October 21, 2010

"Madam, Are you Pregnant?" - Article by Alok Kejriwal

(Reproduced from Alok's blog at http://rodinhood.com/)

Act 1 – Scene 1

We had established a 30 odd headcount office in Shanghai in early 2001 and were steadily ramping up our operations as Mobile2win, China. Contests2win and Softbank were the original investors and we were operating under strict Mainland China’s government’s guidelines.

As the paperwork increased, we began looking around to hire secretarial staff. As soon as we had spread the word, we intriguingly began receiving resumes of many women – all in their twenties, married and well settled. One afternoon, one of our rather talkative and assertive Sales Head took me in confidence and revealed something quite chilling – He said that all those women who had applied were actually pregnant and were applying for jobs, that they could lock into and then claim maternity benefits as per the dictated statutory guidelines. This was a standard ploy of gaining ‘free employment’ and we should be avoid falling into such traps.

Act 1 – Scene 2

Simultaneously, I was pavement pounding the streets & meeting clients in frozen China. I had a strange situation on my hands. Across Shanghai, Beijing and Guangzhou, large Chinese local Brands dominated the marketing scene and were big budget spenders. Sure, the Fortune 500 brands were around, but the Chinese brands made quick spend decisions on Internet marketing and were lucrative customers.

The only problem was that all these Chinese brand managers expected ‘gifts’ to be left behind for them. It was not money but surely enough a bribe in exchange for business. My local Chinese team members who accompanied me told me, ‘Sir, this is the way business is done in China’.

Both the cases above presented ethical dilemmas to me. They forced me to walk the tight rope of being ‘righteous’ vs. ‘practical’, ‘academic’ vs. ‘practical’ and most importantly a ‘rigid businessman’ vs. a ‘practical one’.

Was I supposed to ask the ladies who came for the interviews indirect questions leading to figuring out if they were indeed pregnant? Pretend that we needed men secretaries’ because they might be required to work the night shift?

In my meetings with the local Chinese firms, was I supposed to carry gifts bought in China and pretend they were from India and just hand them over as a token of friendship?

This blog post examines the challenges of ethics and principles in entrepreneurial and start up life.

Don’t become a cheat if someone cheats you.

Very recently, in one of the group Companies, my COO and I had vocally assured a newly recruited Business Development executive (21 years old, 15k monthly salary) that she would be compensated for the value of ‘barter’ deals that she bought into the company.

Just after a few television spots in return for a couple of web pages, she produced a commission statement of Rs 81,000 for just the first month!! I first thought she was confused but quickly understood she had the mind of a cheat.

All she had done was reproduced the top ‘rack rate’ (stated nominal value) of the media of the TV spots we had received as barter (Rs. 40 lacs), without considering that the value we had provided in exchange to the channel was actually only Rs 1 lac . This rack rate is the typical exorbitant rate you see at the back of a hotel room door (for statutory purposes) – despite you having paid less than half for it. I logically tried to explain to her that Companies exchange the ‘true’ value of goods in the end – so despite the printed rate of the media value being 40 lacs, since we had provided the channel value of just Rs 1 lac, the TV spots we had received were also worth 1 lac since that inventory was unsold by the channel! Simply explained, if I gave you a ball point pen and took another one in return from you, the real value exchanged was Rs. 10(actual value of buying the ball point pen). Sure, as a kid (or better as cheats), I can pretend that my ball point is worth Rs 400 by putting a sticker on it but I was still exchanging it with you for Rs 10! (And hence I am not a kid –just a fraudster).

She insisted that she be compensated on this ‘notional’ value of 40 lacs- given the commitment made to her.

We paid her without any more discussion and surely ‘relieved’ her of her post also.

The lesson here is that we DID not stoop down to cheating even though we were cheated upon. There was no written agreement we had with her for this payment and could have easily refused to pay but we did not.

Why did we pay her?

Because these situations test the principles and the moral fiber of a Company. There is no other way of ‘testing’ where you stand on ethics without such real situations!

In the evening, I chuckled and thought of the 80k paid as fees for an expensive GMAT test of Integrity – whose results thankfully were instantaneous and on which we had received a perfect score!

Being practical.

A couple of years ago, a labor inspector arrived in our office to check our provident fund records. To his utter disappointment, he found that everything was perfect and hence there was no scope for a bribe.

He still insisted on a ‘gift’. When we refused, he did the unthinkable – he sat down on the visitor’s sofa and refused to move. Not just the first day but 3 days in a row!

On the 4th day, tired of having an ugly, smelly owl in our pristine office, we paid him some cash and bid him a happy departure.

I found it practical to bend my ethics a bit in return for the sake of sanity and the healthy atmosphere of the office!

Taking a bullet

A few months ago, one of my ex co-founders ‘informally’ partnered with c2w (contests2win) to launch some niche vertical sports sites.

He came from a real world economy and had lost touch with the digital media world for over 5 years. He spent months in our office learning the ropes, getting lots of art and programming development work done and just leveraging the entire resources made available to him.

