A week can be a long time – especially if there is an ongoing crisis to handle. Be it a company, a startup or an individual, nobody can ever be fully prepared for the unexpected.
This month – the headlines were occupied by the bitter fight between Infosys board and its founders’ and its fallout since Vishal Sikka resigned from the post of Chief Executive Officer and Managing Director of Infosys.
In less than a week, the company lost thousands of crores in market cap, shook investors’ confidence and stunned its clients.
Disputes between founders, investors and or board members are nothing new, either for established MNCs or startups, be it in India or the world over.
Take the example of Tata group removing Cyrus Mistry as chairman of Tata Sons or the infamous sacking of Rahul Yadav by the directors of Housing.com for “objectionable behaviour towards investors and other stakeholders.”
Big companies have both human and financial resources to overcome such crisis, and in most cases, they emerge without much impact.
However, the same may not be true for early-stage startups. Such incidents have the potential to wipe them out of their existence.
Startups and young entrepreneurs can learn four valuable lessons from the Infosys saga;
1. Create a Red-book: Disputes are a major distraction; be it for an established MNC or a startup.
Instead of building the business; a startup can lose precious time in saving the business.
The Indian IT industry is experiencing turbulence globally, and it needs to marshal all its resources to tide over tough times.
Similarly, the Indian startup ecosystem is in troubled waters with global investors losing confidence due to series of devaluations and failures of top notch start-ups.
So, what should start-ups do? It is important that startups create a ‘Red-Book’ with the help from management gurus.
The book should lay down standard operating procedures (SOPs) that can guide a start-up on dos’ and don’t when caught in similar crisis.
2. Build on Past performance: According to a media report “Infosys lost nearly Rs 34,000 crore in market capitalisation, and at least nine brokers downgraded their ratings on the stock” post resignation of CEO Vishal Sikka.
Given Infosys’s past performance and resources, it may win back investor’s and client’s confidence in a couple of years.
However, startups can’t afford to lose investors or consumers’ confidence as they have limited resources and little past performance.
Thus, startups should understand the importance of building on past performance, both with clients and investors, for it may come handy in troubled times.
3. Create a talent pool: Leading market analysts such as Nomura has cautioned that Infosys may lose senior leaders in times to come.
Given its resources, Infosys may be able to fill up various positions with required talent.
However, a startup may struggle to hire talent at short notice especially given limited resources.
In the recent times even the so-called unicorn Indian start-ups such as Flipkart, Ola and Snapdeal saw exits of senior managers citing various reasons.
Such untimely departure can have a long-term and short-term impact on a startups growth plan.
Thus, it is important for early stage startups to build talent pool continuously, and one way of doing this is by cross training staff on skills and expertise.
4. No public fight: Professor Vijay Govindarajan, Management guru while speaking to CNBC TV18 advised Infosys founders and board against a public spat.
Disagreements do happen – but it should be done within the four walls of the boardroom and not in public as this will not help anybody be it promoters, investors and or clients.
In-fighting can impact MNCs and startups alike- however, a dispute among stake holders can adversely affect a startup’s journey and even threaten its survival.
Thus, it is important that as a founder(s) of early stage startup you avoid distraction and just focus on business.
However, do have a well drawn up a contingency plan to meet any eventuality.
(The author is founder-CEO of Hyderabad based AskMentor, a platform for startups. Views expressed are personal. Edited for Moneycontrol.)