Social impact and corporate social responsibility are central to the mission and activities of Sridhar Vembu, the CEO and co-founder of enterprise software vendor Zoho, maker of products such as Zoho CRM.

In this wide-ranging interview, we speak with Sridhar Vembu about combining economic growth, developing human resources and talent in local communities, and making a positive impact.

Sridhar Vembu is the co-founder and CEO of Zoho Corp. In 2005, he began the Zoho University program with six high school students, who were trained for two years in computer science and eventually absorbed in the company. Currently, 15% of Zoho's workforce is made of ZU graduates. Instead of opening new offices in metros, he prefers smaller towns or suburbs. In 2016, the Tenkasi office located in rural India launched Zoho Desk, a product that was developed there.

Transcript

This transcript was lightly edited.

About Zoho Corporation and CEO Sridhar Vembu

Michael Krigsman: We are speaking about social impact, corporate social responsibility, and sustainability with Sridhar Vembu. He is the CEO of Zoho.

Sridhar Vembu: I'm really glad to be back, Michael. Thanks for having me back.

Michael Krigsman: Tell us about where you're situated, where you're located right now.

Sridhar Vembu: I am located in a small, tiny village about 400 miles, about 640 kilometers outside of Chennai, which is the major metro area in the southern part of India, about the same distance from Bangalore as well. It's a tiny village and a hamlet almost. That's where I am right now.

Michael Krigsman: As we talk, I definitely want to hear about why you're there and I think that's central to our conversation but tell us about Zoho and tell us about your role as CEO of Zoho.

Sridhar Vembu: Zoho is what we call the operating system for a business. It's a cloud-based suite of applications that provide you everything from CRM, the front-office, back-office, collaboration, productivity, main chat, and HR, accounting, financials, meeting software. It's a full suite.

We started out primarily in the small business. Now we have moved up to larger enterprises as well in the last five years. It's now about 15 million users worldwide and more than 500,000 paying customers, organizations, so that's the snapshot of Zoho, and about 9,000 employees.

Michael Krigsman: Your focus at Zoho has shifted over time. Where are you focused right now, primarily?

Sridhar Vembu: The school aspect of it. The product side, we are moving towards a fully integrated suite we call Zoho One, which launched a couple of years ago and it's gaining strength now. The trend in the cloud is towards consolidation of all these applications towards a broader suite. That is happening all over and we are very much leading the charge now on that.

From the company side, more than a year ago, actually, I designed it that we will shift our focus towards more rural locations, in terms of our offices, where our facilities are located. In fact, that happened pre-pandemic. Actually, we had the decision … (indiscernible, 00:02:33) the pandemic, so the pandemic has just accelerated all those.

For example, we actually had even our Austin office. We bought a farm and we were going to move a lot of our facilities to the farm. The same thing within India, and the same thing we're doing in Mexico. We're doing it in Germany. We're doing it in Japan. Everywhere, we were going to essentially do a reverse migration from the major metropolitan areas to smaller towns and even small villages. That was the plan.

Ethics and social responsibility: Building a distributed talent pool

Michael Krigsman: Why? What was the purpose of that?

Sridhar Vembu: Actually, there are multiple purposes and I'll list one by one. First, I felt that the major urban areas around the world – this is true about San Francisco. It's true about Bangalore. It's true about Chennai and it's true about Mumbai – all of them, they all have become super-expensive, cost of living-wise.

It's been studied. If you bring the new employee into San Francisco or in Mumbai, they are at a serious disadvantage to people who are already there. If they have not bought any real estate, which the new employee would not have bought, they are going to be in trouble for a long time. They cannot afford it.

This has a meaningful effect on their quality of life, their very perception of their milestones. They cannot form a family easily. All of those issues come up.

Once somebody puts down roots in an area, they would want to form a family and all of that. The Bay Area is too expensive for most people to do that now.

