He may not appear to be one, but N.R. Narayana Murthy is quite the contrarian. At a time when few Indians felt they could become entrepreneurs, he founded Infosys with just $1,000 in the bank. When no one believed that India could offer the world high-tech products, he dared to develop software services for export. In an era when conducting business ethically was virtually unheard of, he created a values-based corporation. Today, as public anger against rampant corruption in India boils over, Infosys faces a turning point, with Murthy stepping down as chairman. In this edited conversation with HBR's Anand P. Raman, Murthy reflects on his tenure and explains that for companies to be financially successful and good, leaders must demonstrate that values matter at every turn, with every employee.
Photography: Ayush Ranka
HBR: "Powered by intellect, driven by values"—that's the Infosys credo. How could you imagine creating a values-driven company in the India of 1981, where corruption, nepotism, and profiteering were—and by all accounts still are—a way of life?
Murthy: In May 1981, seven of us crowded into the tiny bedroom of my rented apartment in Mumbai. I had decided to quit my job to create a professionally managed software company and had invited six colleagues to join me. The meeting was to develop our vision for the new company. One of us suggested that we should try to become India's largest software company. Someone else said that our goal should be to become the country's biggest job creator. A third opinion was that we should strive to be the software firm with the highest market capitalization. When my turn came, I pushed back on those ideas, saying, "Why don't we aim to be India's most respected company?"
What did you mean by that in practice?
If we sought respect from all our stakeholders, I felt, we would achieve our vision. If you seek respect from customers, that means you must deliver what you promise. If you seek respect from employees, you must treat them fairly and with dignity. If you seek respect from investors, you must operate with transparency and accountability. If you seek respect from vendor-partners, you must deal with them on merit. If you seek respect from governments, you must never violate any laws. If you seek respect from society, you must live in harmony with it and create goodwill. If we could do all that, I argued, we would attract customers, employees, vendors, and investors; revenues, profits, and market capitalization would follow.
After much discussion, we agreed to create a values-based organization. The vision statement we drafted that night was to be India's most respected company delivering best-of-breed technology solutions and employing best-in-class professionals. The conversation also laid the foundation for Infosys's value system: C-LIFE, which stands for Client focus; Leadership by example; Integrity and transparency; Fairness; and Excellence in everything we do. Our vision was the answer to the question, What are we trying to achieve collectively? The values answered the query, How will we achieve the vision?
Why would you wish to seek respect—not profit, as other entrepreneurs do? Didn't your cofounders think you were being idealistic or inauthentic?
Not at all. Seeking respect was natural for us. We were all were born into Indian middle-class families and had developed a strong sense of values from childhood. Our parents taught us the importance of education, hard work, decency, courtesy, honesty, respect for others, and putting the community's interest ahead of that of the individual. Our external role models were our teachers, both in school and university, who taught us to be inquisitive, analytical, articulate, and team-oriented. Setting up a values-based company was therefore like a reflex action for us—like breathing.
Since we came from the middle class, our financial expectations were not very high. Making money wasn't essential; earning respect was. Business would come, we believed.
In preliberalization India, where the government regulated business extensively and paying bribes was essential to getting things done, wasn't Infosys at a disadvantage because of your convictions?
When you say that you are committed to values, it implies that you are willing to pay a price for them. Otherwise, there is no meaning in saying you are a values-driven company.
Can you give me an example?
Let me tell you a story that I often tell our people. In February 1984, Infosys decided to import a super minicomputer so that we could start developing software for overseas clients. When the machine landed at Bangalore Airport, the local customs official refused to clear it unless we "took care of him"—the Indian euphemism for demanding a bribe. A delay could have meant the end for us before we had even started. When an Infosys manager informed me about the problem, my only question was, "What is the alternative to paying a bribe?" The manager hesitantly replied that we could pay a customs duty of 135% and then appeal for a refund. I told him: "Do that."
We didn't have enough money to pay the duty and had to borrow it. However, because we had decided to do business ethically, we didn't have a choice. We would not pay bribes. We effectively paid twice for the machine and had only a slim chance of recovering our money. But a clear conscience is the softest pillow on which you can lay your head down at night.
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