"I am the first entrepreneur and perhaps the only one so far who has been very open about accepting his faults"

Corporate Transformation. A process that takes companies into the "Valley of Death". But what are compulsions that force a company to walk this path?

CNBC India's Raghav Bahl and Business Historian Gita Piramal discussed issues relating to corporate restructuring with Zee Telefilms chairman and managing director Subhash Chandra on the channel's show on management precepts and practises - Lessons in Excellence - that was telecast on Sunday and would re-telecast at 10:30 pm on Tuesday.

The interview, a frank and candid one after a long time, is being reproduced here in toto by indiantelevision.com as it makes great reading and gives one an insight into Chandra's mind.


Piramal: Subhash, you have been through the valley of death twice now - 1996 & 2002. What are the similarities? What are the differences?

Chandra: The differences are easy to figure. In 1996 - the issues were different at that stage. That was a start-up team. They became complacent - as if they have done wonders by growing from a zero base to Rs 150-200-crore (Rs 1.5-2 billion) company. We had to change that start-up team. The same team didn't let the CEO - at that time Mr Sanyal - to function properly because he could show them their true face in every discussion. So it was a scenario where they are being told by everybody in the society that they had done a great job, but their CEO was telling them what the reality was - and that was the first journey through the Valley of Death - as you call it.


Bahl: In 2002 now, the second journey into the Valley. You said the circumstances are very different?

Chandra: Yes, because in 1999, we made a major mistake of granting ESOPs to people without thinking very much. And those who got these ESOPs were earning huge figures out of nothing. And these people were middle level executives, they didn't know what to do, how to digest that kind of money. So that process of, as you call the second journey through the Valley of Death, started at that time.


Bahl: Do you think it took away the hunger from people?

Chandra: Yes.


Bahl: The fact that they got so much of wealth overnight - did that lead to complacency again in a different form?

Chandra: In a different form. That sets in complacency in a different form. What happened was - the processes which were in place got dismantled. Let me give an example. We had a policy for previewing shows. But after the ESOPs were granted to people, they became complacent, and the system went wrong. They were also reacting - like for example, to KBC. That was a knee-jerk reaction, which again went wrong. And we went through the second Valley of Death.


Bahl: I was just coming to that, wasn't KBC (Kaun Banega Crorepati), the one reaction that turned out to be a failure, leading to a downward slide?

Chandra: That's correct, you are absolutely right.



Bahl: And you are saying it was complacency because of which KBC was not what it should have been?

Chandra: Yes, because the processes we had developed over a period of time got totally dismantled because of that reaction, knee jerk reaction. And that kind of continued and the new CEO came in and my experience of the past had been to give a totally free hand to the CEO, whosoever it maybe.


Piramal: You gave Mr Vijay Jindal considerable freedom. Did you give even more freedom to Mr Sandeep Goyal?

Chandra: Yes. There is a popular perception in the media that Zee has had seven CEOs, and that's absolutely wrong. There have been only three CEOs in 10 years, and that too in a fledgling media organization, which I wanted to professionalise.


Bahl: How do you say three? There was Mr Sanyal, there was Mr Vijay Jindal, and there was Mr RK Singh, Mr Digvijay Singh, and Mr Sandeep Goyal.

Chandra: No, Mr Digvijay Singh was never the CEO.

"There is a popular perception in the media that Zee has had seven CEOs, and that's absolutely wrong. There have been only three CEOs in 10 years"

Bahl: But he was running the network?

Chandra: No.


Bahl: I mean whatever is the designation, wasn't he in charge?

Chandra: Never, he was only in charge of marketing.


Bahl: You are therefore saying that Sandeep Goyal was the third CEO. What about RK Singh?

Chandra: Sandeep Goyal is the fourth CEO and he still remains with the network as an advisor. He tried his best, I don't blame him for anything.


Piramal: But if we go back to the theory... First, the realisation of the truth, then the benchmarking, then comes finger pointing, then comes euphoria and then comes a solution. So you have taken us through the first Valley but take us again a little more clearly through the differences between the second and the first?

Chandra: I wouldn't be able to tell you all these jargons. I am a simple entrepreneur and I know that if you put logic into place, there is no rocket science to it. I am the first entrepreneur and perhaps the only one so far who has been very open about accepting his faults. It was a greed that had set even in myself, when we bought the media assets from Ketan Parekh. I have openly admitted to this mistake, and that also took away my attention and management time, and kept being in a reactionary mode. Because of this, I took a hit of close to Rs 300 crore on our personal balance sheet as a promoter.

