Shyamal Majumdar: The Aiyar school of management

HUMAN FACTOR

ONGC's Chairman and Managing Director Subir Raha loves to recount a story from his days at the Indian Oil Corporation (IOC). The story "" about a former IOC chairman "" shows how sycophancy is a way of life in India's public sector companies.

This particular gentleman, who was fond of fishing, was on an official trip to Haldia. At 5.30 the next morning, the general manager and his deputy "" both based in Haldia "" arrived at the chairman's official quarters to accompany him on his fishing venture.

All three got their catch within a couple of minutes but the result was quite curious. The chairman netted the biggest fish, the general manager caught the second biggest and his deputy the smallest.

Raha, who was posted at Haldia at the time, thought it was impossible that the fish were also aware of the hierarchy of their captors, and soon discovered how the administrative manager of the Haldia office made a perfect arrangement.

He had positioned three of his lieutenants in the water who did their job as instructed. Raha recounted the story to me sometime back "" much before his public spat with the petroleum ministry.

But Raha should consider himself lucky that he has managed to save his job without following the management lessons given by the administrative manager of the Haldia office.

If the ONGC fire has been doused, the credit goes to Petroleum Minister Mani Shankar Aiyar. One management consultant says Aiyar has acted like a wily promoter of a company who doesn't want his CEO to call the shots beyond a point, but knows when to back off when the exceptionally talented CEO shows signs of rebellion. "India's family-owned businesses should take a lesson or two from the minister," he says.

Though Aiyar managed to distance himself from the spat between Raha and the ministry and positioned himself as a generous patriarch who doesn't want his family members to interfere with the professional functioning of his company, the truth is that no bureaucrat in the ministry would have had the guts to take on Raha without the tacit approval of the minister.

His purpose was to send a subtle message to the fiercely independent-minded CEO that he was the real boss. Once the purpose was served, he chided the babus (who have no other option but to behave like attentive school children) for being "immature" and publicly acknowledged the CEO's professional competence. The ploy worked as is evident from Raha's quick statement to the media that he never offered to resign from ONGC.

In the process, Aiyar killed two birds with one stone. If the babus were forced to backtrack from their hard stance, the public spat also exposed what a former petroleum secretary calls Raha's lack of boardroom skills.

Another former chairman of a public sector oil company says Raha should have taken the entire matter to the ONGC board instead of fighting in public. "If ONGC is not the bureaucrats' fiefdom, it isn't the CMD's fiefdom either," he says.

Though Aiyar has managed to salvage the situation through his formidable management skills, he would do well to look into the issues raised by Raha in the long-term interest of India's most valuable company. In his letter to the minister, Raha talked about intimidation and coercion by the ministry to appoint two additional government nominees on the company's board.

One of the two appointments being thrust onto the board, Raha said, was that of the man who plays the regulator and, therefore, having him on the ONGC board is undeniably a conflict of interest.

Raha's argument makes sense. The government owns 74 per cent in ONGC and already has three government directors. Adding two more would violate the government's stated policy of keeping its nominees to two or less in each state-run company.

Moreover, increasing the number of government directors violated the Sebi guideline of independent directors making up for half of the effective board strength.

On its part, the ministry said the DGH was not a regulator in the statutory sense. But this doesn't hold water as Aiyar himself has told Parliament that DGH is the upstream regulator.

Moreover, the 1993 order for setting up the DGH specified its functions to include regulation of the production and exploration business on behalf of the sovereign owner "" the government.

To be sure, Raha has many critics. People within ONGC have often complained about his dictatorial management style and the biting comments he pens on notes sent to him. It is also true that he still has much to do to establish ONGC as a world-class corporation.

Its decision-making is still slow and many of its business practices are old-fashioned and regarded at times as extremely frustrating by industry players.

But even his worst critics admit that Raha is an exceptional manager who has been trying to genuinely shape a public sector company, which has too many authorities with no stake in the results and no stake in its future. Now that his purpose has been served (that of sobering down the CEO), Aiyar would do well to leave him alone.