead our leaders stumble from crisis to crisis and play to the popularity polls. “The government is thumbing their noses at us!” he says. Bhasin bemoaned India’s corruption and lawlessness: “Private industry is trying to pull us into the 21st Century, but government is trying to keep us in the 18th Century!”

What’s going on here is we’re in the middle of a global leadership crisis. The US was once the undisputed world leader, economically, politically, and, after 9/11, morally. But the Bush administration blew that big time. In the past eight years, we have been diminished tremendously. When Bush gave his lifeless speech at the UN yesterday, he seemed to have shrunk to half of his former size. There was barely a ripple of reaction from the audience. He is not only despised; he’s now irrelevant. Meanwhile, the overheated and untruthful rhetoric of the US presidential election has diminished the stature not just of the liars but those they are lying about.

But the world needs leaders—individuals and countries with the authority, recognized wisdom, and clout to bring stability to global affairs and economics. And, right now, it doesn’t have any. Putin’s a powerful despot who commands no respect beyond his borders; China’s leadership is a faceless, self-absorbed bureaucracy; Britain’s Brown is a faded star; and Merkel is merely a competent technocrat. The only global political leaders who inspire respect and excitement (at least, from me) are India’s Singh, Columbia’s Uribe, and Rwanda’s Kagame. Unfortunately, Columbia and Rwanda are too small to matter except symbolically, and Singh governs a nearly ungovernable India.

Survey the business horizon, and you come to a similar conclusion. Only Warren Buffett commands almost god-like respect. What he thinks and says matters. Leaders such as IBM’s Palmisano and Intel’s Barrett are competently leading their large companies through the storm, but their influence is fairly limited beyond the borders of their supply chains.

In civil society, people expect a lot from Bill Gates now that he’s spending most of his time on his foundation. He has a ton of money, between his fortune and Buffett’s, and a bold strategy for attacking poverty and disease. I have a lot of hope for what he can do, too. In fact, I suggested to a couple of Gates Foundation people earlier this week that he should use his UN speech to try to calm the world. Their answer: It’s impossible to do that in the six minutes that have been allotted for him.

I have hope, though, for the state of leadership in the world and for America’s role in it. Think of the US in the early 1930s. We were in disarray, yet a great leader came in with a vision, a plan, and a commanding confidence that turned the tide and set us on the course that made America a positive role model and shaper of the course of world history for more than half a century. That sort of thing could happen again.

Math, anyone?

A favorite clip of mine.. Can you beat the logic? And btw, it isnt meant as a tirade against anyone;)!

Blame the B -Schools

Peggy Cunningham, the Director of Dalhousie's (Halifax, Canada)) MBA program echoed the thoughts of millions of others in this interview when she said that B-schools are to be blamed for current crisis and B-schools have ended up creating greedy monsters.

I tend to agree with her in largely. (If you dont, loook into placement fair historically in last 7 years at IIM-A). However I would add one tag to that. It is basically Bankers (& Finance MBAs) who are to be blamed for this. Of course, it doesnt mean rest of the world is as innocent as it can be. The overall greed still is the root cause of all evil - however Bankers (and I include Financial services giants as the leaders of this group) had the great evil genius brains to innovate bad financial instruments, make the rest of the world poor while they continue to grow rich - thus not bothering about true creation of wealth.

Captialism & Socialism - Mini Lecture Series - Parts I thru V

Re- posting notes from Capitalism & Socialism - Mini Lecture Series (I thru V).

• Part I - Introduction
  
• Part II - Failure to complement
  
• Part III - Greed & Impatience
  
• Part IV - Immature policies
  
• Part V - Liquidity Trap
  

Shareholder value is a myth - says who? Neutron Jack!

Jack Welch, the idolized management guru, Neutron Jack who mercilessly shutdown businesses which didnt add shareholder value, the same Jack who possibly influenced several MBA classrooms with his 'investor/shareholder returns should be focus of the business' thought gave an interesting interview in FT.

