Narayana Murthy - Part 4

Despite the fact that India's stature has grown globally, there is criticism that only 30 per cent engineers are employable in India. Do you agree?

You know this industry -- my own IT industry -- on an average recruits about 200,000 to 250,000 engineers a year. And we produce about 400,000 or so.

In that sense possibly about 50 per cent engineers are absorbed, and hopefully other sectors employ the rest of them. It is difficult for me to believe that 70 per cent of the engineering graduates are unemployed. However, this year it could be different because the recruitment levels of all companies have gone down.

What do you think could be done to make higher education in India better?

To enhance the quality of our higher education, we can do five things:

One, enhance the autonomy of our higher education system;

Second, encourage them to collaborate with world-class institutions outside India, within India too, but most of them are outside India... ;

Third, bring in a sense of meritocracy in the selection of students and the appointment and promotion of faculty;

Fourth, create incentives for our faculty members to do more world-class research; and

Fifth, remove any licensing in the education system. We gave up most of industrial licensing in 1991. It is silly that we continue licensing of our educational institutions.

Talking about higher education... even the recommendations made to the Knowledge Commission have not been implemented? Why does this happen?

The Indian society is a society of ideas. It is a society that has revered talk. In this society, articulation is mistaken for accomplishment. We are quite satisfied with our voice, with our writings. This is not a society that is focussed on execution.

Frankly, the problem is due to our caste system and the dominance of Brahmins in our society for long period. The Brahminical system said my job is to think of the higher worlds. My job is to think of connecting you people with God. I don't want to do anything that has a relationship with the real world.

Now that is a problem that has played havoc with the Indian culture. So, here in this culture, if you do anything with your hands, it is considered less honourable that anything to do with your brain.

Here everybody wants to be an engineer, nobody wants to be a technician. So when a society does not value implementation, execution, what happens is you create more and more reports and nothing gets done.

For example, (Reliance Industries Chairman) Mr Mukesh Ambani and I gave two reports on how to improve the higher education system: one to (then prime minister) Mr Vajpayee and one to Dr Manmohan Singh.

Second, there has been the Knowledge Commission. Nothing has happened. Third, in 1998 I was a member of the IT Task Force -- which was headed by Mr Jaswant Singh -- and that task force submitted its report somewhere in 1999 0r 2000.

Nine years and I don't think even one suggestion has been implemented. And we made 108 suggestions! So that is why I am not a big fan of ideas in India.

My brother-in-law is a famous professor of physics at Caltech and he tells me it is very easy to come out with an idea. But to validate that idea he and his doctoral students will have to work hard for six months, one year... sometimes two years. That takes 20 hours of work each day for two years. So it is important to come out with new ideas, but it is even more important to execute them.

We are not a nation of doers; we are a nation which believes that our articulation is our accomplishment.

What would you say has been your best business decision?

My best business decision is clearly sitting down with my younger colleagues and together coming to the conclusion that our objective must be to seek respect from every one of our stakeholders -- respect from customers, respect from employees, respect from vendor partners, respect from investors, respect from government of the land, and respect from society. . . I can tell you that that is the best decision that I have taken.

We had a four-hour-long discussion in 1981. Somebody said we must be the company with the most revenue, somebody else said we must be the most profitable. Finally, we all agreed that we will become the most respected company in India. Our logic was very simple. If we seek respect from our customers, we will not shortchange them; if we seek respect from our employees, we will treat them with dignity and fairness; if we seek respect from our investors, we will follow the best principles of corporate governance; if we seek respect from our vendor partners we will be fair with them and sympathetic to them; if we seek respect from the government, we will not violate a single law of the land, and if we seek respect from our society, we will give back to the society.

And then we said revenues will come, profits will come, market capitalization with come.

And in 1999, when Economic Times instituted their award, we were the first company to win the award of the Best Company of the Year, ahead of all multinationals and corporations much bigger than us! To me, that has given us the greatest satisfaction: the fact that we chose respect as the most important objective.

Narayana Murthy - Part 3

Layoffs have become the byword today. Even an employee-friendly company like Infosys has laid off people. What processes does Infosys follow while implementing such harsh decisions?

No, actually, Infosys has not laid off people. Please!

What happens in a layoff is that the number of employees decreases. Actually, the number of employees in Infosys has increased!

We have let go 600 employees for lack of performance. Out of the 2,100 employees who belong to the lowest rung of performance in the company, 850 left on their own because they didn't see much future for themselves in the company. 650 employees have been put on the PIP -- Personal Improvement Program -- that is, we have given them a chance to improve.

Six hundred people who did not perform well and at the same time did not demonstrate an attitude towards self-improvement -- they come late, they do not work hard, etc -- we said there is no place for such employees in the company.

This has been going on for a long time. The only difference is that in good times this did not become an issue as they would go to other companies and get even better salaries. Now as those poor people are not able to get alternative employment, this has become an issue. Nothing new has happened, let me assure you.

In fact Infosys did something extraordinary. We said, instead of layoffs, we will take lower bonuses, lower variable pay this year and make sure that everyone who is worthy of a job is continued in the company.

For example, at the board level there is only 58 per cent bonus, at the next level they had 65 per cent, then 70 per cent and at the next 3-4 levels they had something like 84 per cent variable pay.

And in bringing about the reduction in variable pay, we ensured that the senior people suffered more than the juniors so that there is a sense of fairness and equity because we said we have to ensure that people who use their disposable income for very important activities -- like buying a house or children's education -- should suffer less that those who have much larger disposable incomes.

But recession is now a fact of life for a while to come. How long do you think will this economic downturn last?

