How to build a great company, tells Narayana Murthy

Sitting in a quiet room of his Bengaluru-based office, Nagavara Ramarao Narayana Murthy’s demeanor exuded composure and humility. Father of the IT industry, co-founder of Infosys, country’s second largest IT behemoth, Murthy started the company with six other engineers in Pune in 1981 with an initial capital of Rs 10,000. It was he who introduced the global delivery model, built India’s first software campus, made Infosys the first Indian company to get listed on Nasdaq, got certification to CMM level 5 and issued one of the world’s largest stock option plans. 

His company was applauded for everything -- from its business model, delivery excellence, leadership to corporate governance ethics. Though Murthy retired from then $8.3-billion IT bellwether in August 2011 on turning 65 in compliance with the policy he laid down for co-founders at executive posts, the company’s board prevailed upon him to return June 1, 2013 for five years. Murthy finally bid adieu to the iconic company in 2014. 

With BW People, Murthy shares his vision on ‘how to build a great company.

Employee centric approach: Infosys was the first Indian company to offer stock options to employees in 1993, the year it went public. A total of 16,237 employees benefited until ESOPs were halted in July 2003. “Also, it was the first company in India, one of the very few in the world to have used a model called Lev and Schwartz for valuing the human resources in a company,” Murthy said. Lev and Schwartz model proposes an economic valuation of employees based on the present value of future earnings, adjusted for the probability of employees’ death or separation or retirement. “We, at Infosys, believe that the most critical resources of any corporation is the quality of human mind because a human mind can innovate, invent, lead and bring about huge transformations. Therefore, the objective of any corporation will have to be to acquire as many smart and value-based professionals as possible and to create an environment of fairness, justice, meritocracy, excellence and openness so that these professionals can contribute effectively in the company,” he said. From its earliest start-up days, Murthy created a team at Infosys. 

His team included stalwarts: Nandan Nilekani, the strategist and rainmaker; Kris Gopalakrishnan, the technologist; SD Shibulal, the delivery specialist; Mohandas Pai, the financial magician. Murthy held the team together while setting up processes and rules for predictability, quality, scale and growth.

Create a different business proposition and never overlook your mistakes: “When I founded Softronics in 1976 I focused on the domestic market. I soon realized that there was hardly any domestic market for IT in India at that time. I closed Softronics, took up a job to learn about export market, and eventually I started Infosys.

Creation of a value system must for every entrepreneur:  Murthy says that he is a great admirer of Mahatma Gandhi who introduced the concept of leadership by example. “Gandhi also introduced the importance of walking the talk. Therefore I believe that the best form of leadership is through setting personal example. So my style of leadership is through setting an example,” Murthy said while looking out through the glass in his cabin. His posture remained serene. 

In 1999, it became the first Indian company to list on the Nasdaq. It was also the first in India to report quarterly financials, issue guidance against insider trading, come up with the concept of a lead independent director, and have directors assessed by peers.  

Murthy sounds very particular and confident when he shares his vision on compassionate capitalism. “In a country like India where majority of our people live in sheer poverty, it is the responsibility of capitalists to think about the lowest level of employees in instituting policies and ensuring that there is a fairness in allocation of benefits amongst various rungs of employees.

Basic ingredients of a successful organisation: Honesty, hard work, integrity, transparency, fairness, accountability, austerity, leadership by example and austerity, these are all universal features which improves the probability of success. However, if someone wants to build a great company the other requirements include the understanding of conducting an inexpensive test marketing exercise. Also, every entrepreneur must know the principles of finance and sales to be successful.By following these principles you are only improving the probability of your success because every entrepreneur requires four attributes, counts Murthy. “First is competence, second is character or good values, third is commitment and fourth is chance. Nobody in the world can guarantee an entrepreneur, they can only see that if you follow these, then the probability of getting successful will increase.”

Recently, Murthy said his biggest regret was quitting as chairman of Infosys in 2014, even as he has been involved in an acrimonious battle with the company’s board and management. “A lot of my founder colleagues told me not to leave Infosys in 2014, to stay a few years. Generally, I find that I am avery emotional person. A lot of my decisions are based on idealism and probably, I should have listened to them,” he told a news channel. The public spat has also brought in institutional shareholders who have said the interference from the founders was hurting the company. However, he refused talking about Infosys with BW People where he has slammed Infosys’ board for poor governance and for handing out heavy pay increases to the management. During his time, he strictly followed his principle of compassionate capitalism.