The death of credibility - The Satyam effect

I worked for Satyam for 24 months. I was not overtly proud of the 'brand' during my association with the organisation because there was nothing that really stood out (except for the Knowledge Management practices of the company - they were excellent) and captured my loyalty. What happened with the firm is greatly disturbing and a lot of media space has already been spent on dissecting and sensationalising the Raju brothers and their adventures with 53,000 employees and lakhs of shareholders. For me, what has happened in Satyam is not an aberration at all, contrary to the opinion of a number of analysts. Unfortunately, ours is a country ridden with underhand dealings, corruption, unethical practices in almost all spheres including education and healthcare and why wouldn't strains of that virus be present in the IT industry also? The Satyam fiasco is the Black Swan of the Indian IT industry - a similar expose tomorrow will just validate the existence of the black swan. Moreover, Ramalinga Raju is not a technologist, he comes from the gruesome construction and textile industries and is it any aberration that he swindled money to where his heart really was?
But what this entire episode has done to me is to dispel the myth of credibility. How could an entire system - stuffed with the best minds and organisations of the world have a collective failure? How could one of the best auditing firms in the world(which only recruits from select IIMs in the country!), high profile directors including deans of reputed business schools, independent stock analysts and investment bankers(yes, the reputed i-bankers!) who spend all their time analysing the 'fundamentals' of a company, international standards organisations (Satyam even won an award for Corporate Governance!!), national regulators and top managers fail to figure out the tricks of one crooked mind? Not for a month, not for a year, but for seven long years! How come their above average intelligence, world class processes, diverse experience, ivy league business school education and years of research failed to detect this fraud? And what credibility can I attach to their words and advices in the future?
Credibility plays an extremely important role in a number of decisions that we make. Brands are entirely built on the foundation of credibility, perceptions, judgements and stereotypes are formed based on credibility, our choices are influenced greatly by it. Why do the best companies recruit only from IIMs and IITs? Why would you pay a premium to buy a branded shirt? Why do we even trade 'respect' based on credibility? Why are even marriages based on the credibility of families and the lineage? Why are even votes cast on the 'credibility' of political families?
We attach a 'credibility value' to each of these symbols or brands and the market value of each commodity, service or individual is to a large extent decided just by this credibility index! Our minds are tuned to think that an IITian 'ought' to be better than a local college grad, that management consultants from the big four 'ought' give more insights than a normal employee of the organisation, that a movie that has won numerous awards 'ought' to be better than one that even didn't get nominated and the list goes on.
We put the brand and the 'perceived' value of a product, service or an individual above the 'actual' value that it delivers and thereby inflates the price attached to it (as well as the risk involved in the investment). But for me, it's an error of judgment, an error too costly to be entertained, an error that can change our perceptions, prejudices and way we look at things. Everytime I've taken an interview, I've found myself forming perceptions about the candidate based on his college and organisations he/she has worked with, we all see the market and analysts forming blind perceptions about organisations based on the numbers it brings out, I've seen people deciding marriages simply because the family lineage is good.
And that is exactly what Ramalinga Raju took advantage of. He knew that the markets blindly looked at 'credibility value' of an organisation to decide the stock price. This meant having a board stuffed with 'reputed' individuals, bringing out stunning numbers, increasing the workforce, creating flashy offices and even investing in corporate social responsibility initiatives. The markets were hoodwinked by such a think curtain of credibility and Raju pulled off his tricks.
It's an extremely interesting subject because it not only influences share prices of companies, but more importantly our personal relationships and day to day decisions. We need to train our mind to see through the chimera created by the credibility value that we attach to objects and individuals and perceive their true worth.