Recession is a fact of life. Some people are even saying that what is happening on the global scene is a depression, like the 1929 Great Depression.

How long do you think will this go on?

Based on the data that we have -- which came from a survey that we conducted -- and based on the discussions we have had with various decision-makers and opinion leaders and thinkers and economists, we have come out with guidance for the next year which clearly shows that our revenues and profit may dip.

We believe that the next four quarters will continue to be difficult.

How badly will this impact a strong company like Infosys?

We have cash of about Rs 11,000 crore -- $2.2 billion -- which is almost 8-9 months of entire expenses, when you remove certain discretionary expenses. So the company has no issue in surviving during this period.

However, we have had a culture of high performance and high growth, and that is not likely to happen.

Do you think the government can do, say, 4-5 things to help alleviate the pain, not just in the IT sector but across industries?

You know I am of the opinion that the primary objective of the government in a country like India is making sure that there is efficient delivery of basic services, like primary education, primary healthcare, nutrition, and shelter to the poor people. I don't think corporations should expect the government to put money and help them out.

However, can there be any policy changes? Well, yes. We must become more aggressive in promoting our exports. We must become more aggressive in accepting foreign direct investment... so that they start creating more and more jobs.

And even if they do not make profit, because these are large multinationals, they can withstand a year or two of losses.

I would say that we must promote investments heavily, make sure that banks provide working capital to Indian companies quickly and efficiently at the lowest possible interest rates, and make sure that the Indian company does not have to spend too much time in state corridors or even in Delhi. That's all the government can do.

What about improvement of the nation's physical infrastructure? What can the government do? Or does it need a public-private partnership model?

You know the record of public private partnership PPP in India has not been very good. I do agree that we need better infrastructure and that we should not put the entire burden on the public exchequer.

But if all political parties come together and say whatever contracts are signed with the private parties will be honoured, no matter whether government 'A' or 'B' is in control. That is needed.

That will raise the confidence of the private party that their contract will indeed be honoured and then they can take more risks: they can take huge bank loans, they can put up front money.

But if the private party is not certain that the next government will honour what has been agreed to by the previous government, then it's very difficult.

Is that what is hurting the infrastructure today?

You know what's happening in many places. I don't want to comment on that any further.

What do you think India's youth do to change the country? What can they do to face today's harsh economic realities?

When I was small, my father used to give me jaggery and neem on Ugadi day -- the New Year day. We would try and throw out neem away and eat only the jaggery. He would not allow it.

He would make us sit in front of him on the floor -- we had no furniture then -- and he would say the reason why you are eating neem and jaggery with equanimity is because you are saying that in the coming year there will be some good and some not-so-good events, and you will face both these with equanimity.

That is one message that our elders have to communicate to the youngsters: that bad times will pass; they will come from time to time, but they will pass.

Bad times are the times when we have to show our hard work, our determination and our talent. That is the key message. That every nation from time to time will face difficulties in the economic scenario and that is the time when we all have to show greater determination, sacrifice, and commitment.

Narayana Murthy - Part 2

Should the chief executive of a company have a free hand at what he does?

See, in life there's nothing like a free hand. I will explain.

A lot of people think that the CEO is the most powerful person, but he has more bosses that most people.

Every customer is a boss of the CEO. With a stroke of a pen, a customer can take away his business from the corporation. If a key employee perceives that the CEO has been unfair, with a stroke of a pen he will resign and go.

If a key investor perceives that the CEO is not doing the right thing to advance the interest of the corporation, with a stroke of a pen he will take away his investment.

So what power does the CEO have? The moral of the story simply is that as long as we follow the agreed protocol for behaviour and performance, we have a lot of freedom to exhibit our innovation, our resolve, our courage, our hard work, our honesty to achieve those goals. But the day we forget that we operate at the pleasure of all these people, then we will disappear. So authority and power always come concomitant with tremendous responsibility: the higher the perceptional power, greater the responsibility.

Shouldn't the CEO of the country have a freer hand. . .?

The issue is simply this. As long as the overall objectives of the country, the coalition partners and the party are fulfilled, the CEO -- the prime minister -- must have full freedom.

Absolutely, there is no doubt, I agree with you. But just like the CEO, the prime minister too has to fulfil that responsibility.

If you were the prime minister, what would you do differently to boost the economy...?

That is a very hypothetical. I must say that Dr Manmohan Singh has done a good job under the circumstances, given all the constraints under which he has operated. He has been very sincere, committed and I have tremendous appreciation for him for whatever he has done.

A lot of corporate bosses are in the fray this time. Do you think independents can make a difference?

Independents have a role to play in the sense that they bring a sense of responsibility on parties to field better quality candidates... because, by and large, these independents have to win on their individual merit.

They have no party strength, support, money power, et cetera. So the good thing about independents is that they will invariably force parties to field good candidates. That is the contribution of independents, and I think we definitely need some.

What do you think about the growing intolerance in India currently? For example, Kandhamal, Mangalore...?

I think we need secularism, and why is secularism so important for India at this time?

When you are on an accelerated growth path, you have to energise the whole country, unify the whole country. You need the efforts of everybody, belonging to every caste, every class. You cannot afford to discriminate against any particular group of individuals, and that is why I believe secularism is important.

Secularism is not about forgetting who you are; secularism is about saying I will respect you for what you are and that we will take all decisions without considering what religion you belong to. That is secularism.

Secularism is not about not saying I am a Hindu. I am a Hindu, I am proud to be a Hindu, I do my pooja everyday, but the relationship between me and my God is a personal affair at home and it is not something I bring out into the public and I will not use religion as the basis for any decision-making or any discussion.