I felt that this doesn't have to be. How technology already enables us to work from anywhere, then we do we insist on working in that one square mile area? That was one of the conditions.

From the other side, I noticed pretty much around the world, and this is true in India and this is true in the U.S., the talent pool we are drawing from smaller towns, we are sucking the talent pool and sending them into the major metro areas: New York metro, San Francisco, or LA. The talent pool could be coming from Kansas, Colorado, or wherever, right?

I felt that this type of what I call topsoil erosion, the talent as the topsoil, is not good for culture. It's not good for national well-being, all of that. You need to have balance. You don't want to concentrate the talent wealth, all of it in one place, to a few places. In order to distribute talent, it means companies like us have to play a role in where we locate our employees. That was the second reason.

There was the cost of living. Then there was the talent topsoil erosion preventing that. Those are the two major reasons, really.

Sustainable connections to local communities

Michael Krigsman: Certainly, there are two aspects to what you just described. Number one is, simply, there is a practical business aspect of talent and talent availability at a reasonable cost for Zoho.

Sridhar Vembu: Correct.

Michael Krigsman: At the same time, clearly, there is a social dimension where it appears you're thinking beyond the narrow interests of Zoho.

Sridhar Vembu: Yes.

Michael Krigsman: Is that correct?

Sridhar Vembu: That's correct. In this case, the social dimension and the business dimension actually coincide remarkably well. If our employees can afford to live on their income, well, then they can also be pillars of their community. Their own needs are taken care of. Then naturally they'll do more voluntary work. A lot of things will benefit in the broader community.

On the other hand, if they are on this treadmill where they are constantly worried about their own future, they cannot really be contributing to their community. They become more self-centered. They have to be. There's no other way.

In that sense, I felt that just distributing the talent to smaller towns and locating our facilities there automatically cause a lot of other good things to happen and people will … (indiscernible, 00:06:47). We encourage people to get into organic, natural farming so that they become more rooted in their soil.

We have more people to volunteer in their communities, maybe in education, training, field development, all of that because, of course, when we go to a place, there's local talent that, with some training, could be employees for us. Our own employees could play a vital role in bringing the talent to the surface, exposing the talent.

That actually is not only beneficial to the company. It also benefits the employees who are doing this kind of work because they get a real kick out of it, like a psychic energy they get out of the kind of activity. Right? It feels good. It really does feel good. Those are the reasons, really.

Michael Krigsman: Sridhar, this approach to both business and broader well-being, well, broader well-being, in a way, we could call philanthropy. That's the traditional term.

Sridhar Vembu: Right.

Michael Krigsman: This is very different from traditional philanthropy because usually what happens is somebody has a certain amount of money. They run their business. They form a foundation and the foundation writes checks.

Sridhar Vembu: Correct.

Cultivating talent with Zoho University

Michael Krigsman: This is quite a very different approach.

Sridhar Vembu: This is a different approach – very different. I'll explain why I actually don't particularly believe in that model, that writing checks model, because the problems of places like these are just not, weirdly, money. It's about attention. It's about talent retention. It's about people who care about their community, people who are rooted.

In other words, you cannot fix a lot of these problems by just writing checks, however big those checks may be. I felt that by putting our own facilities, our own employees in these places, we could actually play a vital role. That's actually why I don't consider this traditional philanthropy at all.

There is a … (indiscernible, 00:08:51) to it. We actually have this thing called Zoho University. We now call it Zoho School of Learning. This program has always taken high school graduates and put them through our own training program.

For a year, year and a half, we actually pay them to attend this. We pay them a stipend. At the end of this, they finish it successfully, and they go through a battery of a sort of project and all of us evaluate them. Almost 90%, 95% of them do finish. They get absorbed into the company as employees, full time.

That program, we don't actually call it philanthropy even though we pay the students, we invest in them, all of that. The reason for that is, if you look at it over a five-year period, those employees become very valuable to us in terms of their skills, the skills they have gained. They become really major assets to the company.

