Abstract
This case can be examined from diverse perspectives. One way to understand this case is from an organizational perspective. GTL is a family business which have evolved to attain a strong position in its competitive context. It wants to now step up to the next level, for which it must judiciously forget the past, manage the present and create the future. This is akin to repairing an aeroplane while it is in flight. This process of change is not without challenges, it will call for changes in methods and processes, most importantly it can affect the culture of the firm.
The other way to examine the case is to view it as a clash of personalities. The differing perspectives of the newly appointed CEO who questions the existing organizational practices on the one hand and an employee who has risen through the ranks believing that the legacy practices must continue on the other. Blending these two issues can perhaps offer a better explanation of the case situation and the consequences that followed, post the meeting on 31st January 2018.
The Meeting and Consequences
The meeting on 31 January 2018 offers a snapshot into the practices of GTL. Mr Satyam, the newly appointed CEO, seems to have laid down some policies for sanctioning special discounts. A sales organization needs to generate sales, but it is crucial to have profitable sales. Excessive discounting at the cost of profits is certainly not an ideal course of action. Mr Satyam is signalling to the organization the importance of discipline in the deployment of discounts, a special discount should be used for maximum impact. He is bringing his experience and education to the table when he attempts to boost profitability at GTL.
However, the sales organization does not seem to be following his directive in both letter and spirit. He is being pushed into a corner by being asked to speedily approve 35 requests for special discounts. If one looks at the sales figures for 2017, it amounts to almost 23 per cent of the monthly sales. It is not surprising that Mr Satyam wants to question such practices. He is right in pointing out that employees do not have the right to take organizational resources for granted, a long tenure in the organization is also not a carte blanch to flout organizational rules and processes. The sales organization is trying to undermine the CEO who is not from the family; this kind of a thug of war is not healthy for the organization. Mr Satyam is not an unreasonable person; he has not rejected all the 35 requests for a special discount. Based on a careful assessment, he has fully approved 15 requests and partially approved 5 requests. This demonstrates his professionalism and need for objectivity in decisions. A person with this orientation will be very uncomfortable evaluating 35 proposals for special discounts at short notice. However, he has over-stepped in admonishing the sales force by saying that nobody is indispensable. This remark creates a negative vibe while engaging with the sales force. He should examine the sales force performance, offer corrective suggestions and the rationale for the same. Those salespersons who are unwilling to correct themselves must be then asked to look for alternate opportunities.
What follows the meeting is a strong action by the Mr Giri and two more veterans, in the form of a resignation on personal grounds. It appears from the case facts that they were already planning an exit, given the change in the leadership at GTL. Mr Satyam faces a stark choice—between a bad and a worse decision. The exit of these three veterans will have a demoralizing effect on the sales force, however, as a leader, he should not view talking to three veterans as a loss of face. This is because, irrespective of the exit or retention of the key veterans, the performance of GTL is wanting on many counts.
GTL: Evolution and Performance
GTL is a classic example of a channel organization that has developed in India, built by enterprising individuals. Lala Ghanshyam Das has built an organization which has grown steadily over the years, leveraging social networks to create a field force with deep roots in India’s rural hinterlands. This is an approach that has borne abundant fruit; GTL is a key channel member for BSL. The organization is built on family values; a strong financial orientation seems to be missing in the operations. This is borne out by the key financial indicators of the firm; Mr Satyam would have seen the red flags immediately on taking over as the CEO.
The induction of Mr Manoj, his grandson, is an inflexion point in the evolution of GTL. He is a quick learner, but unlike his grandfather, he is very focussed on financial performance. This is reflected in his unease with the undisciplined application of the company policies which was affecting the firm. Lala Ghanshyam Das wants his grandson to focus on customer satisfaction, as opposed to profits. He also wants the employees to be treated as family members; this reflects his world view and values. However, there is a fundamental disconnect; Mr Manoj does not foresee exciting prospects in the tractor dealership business. The appointment of Mr Satyam is a generational shift with Lala Ghanshyam Das stepping down from all aspects of the business. He is surprised by the decision to appoint Mr Satyam but realizes the need for a fresh approach in managing the business.
Mr Satyam is an outsider and quickly realizes the problems at GTL; he is not happy to see employees being treated with kid gloves. The flouting of organizational norms was not financially prudent and was hurting the firm. He has taken Mr. Manoj into confidence; the appointment of a veteran like Mr Munshi as second in command reflected the twin objective of a finance focus and co-opting a key family loyalist into the new plan of action, for the firm.
The letter reflects Mr Satyam’s priorities. However, there are some lacunae in his process of communication. He has organized a cultural night for the employees. Why did he not have a daylong workshop to discuss the financial performance of the company. The job of the CEO is to engage employees; a cultural night may be useful for breaking the ice. However, it is not a replacement for a deep and engaging conversation with employees about firm performance. The letter reflects the firm’s priorities but is a shock for the employees, given the terse tone of the same. It is in stark contrast to the supposed bonhomie of the cultural night the previous evening. The financial indicators speak for themselves.
Mr Satyam should have communicated the rationale for the letter to all the staff. The gross margins for the firm have been stagnant, hence, it is imperative for the firm to harness whatever operational efficiency levers are available to boost profitability. A channel organization may have to work on laser thin margins; it can still be a profitable organization if it focusses on the cost side of the business. Unfortunately, that is not to be at GTL. Over a four-year period, the average inventory holding has shot up from 22 days to 35 days, although there is strong predictability of month on month sales in the tractor business.
Financial Indicators (2014–2017)
The most damaging aspect of the sales performance is the number of credit sales days; it has shot up from 15 to 25 days; this has been accompanied by an increase in promotional expenses as well. Thus, it appears that the relationship -building by the sales force has not been reciprocated by the customers who always delayed payments. The sales force cannot hide behind the excuse of customer relationship to conceal the burning issues in credit cycle management. They cannot have the cake and eat it too; longer credit cycle and more special discounts do not go hand in hand. This has had spiralling effects in the working capital costs of the firm, in turn leading to almost non-existent profits for four years in a row. Mr Satyam had an excellent opening to communicate this, however, the opportunity was not utilized.
The Way Forward
Mr Satyam can still salvage the situation by clearing and communicating the issues to Mr Giri first and then to the others. It is the proverbial burning platform; veterans like Mr Giri must understand this if they really have a loyalty towards the firm. They would be well advised to understand that a competitor will welcome them with open arms but is unlikely to give them the leverage they enjoyed at GTL, over the long term. As the CEO Mr Satyam cannot afford to brush away issues under the carpet, he must take up the issues head on. Based on a clear communication, Mr Satyam must assess where the salesforce stands with respect to change. A framework for decision making is given in Table 2.
A Framework for Decision-making
Conclusion
Change is a necessary, albeit painful process. Mr Satyam as the CEO needs to transform the organization. GTL may lose Mr Giri and two more sales key salespersons, however, they were unwilling to change. Mr Satyam should still talk to them as a professional; if they still decide to leave—they have lost a golden opportunity to transform a firm they helped create.
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author received no financial support for the research, authorship and/or publication of this article.