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Leadership - Are we in the right direction? Amitabh Chaudhry - MD and CEO, HDFC Life

Leadership is one of the most observed but least understood phenomena on earth. The question of leadership has evoked considerable interest primarily because leadership conjures up powerful and romantic images (emperors, kings, political & religious leaders among others - Meindl, Ehrlich and Dukerich,1985). While the concept has been known since early ages, much of the scientific research on the topic did not take place until the 20th century. There are probably as many definitions of leadership as those who have attempted to define the concept. In times of rapid change & environmental complexity, the subject and practice of leadership has taken on greater importance than ever before.

Evolution of Leadership Theory

Leadership theories continue to evolve based on greater research and empirical evidence but no one theory gives a perfect fix. Over time research has evolved starting from the "personality era" where few individuals were considered as "Great Men" and all their skills were expected to be replicated to more complex areas (David Seters, Richard Field). The "contingency era" for example based leadership as one contingent on multiple-variables - behaviour, personality, influence and situation building on the works of previous researchers. There was also a phase "anti-leadership" which basically believed a leader is just one whom people perceive them to be a leader in their views. Subsequently we moved to the "transformational era" where leadership needs to be visionary, have a stronger sense or purpose & meaning, empowers subordinates and shows active leadership. Leaders are involved in building, monitoring and reinforcing a culture of high expectations. They can be from the top or bottom - best fitted for task, focus and cohesion of the group.

Dynamic Environment and Leadership

Modern organizations operate in a more dynamic environment than their predecessors. A dynamic environment consists of changing surroundings through which a leader needs to navigate the organization. Indicators of this dynamic environment are visible in our day-to-day lives

a) Changing Consumer Behaviour - Research and comparisons of products through different sources before buying even as inflation eats into household savings, instant product feedback with the advent of social media and increased role of regulators, increased comfort levels with online/phone transactions for servicing

b) Increased technology adoption - Out of 900 Mn mobiles projected by 2014,10% will be widescreen devices (PCs, tablets, laptops); Over 80 Mn Internet users expected to increase to 120 Mn by 2015. Nearly 85% of travel bookings is through the online route; e-commerce business growing

c) High competitive intensity - Shift from state-run industry to a mix of public and private sector participation in most sectors, presence of MNC and Indian firms in most industries; efforts underway to open up closed sectors such as multi-branch retail

d) Increased regulation - Regulatory activism seen across sectors; pre-dominantly visible in financial services but also impacts other businesses - outsourcing, governments intervening in monetary and fiscal policies

e) Increasing mistrust of corporations - Pursuit of shareholder value alone at the expense of other stakeholders (employees, consumers, environment) is attracting criticism. This is visible in movements around the globe such as Occupy Wall Street and in events at home. Given this background and environment, a leader must continuously adapt to new situations and overcome possibly unpredictable obstacles through a set of timeless skills of leadership that continue to be relevant even today -

1. Strategic planning is the first priority of the leader. Drucker believed that the leaders job was to create the desired future for the company or the organization. The leader needed to be intimately involved with the strategic direction.

2. Ethics and integrity are critical for leader effectiveness. Character and ethical behavior are of central importance for the leader. According to Drucker, followers might forgive leaders for mistakes, but will not forgive a lack of integrity.

3. Model the military. Peter Drucker had great respect for how the military developed leadership, with an emphasis on character and leaders as positive role models. The militarys emphasis on commitment and "taking care of your people" are examples of what Drucker admired about military leadership.

4. Motivation: Treat employees like volunteers. Drucker greatly admired non - profit organizations, and he extracted leadership lessons from them. If a leader treats employees as if they were volunteers - free to leave at any time - the leader pays greater attention to the non-monetary needs of workers, and moves from transactional motivation to transformational motivation.

5. Be marketers. This surprising lesson really means that leaders should be focused on the customer, and be concerned about how customers view the organization and its products or services. The leader must set the tone for how the organization is viewed, and be its best representative. Contemporary leaders have implemented them for decades now.

Leadership and the pursuit of Organizational Excellence

Organizational Excellence is a process of continuous improvement which does not have a defined starting or stopping point. It is achieved over a period of time, maintained through ongoing commitment to improvement and testified by external stakeholders. Leaders via the display of these timeless leadership skills have helped organizations move substantially in the direction of achieving high levels of excellence by ensuring that they meet the criteria laid out (Vaill, P. B. - 1982)

a) Performing excellently against a known external standard

b) Exceeding expectations against what is assumed to be their potential level of performance

c) Surpassing their previous best

d) Evaluated by informed observers to be doing substantially better qualitatively than others

e) Doing whatever they do with significantly less resources

However, the pressures on leadership are clear as evidenced by a high turnover of the CEOs - as per the Booz and Company CEO analysis CEO turnover has seen a rise during the last 8-10 years apart from a dip seen during crisis years when stability is preferred by shareholders. Average CEO timespan is now considered lower than that of a top-performing athlete at his/her peak. Organizations like H-P, Yahoo have seen multiple churn of CEOs. Citibank and Barclays have seen their CEOs stepping down due to board/shareholder/regulatory pressures. If we were to take a close look, we will realise that the key reasons for this includes.

