02 Jul 2015 20:23 IST

How CEO-Board squabbles can eat a company from within

In the context of the sacking of Housing.com’s Rahul Yadav, HR experts analyse the impact of bruising fights between a board and CEO on a company and its employees

On Wednesday, after months of squabbling and high drama, the online home search portal’s young co-founder and CEO, Rahul Yadav, was shown the door by the portal’s board. The board said that Yadav’s behaviour was not befitting that of a CEO and was detrimental to the future of the company. He was relieved with immediate effect and the board said it would work in tandem with senior executives to ensure smooth functioning.

In the fight between founder and investors, the company and the nascent brand ended up being the collateral damage.

Madhukar Shukla, Professor of Organisation Behaviour and strategic management at XLRI Jamshedpur, says Housing.com is facing a typical point of transition in the life of start-ups, wherein the aspirations of the founder, who came up with the business idea, may not match with the board's and investors’ thought process and vision.

“A company,” explains Debashis Chatterjee, Professor at IIM Lucknow, “is a corporate entity, and a CEO or leader's irrational behaviour can trigger a negative or defensive reaction within the organisation. Employee morale may drop and they may feel isolated.”

Leadership Woes

Disagreements and visible friction among the senior management can lead to bigger problems in a company. “The company can face uncertainty when such spats take place, and employees may feel divided on the overall positioning of the company," says Shukla. “People who joined the start-up for the founder's vision may not agree with the board's decision. Whereas, those who joined the company after it had acquired the funding may feel the board's decision to be just rational.”

Culture: A Casualty

Leaders drive the culture and build the organisational path, and a conflicting or confusing behaviour can make the employees feel lost and de-motivated, says Puneet Rathi, Advisory and Knowledge Head, SHRM India. “Employees come to an organisation to learn, earn and deliver their responsibilities. But most employees also want strong and inspiring leadership," says Rathi. "The way Yadav has acted might have impacted employee morale in a negative way,” he adds.

Leadership is the backbone of an organisation and positive associations (with company and leadership) can go a long way when it comes to growth. “Companies that are associated with progressive and positive initiatives are more likely to attract better investors, stakeholder, and more customers," says Anil Sachdev, Founder and CEO of the Gurgaon-based School of Inspired Leadership. Sachdev gives Snapdeal's example of receiving funding from Rata Tata. “Such things boost employee morale and a company's reputation to a great extent,” he says. A senior Chennai-based HR professional lays the blame squarely on both parties. “It is classic case of both the CEO and the board failing to play their part effectively. The maverick co-founder did not make the transition quickly to be a mature leader of the organisation and the board failing to provide the necessary emotional infrastructure critical in making the transition,” he explains.

True north

Leaders play multiple roles including being an organisation’s “inner voice” and “external face”. Ineffective leaders who fail in these roles will be the death knell of organisations going forward, says Shankar Viswanathan, Managing Principal of consulting firm ZS. “As the inner voice of an organisation, leaders set the tone for the company’s culture. The culture is composed of values, such as integrity, transparency, clarity of thought and vision, effective communication, are all critical skills an effective leader needs to possess. A leader should be able to define the true north of an organisation and rally the team to work towards it. If they fail in this role, it can lead to lack of organisational passion leading to lower engagement and productivity of its people.”

Yadav's turbulent stint with Housing.com also reflects the need for a higher Emotional Quotient among young Indian leaders, says SOIL’s Sachdev. “One can only get away with a mercurial temper, if he/she has already created a brand. The right to behave erratically has to be earned, that too in special cases.” Evidently, Yadav still hasn’t earned it.

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