Status Quo saves the day in troubled times

Speaking to the CEO of a large shipping and logistics company based out of Bangalore a professional was assuming that the CEO’s company might be going through a bad time due to the down turn resorting to desperate measures to keep the business afloat. It was surprising to note when he told that he continues to do whatever that made him successful during boom times. The CEO said they would not take away anything from it, nor would add on.

However, this is quite different from the way many leaders view troubled times. They feel that doing the same thing, or not doing anything is close to sacrilegious when things are not going right. When the economy goes through poor stints, leaders are more likely to be tempted to do something, at times even when the risks outweigh the possible gains.

In fact, even during good times when a new CEO takes charge, he tends to overhaul most policies put in place by the predecessor, irrespective of whether they were effective or not.

In a recently concluded research that could have interesting parallels to the time that we are going through and the choices CEOs make. Their research was conducted among goalkeepers, specifically relating to penalty kicks. Stopping a penalty kick is considered to be one of the most difficult challenges in sports. The researchers computed the probability of stopping different kicks with different actions like jumping left, right etc. to see which one maximizes the chance of stopping the ball.

The results were surprising staying put gives the goalkeeper the best shot at halting a penalty kick. No jumping to the right, no leaping to the left, just stay right where you are and you have more probability of saving the goal. At the same time, the researchers also found that goalkeepers seldom go by this. They choose to leap, in fact almost 95% of the time, even though their chances of saving the goal are less.

Why are goalkeepers and leaders so biased towards taking an action, any action, even though the best route is probably not to take any? The answer might emerge if we take a closer look at how people feel after they have gone through the challenge. A leader, who failed after taking an action might be seen in better light by the shareholders than a leader who failed by not taking any action.

If things turn bad, at least they take solace in the fact that they tried to do something, whereas if they choose not to change anything and the situation continues to deteriorate, it may be hard to avoid the criticism. The results could be just the same (probably better because not doing anything might actually save more of your money), but the perceptions are different, thus driving action when the need is inaction.
Analyse whether all the action that you are taking is justified. If not, just avoid what is unnecessary. Do not take an action, just because it would make you appear better if things fail.

India as a country has undergone a lot of change since then and the market has also opened up. There are far more ‘global’ Indian firms, and also the next generation that has entered the business have a more international background. They are more open to using external resources for advice on strategy and also, they are entering a number of new business areas where they need outside help.

Even though the economy is slowing down, India and China are still growing unlike countries like Japan or Germany. India is a market which is undergoing a lot of change consultants are agents of change. We think this is a good time.

Of course it will be tough competition for consultants, but we have dealt with this even in other countries. The services offered are similar to McKinsey, but with a European background which tends to be more stakeholder oriented and less focused on the short term.

Europeans tend to have more respect for cultures and traditions. On the other side, the partnership with TSM makes it a unique combination as India is of particular importance and significance for the Tatas compared to an American consultancy. Of course competition is all-American and that is one of the reasons for the current crisis. Of course it will be tough competition, but we have dealt with this even in other countries but with a European background which tends to be more stakeholder oriented and less focused on the short term.