"When the professionals start looking at what others are doing, that's where things go wrong"

Bahl: Now that you have got you attention back. The first thing is really about showing a mirror to senior managers...telling them where the team went wrong, and what the way ahead is. Are you still in that stage?

Chandra: No, I think not. We have already cleared that stage. My second level management team is well in charge. They are motivated, and have already crossed your processes of Valley of Death. We are at the execution stage. People are not blaming anybody, they are highly motivated, and the results are already visible.


Bahl: When you launched your restructuring, there must have been some managers you would have wanted to keep, and some you may have wanted to show the door. How was your reaction and interaction with these two sets of managers different?

Chandra: My interaction with the second level executive is very clear. As the entrepreneur or as the head of the organisation, what I need them to do is clearly understand what's profitable and what's not. I would like to remind everyone that it's only Zee network that saw a downturn. The other products, or other brands - whether regional brands or cinema or news - they have been growing. News slipped for a little while for a year but it's back.


Bahl: So you are saying that your managers went off financial discipline required for running a profitable company and you brought their attention back to this issue?

Chandra: It was not just an issue of profitability. You see - Zee TV retained its leadership position due to the simple reason that Zee TV was always responsive and listening to what viewers wanted. And we used to look and do things on our own, without looking at what Star was doing or what Sony was doing. We were always finding and bringing new genres of programming.

"Being an entrepreneur, I will not insist on being Number One. I'm happy being a strong Number two. I don't want to be just emotional about things."

Piramal: Is that where things started going wrong? When you started looking at what competitors were doing, rather than playing the leadership game?

Chandra: That's correct. It was my desire to professionalise this company completely. And when the professionals start looking at what others are doing, that's where things go wrong.


Piramal: Moving on, how do you see the role of entrepreneurs in India?

Chandra: As a leader in any business, the leader's job is to continuously innovative and lead from the front.


Piramal: And that only the CEO or entrepreneur can do? Professional managers can't do?

Chandra:If directed properly, professional managers will do.


Bahl: How do you then engage with them?

Chandra: The team today at the Zee Network is a young team. They don't carry any baggage. As I have earlier quoted in some of my press interviews, when a company is at a turnaround phase, every employee - from the lowest to the highest level - must work in the same direction. What happened with Mr Sandeep Goyal was that he himself in his own right was a star CEO. He had seen successes everywhere... However, in a media company there are mini stars everywhere... in news, in programming, creative people, they are all stars in their own right. So if an entrepreneur is leading, all the stars will look up to him and accept him. But when a professional CEO, who is a star value CEO, is there, they don't want to give their wholehearted support to him because they don't agree with his ideas. Yet, they can't confront him because he is a CEO.


Piramal: Unless you get talented people to be your CEOs you will always be stepping in as the acting CEO...and you will come in their way. Do you mean to say you are the best CEO?

Chandra: No, I am not saying that. I am saying that instead of having one CEO, I have got five CEOs. We have now divided Zee Network into five clusters, Zee TV, Zee Cinema, Zee Music, Alpha, and Zee English.


Bahl: The sense that I am getting is that someone like you - the entrepreneur and the person who launched the company and managed it the first few years directly - will always be needed. Is that so?

Chandra: : I would not say that fully. But I would say that I would need to keep my eyes on the business. I just have to be available to them for guidance. It's not that I am doing day-to-day management.


Bahl: We have also seen the resurgence of your family in your business. Take us through your argument between family management and professional management.

Chandra: My belief is very simple. Why do we all think that a family member cannot be a professional? We have had my family members managing the business in the past as well. It's only recently that a third person has been added - Laxmi Goyal in Zee News. But let me say this in Hindi: "Jo tan laage, so tan jaane". I think a hired professional CEO may not be able to do a better job than a majority shareholder, or the promoter founder...


Bahl: So this is clearly your management philosophy "Jo tan laage so tan jaane". The one who owns the most is also the one who is hurt the most...

Chandra: Yes. On the other hand, we have companies like Essel Propack, where the managing director is a professional CEO. We just look at the management reports once a month.


Bahl: Now let's look at the future. You have restructured twice, and you are beginning to see success. Let's project this forward. What does this mean for you? Will you step back, and hand over to a new CEO. If yes, what kind of a person will he be?

Chandra: First of all I think we have not reached where we want to reach. Being an entrepreneur, I will not insist on being Number One. I'm happy being a strong Number two. I don't want to be just emotional about things. Now we have consciously decided that in the years to come, we will concentrate on grooming an insider to be the CEO, rather than hiring someone from outside. I don't see a new CEO for Zee Telefilms for at least five to six years.

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