CEO Series Lecture

As part of our CEO Series lectures, last evening we had Mr. Keki Mistry, MD, HDFC on our campus. He spoke for about one and half hours on the requested topic “Roles of a CFO”.

He began with the traditional role of a CFO (Chief Financial Officer) in an Indian company, and then followed it with the changing business environment after the economic reforms of 1990s. The roles of the CFO have changed with the changing nature of industrial environment and global competition.

What I liked about his speech was perfectly balanced oratory, and that he didn’t use any fillers in his speech e.g. like, actually, I mean, what I want to say is that: I personally don’t like such fillers while speaking in public but have seen many of even the senior people take help of fillers like these. Also, almost everywhere, he went on explaining point wise, as if he had everything well prepared from before, when actually he was not. To top it all, the day was marked with the news about HDFC taking over Centurial Bank of Punjab, and when asked about it, he said: “We have neither denied not accepted the news. You will come to know about it tomorrow.” This made the audience chuckle.

According to him, Indians don’t have the ‘credit’ culture! Around 8-9% of the borrowers repay their loans to HDFC before the last date! This is in direct contrast to the credit culture that prevails in the West. While this was not a new realisation, I have always wished that we Indians remain in this way: our culture terms credit as bad thing, and that protects us from financial vulnerabilities in the long run.

Group polarisation

Group polarisation is a phenomenon relating to our tendencies to make decisions which are more ‘extreme’, when in groups, rather than when individually. It is also called ‘risky shift’ (earlier term) and ‘incestuous amplification’ (military).

After group discussions, attitudes such as racial and sexual prejudices are seen to be reduced for already low prejudiced individuals and increased for already highly prejudiced individuals.

The mechanism of group polarisation is said to be based on two phenomena: Social comparison (drive of individuals to appear socially desirable) and informational influence (individuals weighing ‘remembered’ pros and cons).

A host of people and organisations will make use of this phenomenon – from people groups, religious organisations, political parties, or even the terrorist groups.

But I wonder why group composition or peer type has no effect here? I am trying to reason this out from my own experience. If I am inclined heavily towards an issue and am discussing that within a group, if others think like me, definitely I would become more confident of myself and would go for harsher conclusions… And on the other hand, if others have predominantly opposite view from me, I would tend to get back into my shell, reinforce my arguments, and in an effort to defend my views, I will become harsher! Also, in a way, this is like negotiation, to show the other person that you have compromised from your position in order to accommodate the other person’s views; I will tend to demand more and then later pull back a little. But in effect, I have become harsher than I was before!

Another interesting aspect is that the ‘online’ or ‘virtual’ groups behave in almost the same manner except that members feel freer in sharing their views because of the associated anonymity. They will still behave in the same manner – becoming milder if they were mild and harsher if they were harshly prejudiced before the discussion. You must have observed this phenomenon among bloggers. The more the readers counter you on the comments page, the more you get reinforced in the strength of your own arguments. Very few of us are able to break this tendency and are truly receptive.

This phenomenon again raises the question: when and how much discussion we should have and on what issues? Also, this phenomenon makes us think about can we get some desired results by any manipulations: if I know that Mahesh is highly prejudiced on an issue, will I make him more or less prejudiced by involving him in a group discussion? Also, the question comes: what about rationality? Am I too bounded by such psychological theories? How can I break the clutter? From my own experiences, I understand that this phenomenon is true and real. But I would prefer not to confirm to this.

Pages referred: Wikipedia article [http://en.wikipedia.org/w/index.php?title=Group_polarization&oldid=179775673], Sharon Bender [http://www.sharonbender.com/polarization.html]