labels: quality, i-flex solutions, infosys technologies, polaris software
Sex, harassment and detention news
The lessons i-Flex, Po
16 May 2003

Raghuraman Balakrishnan Chennai: A crisis brings out the best and worst in any organisation or in any person. It is also true that a crisis provides a learning opportunity for them. And communication during a crisis, to a large extent, shows a person's true self.

Recently, we have been witnessing three high-profile software companies - Infosys Technologies, i-Flex Solutions and Polaris Software Lab - getting into a fix for different reasons. There are some striking similarities.

All these three companies operate in the banking software sector. The last two companies are from the same stable - Citigroup. And more importantly it is their CEOs, one based in India and the other two who are abroad, who got into trouble.

The first to get dragged into a rut was Infosys, known for its excellent corporate governance measures. And what a crisis it turned out to be. Reka Maximovitch, an employee with the company's US subsidiary, filed a case against Phaneesh Murthy, her boss and the company's US operations in-charge, for sexual harassment.

An Infosys board member, Murthy was one of the highest-paid (drawing a salary of Rs 1.91 crore every year) employees. He resigned from his post ostensibly to "focus his time and energy" to fight the sexual harassment case filed by Maximovitch, his former secretary.

The second corporate head honcho to get into trouble was Arun Jain, chairman and managing director and CEO, Polaris Software. Jain, who went to meet his Indonesian banking client, Bank Artha Graha, to sort out a commercial dispute, was detained by the Jakarta police and was jailed for seven days along with his senior vice-president, Rajiv Malhotra (See '').

The third and the latest one is that of i-Flex Solutions' 100-per cent Dutch subsidiary i-Flex Solutions BV's CEO Senthil Kumar. Based in London, Kumar was arrested and later let out on bail by the London police based on an extradition case filed by the Netherlands government. The complaint: i-Flex and its employees violated Dutch immigration laws (See '').

Now, the crisis communication strategies adopted by the three companies were as different as chalk and cheese. After the initial dithering, like the delay in reporting Jain's detention to stock exchanges and the media, Polaris Software came out with flying colours (the only time it did that; that too when it was in a tight spot). Still in the midst of the crisis, i-Flex Solutions' communication with the outside world is satisfactory, though in part.

But the great let down was Infosys Technologies. The company maintained a studied silence on the sexual harassment episode on the ground that the matter rested in a US court. Nevertheless, it is to the credit of Nandan M Nilekani, chief executive officer, president and managing director, who promptly responded to domain-b and tried his best to mitigate the damage (See '') and (See'Sex, Infosys and the media'). On 11 May 2003 Infosys finally announced the amicable settlement with Maximovitch by agreeing to pay $3 million as compensation. Here, again, Infosys refused to give more details about the manner in which the settlement was arrived at.

Communication when there is a crisis David Drobis
According to communication experts like David Drobis, senior partner and chairman, Ketchum, successful crisis communication focuses on reporting just facts, not speculation; and by communicating early and often, and as completely as possible (). Ketchum is one of the top 10 public relations companies in the world.

The communication strategy should address all the stakeholders - employees, shareholders and customers - apart from the general public through the media. "On the external side, an important area for strategic focus is public reporting and doing it in a manner that is easily understood," he says.

Peter Yorke, senior manager, corporate communications, i-Flex Solutions, responds with alacrity: "We informed the Indian bourses on 27 March 2003 [a day before the crisis erupted] itself about the investigations made by the Department of Social Security, Netherlands. Simultaneously, the news of Kumar's arrest in London was announced."

According to him the company decided to be proactive from the beginning. "The key aspect that underlines our communication strategy is to be transparent and avoid or nip in the bud any kind of grapevine or rumours that could cause more damage." Perhaps that was the learning for the i-Flex Solutions team from the detention of Jain in Jakarta, though Yorke doesn't say so.

The two Polaris Software officials were detained on 13 December 2002 (Friday) but the information was given out to the bourses and the media only on 16 December 2002 (Monday) evening. The time gap in announcement came in for sharp criticism by the media while the company officials cited the intervening holidays (Saturday and Sunday) as the reason for the delay.

