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.

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