Jack says:

"On the face of it, shareholder value is the dumbest idea in the world," he said. "Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products."

I still believe that there should be a minor tweak to the order of main constituencies - customers should come first, followed by employees and finally products. If every company strategizes "customer care" as a core competency and willing to risk short term gains, success is definitely on the cards. But then, getting to that decision and living by that commitment needs lot maturity.

The Satyam Marriage

Per today's Economic Times, one of India's highly unreliable business gossip dailies, the current list of Satyam suitors include IBM, KKR, iGate and Fidelity in addition to Tech Mahindra, Spice and L&T. Let us forget that ET news is as unreliable as it can get and do a quick and dirty analysis of who will win over Satyam finally. Of course, all the MBAs from various financial markets will publish voluminous analysis - especially that they have nothing else better to do anyway.

The analysis will have to be done typically 5 angles - investors of original Satyam, buyers/current investors, the employees of Satyam, clients of Satyam and the Govt. (appointed board)...

Investors of 'original' Satyam - this is a easy set of people to be ignored. In the current scenario, any type of purchase is not going to recover the lost money, especially all the goodwill asset value. However the undoubted optimist will still hope that it will be a large public company (read IBM) that will buyout Satyam with a share-exchange plan in place. Institutional investors will oppose any PE buyout because they know all they will get is few peanuts if that was the case.

Buyers/Current investors - Given Satyam clientele, the large workforce, processes of Satyam, IBM might see lot of value in the acquisition. Particularly after HP has lapped up EDS/MPhasis and Obama creating issues for offshoring jobs, IBM might want to solidify its commanding presence in low cost labor. For Tech Mahindra, it is a great time to scale huge right away. iGate's story is still vague - am not sure they have done a due diligence of what they will do if they acquire Satyam - more or less they would get eaten away by the magnitude of Satyam's operations. L&T, Spice are not right suitors according to me. They neither have a good vision nor the capacity to manage a large ITeS organization for now. However, the most important suitor is KKR. No matter what KKR says, the end result is that it will break Satyam into smaller pieces and sell them off one at a time within 5 years or less.

Employees of Satyam - Currently the employees are the strength of the company. However, it is also to be noted that the employees dont have much bargaining power, given the economy. In this kind of situation, the employees would prefer taken over only by an IT Services organization - IBM, Tech Mahindra, iGate - in that order. For them moving to IBM is the safest option - they get a better branded tag and also move into a safe, comfortable and familiar territory. The employees' big fear would be to be taken over by KKR. For a KKR buyout will clearly result in quick layoffs of the excess fat right away and KKR would never hesitate to take tough decisions in tough times.

Clients of Satyam - This is a tough set to deal with. I am sure that the clients would not prefer a L&T/Spice takeover. The clients might be ok with an IBM takeover, with IBM's established reputation. From their point of view KKR may not be a bad choice either - however, the clients know that if KKR steps in, their bargaining power will go down for sure.

Govt/Board - Now what would the board declare as a victory? Am sure that the board would definitely not accept a PE takeover as a victory. For one, the PE pricing will be the most conservative and PE buyout will create lot of uneasiness for various stakeholders. For the board, a sale to Spice might be a full victory -an Indian company transitioned to a Indian company. IBM may be a close choice as well - safe zone.. and IBM has a history of mess-up in a lot of things and will live up to that reputation - a mess in Satyam acquisition will be soon forgotten.

Considering all above, as one can sense, IBM comes to close enough to satisfying lot of factors and a suited suitor for Satyam, though in my opinion, KKR would possibly be the right buyer at the moment. Satyam, in spite of having a strong workforce, is definitely struggling with a immature senior management and a bloated labor force to some extent. KKR would be the right choice to put the company back in shape.

IBM is popular. KKR is a fit. But we should not forget a lot of other players in this game - institutional shareholders, LIC, NASSCOM, other Indian IT Services majors, media and finally Raju (!). 

Lets see who wins the Swayamwaram.