For good leadership, principles need to be a notch above the rules

Technology is changing the rules of business. But business leaders aren’t skilling themselves for the new world. And without principles, the company won’t go anywhere

D Shivakumar

Note: Watch the 12-minute video above (recommended), or read the transcript.

“The challenge with management and management literature today is, everybody has observations. And from the observations we're making, I believe, dangerous rules and dangerous principles,” cautions D Shivakumar in his keynote at the launch of Founding Fuel columnist Rajesh Srivastava’s book, The New Rules of Business.

The book is based on an eponymous column that Rajesh wrote for Founding Fuel. The column explored new disruptive ideas from his own experience as well as international brands. The book was launched in January at Title Waves bookstore in Mumbai.

In his address, Shivakumar says, rules, principles, and observations go hand-in-hand. Tech is upturning many rules—in sports, employment, and advertising for instance.

But blindly following rules is not enough. Principles trump rules.

He goes on to talk about eight principles he holds golden.

Edited transcript

Good evening ladies and gentlemen, and thank you for being here. I was asked to speak for 10 minutes on the dot. I'm really happy to be here this evening to mark the launch of Rajesh Srivastava’s book, The New Rules of Business. Rajesh has put 16 new rules in this book. I wish Rajesh all the luck and I hope that this becomes a bestseller.

It's a very interesting book. I’ve made copious notes. I’ve written some 25 things I’ve learnt from this book. I’ve read the whole book, top to bottom. It's an interesting book with many interesting examples, from his own situations as well as international brands. I'm sure that you’ll learn a lot from it today. But my talk today at this launch is going to be about rules, principles, and observations. I believe all three of them go hand in hand and work in tandem.  

Rules are a set of explicit or understood regulations governing context or procedure. A principle is a fundamental truth or proposition that serves as a foundation for a system of belief and behaviour. And observation is closely monitoring or observing the practice of the rules and principles. An observation has to be specific, systematic, objective, quantitative and recorded.  And when you do that, then rules become thumb rules, those become rules, and then maybe at a later stage, somebody will make it a principle.

Now, we know the rules have to be completely complied with, and whether we like it or not, in some cases, we look at the context of the rule, in many cases we don't. Take double entry bookkeeping as an example. It started in the 11th or 12th century. There are very clear rules as to what is debit, what is credit, what is profit or loss, etc. Very clear rules. But today if you look at the principles and if you read the newspapers, if you make a profit, you're no longer a startup company. Now you have to make a loss in order to be classified as stratup. It's amazing how things have changed. Double entry bookkeeping hasn't changed; the rules haven't changed; but the principles of how we treat it have completely changed.

In my view, a principle is not a principle till it hurts you. Let me explain.

I’ll start with cricket. Most batsmen will not walk when they nick the ball. However, Viswanath and Adam Gilchrist, an Australian, always used to walk. Why? They never waited for the umpire. They said, my principle is, if I know I’ve nicked the ball, I will walk. They have more respect from everybody in the fraternity compared to the rest who didn’t walk.  The rest who didn’t walk were within the gamut of rules—to say the umpire is there, he didn’t do his job. But you also need a conscience and you need to do your job. And that's what we miss when we say I followed the rules, but I'm not a principled guy. That's a very fundamental shift.

In Finland, a country which is home to Nokia—I worked there for a decade—traffic fines are a percentage of your salary. The principle being, if you earn more, you have more responsibility to society, and hence you should not be flouting rules. Interesting concept. I’ve not heard of any other country do it.

Technology has changed every rule in sport. We have the third umpire now in cricket, VAR (video assistant referee) in football. The point is to ensure that the game improves. That's why we brought technology in. Not long ago—just 20 years ago—believe it or not, umpires used to be from the local country. New Zealand umpires, Indian umpires, Pakistani umpires, Wes Indies umpires. They didn’t have a good reputation. Chandrasekhar in New Zealand once bowled an opponent, a New Zealand batsman. And he turned to the umpire and asked, how’s that? And the New Zealand umpire said, he's bowled. And Chandrasekhar said, I know he's bowled, but is he out?

And it required a very different rule and a different mindset. Imran Khan was the first guy who said, I want neutral umpires. And if you see his interviews, he said, I do not want Pakistani umpires to get credit for my victory. I want me and my team to get credit for my victory. So he started a new trend that's now par for the course.

Technology is changing every rule in business, as Rajesh mentions.

Employers today trust Glassdoor. They don't trust their hiring manager. They don’t trust HR. They don't trust the ad. They trust Glassdoor. They trust other employees who left a comment to say what they think about the company. Today, the new rule I think is, an employee is not an employee—he is a volunteer. He has volunteered two years of his time to you. If you can make the most of those two years, you are a damn good employer. If you waste that, you're gone. So employees are not employees, they are volunteers. Remember this and treat them as that.

Span of control. When Drucker wrote the concept of the corporation, he said span of control—eight (subordinates). Today, with technology and collaborative tools, I had 18 people reporting to me in my last job. So spans of control are 15-plus right now, thanks to technology. That's a completely new rule, and a completely different set of demands on a leader.