Except for that slip, Polaris Software's handling of the crisis and communication strategies were top-notch and provide some lessons for others, too. But the company was not idle during those two days. A crisis management team was formed under the leadership of Govind Singhal, executive director. He was later made acting CEO.

Says the company's vice-president, Raghuraman Balakrishnan: "Efforts to secure their release through diplomatic efforts led by the ministry of external affairs, the ministry of information and technology, the Indian embassy in Jakarta and the National Association of Software and Service Companies (Nasscom) were also made. A legal firm was recruited and put on the ground in Jakarta to handle the case."

The government took the issue very seriously, with the ministers (both external affairs and IT) taking up the matter with the Indonesian government. Similar actions were seen with reference to i-Flex Solutions and the Netherlands government.

The media: A friend or a foe?
One of the areas that corporates neglect during a crisis is in their media relations. According to Drobis, many companies make the mistake of neglecting the ongoing relationship with members of the media during a crisis.

On this front, the normally reticent Polaris Software and its external media relations agency, Imagequity, worked overtime to feed the media's voracious appetite for updates on Jain's detention. Press releases and backgrounders were promptly dispatched to all kinds of media - print, visual, websites. It could even be said that the media virtually ate from their hands.

"The media from around the world, including those in Indonesia, supported the cause of Polaris Software," recalls Balakrishnan. But the same kind of proactive attitude was not seen with i-Flex Solutions and Infosys.

Perhaps they were constricted by the nature of allegations - like violating the Dutch immigration laws - by i-Flex Solutions employees and sexual harassment in the case of Infosys. Defends Yorke: "We are yet to receive the formal charge-sheet from the London police and hence cannot talk much on the issue."

According to Yorke, the office of public relations firm Burson Marsteller acted as the first point of contact for the media in London and the Netherlands. "Their Indian affiliate, Genesis PR, took care of the domestic end."

Of the three software companies, Jain's arrest and the events that followed got better column-centimetre coverage in the news dailies and magazines. Similarly, Polaris Software and i-Flex Solutions didn't lose sight of their employees and customers in their crisis communication strategies.

Pepping the employee morale
The employee is the ambassador of the brand and while protecting a corporate's reputation. Too often companies neglect to inform and talk with their own people, especially in times of a crisis, says Drobis.

While the associates (as employees are termed at Polaris Software) received detailed communication from the core crisis management team on the status of the crisis and the role played by the company in it, the morale-booster was the message sent by Jain to them.

"Jain found time in the Jakarta police detention centre to share his thoughts on a piece of paper and this was sent to every associate to lift his or her spirits as their CEO is standing up for ethical business practices," says Balakrishnan. The associates reciprocated by ensuring that none of the other clients' work was affected and deliveries were made on schedule.

No such dramatic message came from i-Flex Solutions' Kumar, who was arrested in London. Soon after the issue blew on their faces, the company's top brass called around 150 senior employees and also formed a crisis management team, comprising the senior management and those who are relevant for the issue, like the marketing vice-president, to pacify the company's clients.

Further, two emails were sent to all the employees - one immediately after Kumar's arrest and the second one thereafter. "We also had one teleconference with all the senior managers, with Kumar speaking from London after he was released on bail as he should not leave the UK as per the bail conditions," says Yorke.

In order keep up the morale of the 12 employees who were asked to return to India by the Dutch, a dinner was hosted by the company management, which the above employees and their family members partook with the seniors.

Investors: A pitiable lot
The one area where all the three companies converge in their crisis communication strategies is in respect to that of their shareholders. All the three companies didn't adopt any special strategy like sending out mails or feelers. They were content with the public reporting, issuing media releases and putting the same on their websites.

"Every concerned investor's call was handled with utmost care. The intent was clearly to share as much information as possible on the progress of the crisis resolution and allay their fears," sums up Balakrishnan.


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Sex, harassment and detention