a) Increased globalization as companies compete with larger players or within conglomerate / group for capital - there is peer comparison across countries

b) Short-termism - especially for listed companies

c) Increased corporate governance standards and shareholder activism

There is however a clear increase in the emphasis placed on the customer and on managing costs & investments efficiently and in my opinion the jury is still out there whether leadership is moving in the right direction or not?

Role of Leadership Today

In my assessment, the role of leadership today requires a more hands-on approach and leaders who display the below mentioned skills are more likely to be moving in the right direction than others -

a) Leading the way for Organizational Antifragility :

Antifragility (Nassim Nicholas Taleb) means that something does not merely withstand a shock but actually improves because of it. Organizations survive shocks not because they are immovable but

precisely because they do change, bending in the face of stress, adapting and learning on the way. Leaders need to be at the forefront of this adaptation and learning.

b) Balancing the long term and the short term goals is going to be key :

There is a risk of leaders getting lost in short term fire-fighting given the volatile nature of the operating environment. It is imperative that leaders assign equal attention and resources for enablers that drive long term organization building. Leaders should develop the foresight and should believe that investing in tough times provides a long term competitive advantage to organizations. During challenging business phases, they should ensure that they identify and invest in the areas which have the potential to deliver long term gains.

c) Encouraging rapid experimentation for creating a differentiation:

Leaders provide an operating environment that fosters innovation and a platform that allows teams to experiment with new ideas. Use or discard approach i.e. using what works and learning from failures helps the organization move up the learning curve faster than its peers. Leaders should encourage new ideas and processes and should provide the scope for experimentation.

d) Reach out to multiple stakeholders:

Given the growing influence of governments, regulators, consumer groups, media and society at large in business it is important that leaders are able to reach out to each of these stakeholders. This goes beyond communication as there is a need to build credibility of the organization with all stakeholders.

Leadership Development at HDFC Life

We run initiatives across employee levels to identify and impart the relevant leadership skills & competencies. A brief overview of the leadership levels would help you get a perspective on the interventions we run in the organization. The entire organization is divided into levels of leaderships - Junior Management, Middle management, Senior Management and above. Junior Management typically consists of a mix of individual contributors and team managers (Sales and Operations roles).

Middle Management are team managerial roles whereas Senior Management and above are vertical / functional head roles.

All levels require certain behavioural and work-related competencies. Once they are identified, development processes for them are designed and process flows are established. Some of the key initiatives are listed below -

a) LEAD - Competency based leadership development program for middle level managers.

Various skill based modules are delivered through workshops by certified trainers aimed at developing specific performance behaviours. It has been designed to develop the foundational and role specific competencies in order to enhance leadership effectiveness. The program is divided into three milestones - Stepping into leadership, Foundations of leadership and engaging distributors.

b) Potential Review Process - Potential Review is one of the important initiatives under the overall Talent Management framework of the organization. It aims at rating the leadership potential of each individual, based on their performance and readiness to move to the next level.

As a critical process it helps the organization to:

I. Get a view of the readiness of its leaders to meet the current and future needs of the business and its strategy.

II. Be future-ready by identifying near-term successor candidates for most-critical roles.

III. Focus on identifying specific developmental interventions that will help bridge the gap to strengthen its leadership talent.

c) Zenith - Leadership Development Initiative for middle and senior management. Launched with an objective of providing a robust structure and support to individuals for their development journey defined as an output of PRP. Developmental interventions are provided in form of workshops, competency labs, psychometric tests, personalized feedback, action learning projects etc. Each

reviewed throughout the duration of the program to ensure they are getting the right inputs and are on track their developmental journey.

d) Apex - Objective is to provide change management and leadership thinking, training and development for the thought leadership of HDFC Life. It is designed to groom leadership and build a deeper appreciation and understanding of insurance.

I believe that as an organization we have invested in the right areas with a long term perspective. We are looking forward to results which will validate our decisions. However, whether these skills will suffice is for time to judge.

Conclusion

The subject of leadership continues to evolve as new circumstances throw up new, unprecedented challenges for leaders. Individuals who continue to be ahead of the curve in predicting and working on these challenges would be considered true leaders.

At the end of the day, as in the past, the buck will continue to stop at the leaders desk and there is no escaping that !!

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