Management No. 1 - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Management No. 1

Jun 14, 2002

Value investing is easier said than done. Invest for a long term, they say. But in today's world where business is done at the speed of thought, a longer time frame implicitly implies that the exposure your investments have to a rapidly 'mutating' environment is more. Thus, the businesses you own stand a greater risk of being impacted by rapidly changing technology and business environment. Thus, one of the key criteria for evaluating potential candidates for your portfolio should be the ability to successfully manage through fast changing operating environment. Why do some companies manage to adapt themselves to the ground realities, while some others don't? The answer is not very complicated. It is the leadership at the helm, the management.

Jim Collins in his book, 'Good To Great' identifies some common factors among companies that made a transition from being merely good companies to great companies. The first factor he identifies is 'level 5' leadership. A leadership that is not obsessed about itself but about what the company has set out to do. More importantly, a management that has institutionalized leadership. The organisations performance is not a one-man show. Thus, when the leader departs the organisation continues to work unaffected.

Now comes the more difficult part. How does one gain an insight about a company's leadership? Well, annual reports are a very good place to begin with. While some companies print their annual reports because it is mandatory to do so, others use it as an opportunity to communicate with their shareholders. This is the first differentiator. Then of course comes the content of the communication that speaks volumes about the management.

While talking about annual reports, does the next thing have to do something with Infosys? You guessed right, it has. Infy's FY02 annual report begins with four brilliant essays. Each one of them provides a brilliant insight into ingredients for managing in turbulent environment. While Mr. Shibulal, Head, Customer Delivery, talks about a maintaining skills sets cross a wide spectrum of technologies and the ability to attract right people, Prof. Marti Subrahmanyam, Independent Director, talks about financial flexibility as a key competitive advantage. And then there is an essay by Mr. Phaneesh Murthy, who talks about technology driven leadership. But what is more striking is that the man, who started it all, Mr. Naryana Murthy, has hardly anything to in the whole of the annual report. He has moved on. And is now busy creating the next generation of leaders for the company.

And then there is Satyam's annual report that has a hundred pages more, mostly due to the astronomical number of subsidiaries the company has. Did you know that, were all Satyam's subsidiaries? The company talks a lot about customer delight, but nowhere does it talk about what it can do for its customers. There is hardly any communication from any member of the company's board other than the mandatory directors report.

Businesses are made up of organisations and organisations are made of people. And numbers alone can't evaluate people. While numbers are important, very important, but once a company's credibility and integrity has been well established, a long-term investor has to look beyond numbers. Jim Collins in his study found that many organisation made the transition from good to great even when the industry from which the company was from, performed very badly. The moral: When times are bad for an industry, it is perhaps the best time to buy the consistent outperformer in that industry.

Equitymaster requests your view! Post a comment on "Management No. 1". Click here!


More Views on News

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

Wait! Don't Chase Smallcaps Now (Profit Hunter)

Sep 18, 2020

Let the markets take a breather before you jump in.

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

A Contrarian View on Whether You Should Load Up on Small Caps podcast (Views On News)

Sep 17, 2020

Rahul Shah discusses whether the SEBI circular is the perfect time to start investing in good quality small caps

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 18, 2020 (Close)