A few weeks before launch, this partner took me in a conference room and declared that he had new ‘views’ on the partnership %’s that were earlier agreed upon and that he was not happy to stick to the original commitment.

We had this meeting at 12:58 pm. I told him that I would think about it and revert. At 1:01 pm, I wrote a mail to him saying that there was a fracture in our business thinking and hence the deal would not be possible.

He offered to buy out what we had made in terms of the product, but we took a call and swallowed a Rs 25-lacs hit (actual cost of time and money) rather than selling out on our ethics and principles.

In this case, we made the gun & the bullet and trained the shooter – only to have him shoot us in the face.

The satisfaction was going home with the headline that we don’t SELL principles, but only our services. And they cannot be bartered!

Act 1 – closing scene.

So how did we deal with the China situation?

I did not heed my China Sales head’s warning and continued with our interviews. Amongst the 3 ladies short-listed, we finally selected a simple, homely (and possibly pregnant) lady.

9 months later, there was no baby.

I later found out that the Sales Head was trying to place a couple of his cousin brothers in the Company and hence had fabricated the entire story!

As far as the Chinese brands went, we did not work for them. Instead we focused on the Fortune 500 brands and won strong business from them – leading to Siemens investing into the Company in 2003 and the Walt Disney Company buying out Mobile2win China in 2006. Neither Siemens nor Disney would have touched us if we had started bribing our way into business.

Mao said – behind every great fortune, there is a great crime.

Rodinhood says – Inside every great entrepreneur throbs an ethical heart.

October 18, 2010

"Entrepreneurial Dharma Sankata" - By Sanjay Anandaram

In the backdrop of the umpteen scandals that’re making news nowadays and when it appears that integrity, principles and ethical behaviour are but quaint niceties from a bygone era, this tale of an entrepreneur’s dilemma is worth telling and discussing because it offers hope especially to us in India.

After completing a hard day’s work, our entrepreneur boarded an evening train at Hyderabad en route to Pune. As is the case, the Travelling Ticket Examiner (TTE) showed up sometime later that evening in the compartment. Our entrepreneur handed over this e-ticket and upon being asked for his ID, handed over a photocopy of his driving license. He wasn’t carrying the original. The photocopy wasn’t acceptable and the original was demanded. Our entrepreneur pleaded with the TTE to accept the photocopy but the TTE was unmoved. There were a few others traveling without tickets. The TTE summoned our entrepreneur and the ticket less travelers to the pantry car to discuss their case. In the confines of the pantry car, the ticket less travelers, being more worldly wise than our entrepreneur, essentially bribed the TTE a few hundred rupees each and, in exchange, received a stern warning and berths in the compartment for the night.

Our entrepreneur unfortunately had principles which precluded him from paying a bribe. Instead he offered to pay the fine which turned out to be twice the Hyderabad-Bangalore fare. Not having this large amount in cash on his person, our entrepreneur offered to withdraw the money from an ATM, if available, and pay the fine at the next station. The TTE wasn’t impressed and, after abusing our entrepreneur for not carrying enough cash, essentially kicked out our entrepreneur from the train. It was after 10pm at night and our entrepreneur was at a remote station with his bag in hand. Using the map application on his phone, he figured out he was perhaps a few hours outside of Gulbarga town in North-East Karnataka. There was no sign of any train at that time of the night.

Our entrepreneur then trudged to the main road, hailed a passing vehicle and hitched a ride to Gulbarga town. He then subsequently made his way back to his home in Bangalore. He narrated his tale to his family and friends who were amused and angry with his behaviour. The responses went along the lines “Why didn’t you just pay the bribe?”, “What was the need to be heroic?” “We’ve all paid bribes, so what’s the big deal?” Don’t you know that’s the way things happen here?”

I asked the entrepreneur why he didn’t pay the bribe. He replied that he had never paid a bribe in his life to anyone. When I asked whether he considered filing a complaint against the TTE, he said he had considered it but his family was totally against it. They recalled the deadly fate that befell crusaders like Manjunath Shanmugam and made our entrepreneur promise he wouldn’t pursue anything so foolish.

“I’ve never bribed anyone. I’ve believed that it is possible to build an honest and ethical company. Today, I’m asking myself whether it is indeed possible to build an honest company in India. Are there any large companies that are clean?” Our entrepreneur then made discreet enquiries amongst friends in the finance and purchase departments of a much admired, very well known internationally renowned Indian company and learnt the dirty secret. The companies themselves were legally clean but employed “service providers” and “consultants” who were paid by cheque against proper bills but who in turn ensured that the wheels of our system were kept adequately and appropriately lubricated.

Dharma Sankata (loosely translated into “difficulty of being righteous”) refers to the ethical and moral dilemma faced by humans and is very context dependent. Our entrepreneur’s dharma sankata was evident and his principles and beliefs were severely shaken by the experience.

Would he compromise, shed his beliefs and become pragmatic like most of us? Or, would he continue to retain his convictions? Would he be able to build his startup ethically and honestly into the company that he aspired to build or would he be forced to compromise? Time will tell.

But, what would we have done in his place? The answer will determine the kind of India we’ll leave for the next generation.

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.