Building a Lasting Legacy: Narayana Murthy’s Farewell Message to Shareholders | Excerpts from the 2011 Infosys Annual Report

In his farewell message to shareholders, Narayana Murthy reflects on the core principles that shaped Infosys into a global powerhouse. Frank, Honest and contains a lot of business wisdom. Read excerpts from the 2011 Annual Report as he passes on the baton to the Co-founder Mr. Kris Gopalakrishnan.

1. “Leadership is about taking bold and firm decisions with incomplete information in an environment of uncertainty.” Leaders who waffle do not inspire confidence in their people. It is important to use as much data and modelling as possible to eliminate clearly bad decisions. My decision to walk away from a Fortune-10 company when they contributed 25% of our revenue was one such example of decision making under uncertainty. It was a tough decision that was taken so calmly and firmly that the head of sales at Infosys at that time thought I was not bothered about the future of the company! I had to explain to him that I did indeed agonize over it but that, as a leader, I could not be driven by panic since such an important decision required a calm and composed mind. Every leader must have a mental model of his or her business with at best five to seven parameters that determine sensitivity to revenue and net-income. It is important to update that model suitably as the business landscape changes. Any leader who cannot quickly do such sensitivity calculation would not be able to take quick and bold decisions. Even today, I carry and update the mental model of our business in my mind.
2. “Leadership by example is what creates trust in people to follow a leader.” As long as a leader is able to show his or her sacrifice and commitment to a cause, others will follow him or her. I am glad we decided on respect from our stakeholders (customers, employees, investors, vendor-partners, government of the land and the society) as the primary objective of the company. I have seen hundreds of instances of such leadership-by-example at Infosys.
3. “Generosity is an essential part of a leader. It is the foundation on which teamwork is built.” The ability to share the limelight with one’s colleagues, the ability to step aside and give opportunity to younger people when they want that fame, power and glory, and the ability to provide a safety net of advice for them is an important aspect of strengthening the future of an organization. It is not easy to give up power, particularly when you have been the object of so much adulation. I must say that Infosys has done a good job in bringing two such transitions before I leave the portals of this company.
4. “Innovation is the best instrument for creating sustained differentiation.” However, it must be accepted that revenues for a corporation come from well-understood ideas and business models. For example, most of a bank’s revenues will come from borrowing money at a certain rate and lending it at a higher rate. Part of the profits from such models will be used for research and development to generate new ideas. A few of these ideas will be seeded and some of them will become mainstream revenue earners. Therefore, it is very important for a leader to focus on innovation, particularly, when the times are good.
5. “Scalability is the true test of the endurance of an organization.” The ability to grow successfully without losing quality, productivity, employee, investor and customer satisfaction and the spirit of a small company is what makes Infosys a great company. We have grown from 50 customers to 620 customers, from 10 projects to 6,500 projects, from 100 employees to 1,30,820 employees, from 100 sq. ft. to 28 million sq. ft. of built-up space, and from 100 investors to over 4,50,000 investors. Such a scalability exercise has been successful, thanks to our PSPD model of operation. PSPD stands for Predictability of revenues, Sustainability of such predictability, Profitability of such realized revenues, and De-risking. Predictability happens because of a good forecasting system that derives realistic data from the trenches and tempers it with the wisdom of senior business leaders. Sustainability refers to the systems that help the efforts of sales people beating the pavement and meeting customers to make the prediction true, the efforts of our delivery people to deliver quality products on time within budgets, and to the efforts of our finance people raising the invoice on time and collecting money on time. Profitability refers to the systems that help our people make value-based sales, follow rigorous budgeting exercises, control costs, get best value for money and ensure the agreed-upon profitability. De-risking refers to systems that identify risks in various dimensions of our operations — people, geographies, technologies, application areas and services — collect periodic data, review the risk levels and take suitable actions to mitigate them.
6. “When in doubt, please disclose” Our investors understand that businesses will have their share of ups and downs. They want us, the management, to level with them at all times. Therefore, “when in doubt, please disclose” is a good policy for a corporation. Society provides customers, employees, investors, bureaucrats and politicians. Therefore, earning the goodwill of every society that we operate in is extremely important for us. Global benchmarking is a powerful instrument that helps us to improve our self-confidence, compete with the best global competitors, and serve our customers better.
7. “Customers put food on our table.” Therefore, we have to have a laser focus on exceeding their expectations, being open and honest with them, and ensuring that they look good in front of their customers. Employees are the only instruments we have to make our customers and investors succeed. Therefore, we have to create an environment of openness, meritocracy, fairness, transparency, honesty and accountability amongst our employees. A sense of ownership among employees is extremely important to build a long-term future for a corporation. Such ownership comes from fair, merit-based and generous sharing of wealth and perquisites among each member of the company. This is my answer to many of my friends, who wonder why, when Infosys was founded, I took a small percentage of my earlier salary while every other co-founder’s salary was increased by at least 10%.
8. “Way forward” The crucial things we have to do in the future are : recognize our weaknesses; be open-minded about learning from people better than us; learn from our mistakes and not repeat them; be humble, honest and courteous; benchmark with the best in every dimension; use innovation to perform at global levels; and create a worthwhile vision and improve every day. This is how our mantra of focusing on speed, imagination and excellence in execution will take this company very far. I have absolutely no doubt about it.

Sitting on a high stool at the NASDAQ headquarters in New York in front of the scorching lights of TV cameras, I borrowed the words of Neil Armstrong to tell the world how important it was for an Indian company to be listed on the NASDAQ.

Narayana Murthy's legacy at Infosys reminds us that true leadership is all about making bold calls, earning trust, and building an organization lasting with strong values. Infosys ($INFY) has continued to deliver value to its shareholders, with its market capitalization growing from ?1.86 lakh crore in FY 2010-11 to ?8.10 lakh crore today. Making it the 2nd largest Information Technology company in India behind TCS.