The rules and principles of brands, consumer engagement, business models, are changing every day.

Many businesses and leaders are simply not reskilling themselves for the new rules. Fortune 500 says by 2022 50% of all employees need to be reskilled. That's exactly 24 months from now—23 months from now. But trust me, nobody is reskilling themselves. So rules are there but the guys are not following.

Brands talk to consumers through 30-second or 20-second TV spots etc. Today, with Facebook Thumbstoppers, we're talking about three-second ads and five-second ads. That’s the new rule. Because people don't have the time to see a 30-second ads on their cell phones.

In the past, all of advertising was a horizontal format. If you go back and remember the famous movie directors, they showed a shot like this (gestures horizontal frame). Today all of viewing is this (gestures vertical scrolling). It’s vertical, it’s no longer horizontal. That’s the new rule.

Believe it or not, many brand teams and advertising agencies haven't latched on to that. They haven’t understood that it’s a vertical format now.

In a digital world, there seem to be very few new rules. You're still searching for a correlation between views, likes, shares, comments. We’ll come with some answer hopefully in the next few years.

Data has changed the way we look at everything. Data integrity and its interpretation is the real challenge now.

Leaders in companies do well when their principles are a notch above the rules. Following rules is no longer enough.

The whole concept of leadership now is having principles, which people appreciate in society, where employees appreciate, and your ecosystem appreciate.

Let me state my own principles as I’ve seen in my own career.

Principle #1: The No. 1 principle I had many years ago, before LinkedIn came in, I said, I will share information liberally. Every article I read, I would make photocopies and send it to my whole team, or anybody who mattered, who wanted to read it.

Principle #2: I would never criticise my predecessor. If I took over a new job, I'd say he did his best till yesterday. Today I have the baton, let me do it. One of the companies I worked with nearly went to the ground because the first year when somebody took over a new job, he was only cribbing and cursing his predecessor. He lost one year. Consumers don’t wait for one year. So this is a huge mistake that managers make—to just curse their predecessor for the first year.

Principle #3: Be fair and honest in giving feedback. That's not true at the workplace. If you're fair and honest, people will appreciate your feedback a lot more.  

Principle #4: Speak truth to authority even if it’s going to hurt you. And let people speak truth to you.

Principle #5: Appreciate the boss for what he does what he's good at, but never be a sycophant. I see so many sycophants at work today. When you lose that principle, you've lost your identity.  Very few people recognise that.

Principle #6: Do what’s right for the company first. Do what's right for the team second. And you will automatically win. Many leaders, the principle is, I promote myself—especially on social media. Everything is about self-glorification. You can be sure that the company’s going to go down the tube sooner or later.

Principle # 7: Always be on time. In my whole career I’ve missed just two flights. Always be on time for any event, because that's how you respect the other person. That's a principle to follow.

Principle #8: And finally, I've never repeated either a presentation or a speech in my life. So every time I accept a speech like this, I work on it. And that's it—it goes; it’s no more. That's the only way I felt I could stay relevant, by having that principle.

So, these are the principles I apply to myself in order to stay relevant in a fast changing world.

I also had the opportunity to change a few rules. In one of the companies I worked with, we had a rule which said, every 18 months we’ll give you a new role. So what were people doing? They got a new role, they just waited for 18 months and moved to the next one. Nobody was bothered about the company. So I said guys, enough is enough, I'm breaking this. End of story. So, we broke the rule. After that people started spending two years and three years in a job, which really helped the company.

In an organisation, following rules blindly is very easy. If you're a leader, you just apply the rule book, and you are a company man. On the other hand, if you do everything for an employee, you want to be a popular leader, you are not taking care of a company. And I’ve learnt right through my career that balancing the rule and the emotion part of the employees is the right thing to do. Just blindly reading out rules is absolutely no good.

The challenge with management and management literature today is, everybody has observations. And from the observations we're making, I believe, dangerous rules and dangerous principles.

So, somebody says, if there are more women on the board, that company does well. Okay, that's one observation. That's not a rule.

There are many, many cases like this: if you have a more diverse workforce, your EBITDA will be higher, your profit ration will be higher. These are just observations. Because we have so many professors, so much research happening, their observations are tending to be quoted as principles of the future world. And I would seriously ask you to worry about that, and seriously challenge those observations which people are touting as new theories.

So thank you Rajesh for the 16 rules in your book. I can relate to many of them.

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About the author

D Shivakumar
D Shivakumar

Operating Partner

Advent International

Shivakumar is Operating Partner at Advent International. Before this, he was President (Corporate Strategy and Business Development) at Aditya Birla Group. Earlier assignments include: Chairman & CEO at Pepsico India and prior to that, Managing Director at Nokia India. Before joining Nokia, he worked with consumer electronics maker Philips and top consumer goods firm Hindustan Unilever. He is an engineer from IIT Chennai and an MBA from IIM Calcutta.

Shivakumar has written three books: Reflections - a collection of Shivs articles; The Right Choice - Resolving Ten Career Dilemmas; and The Art of Management. The latter two are business bestsellers.

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