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Home > India > Business > Columnists > Guest Column > Kanika Datta


A good CEO may not mean good service

May 29, 2008

Is there a connection between a CEO and a company's customers? At one level, the answer is obvious. A bad CEO will create an underperforming organisation and drive customers away and a good CEO will see a company's customer base growing.

But when it comes down to the brass-tacks of service quality, the equation isn't always so simple. Successful CEOs who deliver good profits and dividends to shareholders may not necessarily make an appreciable difference to the quality of service his or her organisation delivers to customers.

The question came to mind as the news of Arun Sarin's shock resignation broke over the newswires on Tuesday. Sarin can by no means be called a failure as a CEO. He's created one of the world's largest mobile companies and a profitable one in a challenging environment.

The company reported record profits of $13.2 billion and a 14 per cent sales growth that beat most analysts' predictions. Even the most sceptical of Vodafone's investors -- including those who clamoured for his resignation just two years ago -- are displeased at his exit.

Last year, Sarin certainly put an impressive performance at a press conference at the Taj Mahal hotel in Delhi when Vodafone announced its acquisition of Hutchison Whampoa's majority stake in Hutchison-Essar. At the time, the deal was up against all sorts of problems.

There were questions over how the Indian partners, the Essar Group, would exercise their right of first refusal and whether the deal violated foreign investment ceilings, tax regulations and so on. 

Sarin answered all these questions posed by an aggressive Indian press with admirable equanimity (even as a Vodafone executive privately grumbled that the problems were media-created). As a customer, I felt vaguely reassured that this was the guy who headed the majority shareholder in my phone company.

As the year wore on, however, the reassurance was replaced by a vague sense of disappointment since the service quality of the newly named Vodafone-Essar was no better or worse than before. On the whole, there is little to differentiate Vodafone-Essar from other mobile service providers (except the little pug, which seems to have metamorphosed into a bigger and less engaging version). Sarin the high performer was not embedded in the quality of my phone service provider.

Yet India has emerged as a jewel in the Vodafone crown in the course of the year. According to Vodafone's statement on Tuesday, revenues from India grew 50 per cent driven by a customer base which grew by 15 million. 

So Sarin has been successful from the strategic point of view. By buying into the world's second-fastest growing mobile services market, he has significantly improved Vodafone's financial performance -- which is what he is supposed to do.
But the growth in customer base in his Indian operations has less to do with service quality. It is mainly because Sarin was quick to spot the opportunity of pent-up demand in an underserved market.

Telecom penetration in India has improved hugely in the last decade, but at 12 to 15 per cent it still provides enormous room for growth.

Perhaps the expectation of significantly better service just because I was impressed by the CEO is unfair. After all, Sarin ran a vast empire and is one of Europe's more respected CEOs. He cannot be held responsible for service quality in every country.

I can hardly blame him if I were to talk to an ill-trained call centre executive, for instance, any more than I would blame, say, Ratan Tata or Rupert Murdoch for problems with my Tata Sky connection or Indra Nooyi for a cockroach in my Pepsi bottle.

But in some indefinable way, customers often do link the two. As advertising and marketing professionals will tell you, markets and market shares are not always driven by rational expectations. And in these days of extreme media coverage, a CEO can no longer restrict himself to satisfying only analysts and shareholders.

A CEO's image is inextricably linked with products his company provides and the more high-profile the CEO the stronger the link. In the competitive West, many CEOs understand this link and have begun to attend roadshows devoted exclusively to customers.

In markets like India where demand for a range of goods and services still outstrips supply, readers will readily be able to identify the disconnect between a CEO's reputation, the company's performance and the quality of customer service.

There are, for instance, successful banks that deliver stunningly indifferent service even though their CEOs are stars on the corporate firmament. The case is no different in telecom, consumer durables or retail chains where media-savvy local chiefs deliver a financial performance that is quite out of synch with the customer experience.

The point is, that several CEOs have shown that a direct link between chief executive reputation and customer experience is possible, no matter how large the company. Richard Branson is one example, Steve Jobs another. These examples, though, are still rare but they do suggest that it is possible to create an organisation in which a CEO's good reputation permeates its services too.


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