Business case study: How a CEO learnt to deal with corruption inside (and outside) her company

As far as Conzerv and its stakeholders were concerned, TT, Ashok and I were united in our determination to run and grow the business ethically, or not at all. The most challenging, but the most rewarding part of our job was to make ethical practices a pillar of our business culture. Was it easy?

Obviously not! In fact, on some days it seemed like a futile and frustrating endeavour. Yet, there were many reasons why we kept at it, not least because we had gathered a team of people in the senior and middle leadership who enjoyed working with us because we were ethical and because our code of conduct mirrored their personal values.

When David Kiron, the case writer from HBS, asked Ashok, ‘Why do you think it is worth it?’ Ashok said ‘it’s a question of the long-term versus the short-term.’

Our view was that making compromises might help you get ahead in the short term but playing the long game needs zero tolerance for corruption.

“Run a business in India without corruption? Impossible!”

“He’s right! This case can’t have got it right. My family has run a business in India for decades and I can tell you this is BS. Especially for a small company like Conzerv!”

Animated comments like these could be heard when the case on Conzerv, written by Harvard Business School, was discussed at some of the world’s premier MBA institutions.

Who could blame them? Doing business in India has never been easy. In 2018, India’s rank on the Corruption Perception Index (CPI) of Transparency International was 78th out of the 180 countries surveyed. The index ranks countries and territories by their perceived levels of public sector corruption according to experts and businesspeople and uses a scale of zero to 100, where zero is highly corrupt and 100 is very clean. India’s score in 2018 was 41 out of 100.

We faced a steep climb in building an ethical culture at Conzerv. But each incident only served to strengthen our resolve.

In 1998, I was travelling with our local area manager on a visit to meet customers in a state in western India. On a busy day during our visit, he said, “I need to tell you something. While you make these grand plans to quadruple the business and talk about integrity, the man you trust to lead national sales is corrupt. Following his lead, the three regional managers are also taking kickbacks from distributors in return for routing customer orders through them.”

A couple of calls to a few area managers in other regions confirmed that this allegation was true. It felt like I was the only one who hadn’t known what was going on.

I sat in stunned silence. The thought of “what do I do now?” made me go numb as I struggled to come up with a response.

I went through the day like an automaton, and after the last sales visit, called TT in Mumbai and poured out my anguish.

He said, “Don’t worry. This happens. Come and see me before you fly back to Bangalore. We will deal with this.”

I landed in Mumbai and went straight to his house. It was late in the evening. He was seated in his armchair with a writing pad and pen, waiting for me. As soon as I caught my breath, he took me through the list he had made.

First, if you are sure this is true, travel to each region and fire all the managers involved. Immediately.

Second, meet all the distributors implicated and tell them what we have done and why. If they are defensive, fire them too.

Third, tell everyone in the company.

By the time he finished I was in a panic. Fire all of them? How do I replace four sales heads and key distributors? What would the juniors who were loyal to them do? What would happen to the three-year plan and the profitability we had strived so hard to achieve? The questions were endless…

He said, “What will happen to the company if you don’t fire them?”

Nothing that followed was easy. But it had to be done. And it was. It was only much later that I realised how fortunate I was to have had that instantaneous and wise decision-maker and the unflinching backing.

We filled the positions over a year by elevating several junior managers and hiring new staff. It was disappointing to see so many young area managers leave along with their bosses, but in my view, it helped the company.

In a bid to grow the top line quickly in my early years as CEO, and much against the advice of TT, I gave in to the temptation of entering the fast-growing segment of tariff meters for state-run electricity boards (SEBs), which were then hotbeds of sloth and corruption. We set up a separate division to design, make and sell what are called tariff meters. We hired a manufacturing shed and recruited designers and sales people.

As if to test our resolve, the very first contract we won was from the largest and most corrupt SEB in the state of Uttar Pradesh in north India. It also was notorious for its long payment cycles. The size of the order was hundred times the size of our typical industrial orders and was just too delectable to pass up. But then the sleaze started surfacing.

The official responsible for inspecting and clearing the meters started making overt demands for taxies for his wife visiting our city, help with college fees for the children and so on. We said a firm no. But because we didn’t bribe, we faced obstacles at every step of the process. Payments were delayed by a year! All of us in the senior team were appalled: what had we gotten ourselves into?

In less than two years, we decided to exit the tariff meters business. It was clear we didn’t have the stomach for it. We lost some money in the process. But, we absorbed all the people from this division into the main business and re-oriented them to the Conzerv way of doing business.

Excerpted with permission from Lift Off: Transforming Conzerv, Hema Hattangady and Ashish Sen, Westland.