Hopelessly Stumped Banking Corporation

HSBC is a solid, and perhaps staid, bank. It rode the financial crisis reasonably well and generally stays out of the headlines. Surprising then to see it on top of the financial news for the last five days thanks to a messy succession saga.

Here's what happened. Successions in HSBC are very orderly. The Chairman retires to tend to his garden somewhere in the English countryside. The CEO becomes the Chairman. The senior most executive being groomed for years, takes over as CEO. All very dignified and solemn. The Board congratulates itself over many glasses of the finest bubbly. The money continues to pour in and all is well in the world.

This time the script went wrong. Stephen Green , the current Chairman, had indicated in May that he wanted to retire in a year's time. A search firm was duly appointed to recommend that there were no suitable outside candidates so that the pesky shareholders can be told to keep quiet. But suddenly Stephen Green was asked to join the UK cabinet as Trade Minister. The garden could wait. Off he decided to go, some months in advance.

So they had to appoint a Chairman "quickly". To complicate matters, there was an outside candidate who would be eminently qualified. John Thornton, ex Goldman Sachs, who famously gave up a shot at the top Goldman post some years ago to move to Beijing and teach at the Tsinghua University. He was already a non executive director of HSBC and apparently was interested.

In stepped Michael Geoghan, the current CEO of HSBC. He couldn't believe that they were really thinking of not giving him, what was his "right". He said  - No way John Thornton. Perhaps even, "over my dead body". Stalemate. The Board didn't want to give it to Geoghan either- he was a bit too brash and they didn't like him all that much. So if not Geoghan, who else ? The insiders were up in arms against any outsider coming in.

So they plumped for Douglas Flint, the current CFO as Chairman. But this left Geoghan in a quandary. His subordinate was going to become his boss. He wouldn't accept that and decided to quit as well. Up stepped Stuart Gulliver who was being groomed for the CEO's job anyway, but which landed on his lap some years ahead of time.

All round dissatisfaction and tut-tutting. New Chairman and new CEO, all in the space of one week. Of such politicking are boardrooms made of. Now nobody is sure if the money will continue to pour in. Or the flow of the bubbly, for that matter.

So here's material for a Kollywood typical, starring Rajnikanth as Stephen Green, Vijay as Geoghan, Surya as Gulliver, Vikram as Flint , Prakash Raj as Thornton and the delectable Asin as the tea lady !

PS : This blogger is constrained to disclose that he banks with the said bank !

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"Isation"

Business Leaders who can see far far ahead are an extreme rarity. Usually a business leader’s definition of long term is the next quarter. Occasionally, there comes a business leader who plans for the next couple of years. Rare is the leader who sees decades ahead.

Two such examples are the subject of this post. The surprising thing is that their names are completely unknown – I don’t think there are more than half a dozen people who’ll even recognize their names. After all, business has short memories and business history is virtually an unknown science. As a demonstration of this, can any of you recall who was Jack Welch’s predecessor at GE – he was a titan in his own right; honoured with the title of the Businessman of the Decade; but who remembers him now.

Back to these two men. One was the Chairman of this famous company in India , a subsidiary of a global company headquartered in the UK. He was chairman only for three years or so until ill health forced him to return back to the UK. The other was his boss, the head of the global business outside of Europe. Their names were Steve Turner and Andrew Knox.

Consider the environment. Late fifties. India had just attained independence. Just shaken off the colonial yoke. There were only a few multinationals in the country. This company was by far the largest of them. As was the norm, everywhere in the world at that time, managers from the parent country would be sent to run subsidiaries across the world. It would be rare to find a brown skin, or a black skin in a senior position in Asia or Africa.

But this company was different. These two wise men, wise beyond their years, and absolutely without parallel in any other company, decided that Indian business was not to be run by foreigners. They decided that Indian managers would now be entrusted to run the company. For those times, this was a positively majestic step.

Steve Turner, in his short tenure, and Andrew Knox, did many far seeing things. But one of their greatest contributions was that they groomed and decided to hand over the chairmanship of the company to an illustrious Indian. The company never looked back. Generations of outstanding Indian business leaders have graced this company . And the company went on to become a star, outdistancing its competition combined until the turn of this century. All because a few very wise men foresaw that to succeed in business in India, you have to let Indians run it. They called it "isation”. Indianisation. And then replicated it in every other country in the world.

The reason I muse about this, is that here we are in the twenty first century. In China, I still see expats running many of the foreign companies here. Many senior posts are occupied by expats from Europe and North America. They talk of the same issues – lack of senior management talent, trust, etc etc. And then I marvel at how wise they were in this company in the 1950s. They were “men of substance”; men, truly way ahead of their times.

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Of Leadership styles

I read an interesting and short piece on leadership styles in Tom Peters’ blog – a nice post by Madeleine McGrath. Click here – it’s a lovely little post.

What do you think ? This is classic Theory X and Theory Y. Can one leadership style exist to the exclusion of the other and promote excellence in the long run ? I am firmly in the camp of “yes, only one style really works in the long run”. But this post set me thinking.

What do you say ?

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