In effect, there's also an investment going on. But if you look at it from that perspective, here's a company that came in and invested in them. They did not have the skills.

They look at the company as doing some philanthropic or charity work. But in reality, we are also investing in them because they will actually be really valuable for us in four or five years. Both are true. Both are true.

Combining profit and positive impact

Michael Krigsman: You look at both dimensions. You're trying to—

Sridhar Vembu: Exactly.

Michael Krigsman: –integrate this social impact, sustainability approach with the traditional profit-making business.

Sridhar Vembu: Correct. In fact, I don't believe that there should be any separation at all because if we conduct our profit-making operation unmindful of the social consequences and then guilt trip ourselves into writing big checks for the social impact things, that's never going to be good because our business life and our philanthropic life don't mesh together well. That duality, that separation itself causes a problem and I actually don't believe in it.

I think it has to be holistically integrated. The business activity and doing good for society have to go together.

Michael Krigsman: Is there a conflict between these two that you see at all?

Sridhar Vembu: At least in my point of view, there is no conflict because when you actually conduct your business in a kind of ruthless manner where you don't take care of your communities, all of that, a business does have a built-in expiry date. Maybe employees, maybe the community, there's always a built-in (indiscernible, 00:11:18).

I'm a believer in this law of karma or cause and effect, really. Really, in English, what goes around comes around. If you are not holistically taking care of your employees, your customers, your community, you're going to reap what you sow. It's going to happen.

It's not even good in a long-term perspective, long-term meaning here maybe a 20-, 25-year, 30-year perspective. Only in the very short-term, say your perspective is five years or seven years to enable it, maybe you can get away with this behavior. But if you intend to be a long-term corporate citizen, you really have to be citizen in order to take part holistically in your community. There really is no contradiction from that … (indiscernible, 00:12:01).

Nurturing local talent

Michael Krigsman: I think, from the popular perspective, there is a disconnect because we don't see these two parts integrated together.

Sridhar Vembu: Correct.

Michael Krigsman: How have you overcome that?

Sridhar Vembu: It starts with how we hire people. We look at hiring differently than most companies do. For example, I always say that we prefer to hire people to whom our existence would make a vital difference in their life.

What I mean by that is, many companies chase after that one percent or headhunted heavily. While there's one percent who has seven competing offers, they want to add an eighth competing offer. That's very common, right? Let's go talent hunting that way.

We say that's actually detrimental to all those people being offered every month, really, where even the person with the seven offers doesn't really appreciate the eighth offer that much. They don't particularly care.

Instead, why not actually take people to whom your existence makes a difference? I am now finding is that there is a lot of talent that does not get an opportunity because people won't take a chance on them. They won't really be willing to take a chance, and business is all about risk-taking. Keep in mind that we seem to have forgotten that. Business is all about risk-taking and we ought to take a risk on people too because that's an essential part of our business and that's what we do, really.

Michael Krigsman: Raghul TG says, "Moving the workforce from urban centers to rural areas may prevent them from accessing other facilities such as educational institutions for their family and other types of arts – whatever it might be." Basically, the advantages of cultural centers.

Sridhar Vembu: Yeah.

Michael Krigsman: What's your take on that?

Sridhar Vembu: I mean I am in a remote village in India. Even here, there do exist educational facilities within maybe a five-, ten-mile radius. There's even a hospital, a decent one, within about a 15-mile radius. So, it's not completely devoid of all those.

There are some cultural and artistic facilities and, actually, the way I say it to our own employees, for example, we have next week a cultural program going on right in this village. We put that together. The kids here are enacting a play.

These kinds of things, we can do it. We can bootstrap. There are artists and there are actors. There are all that, musicians, inside us, a lot of us. We can do these cultural things ourselves.

This again goes to that area that I'm not a big believer of this mass-consumed culture. Culture has to come from within. Locally, what is produced is culture too, and that's the part that I encourage our own employees to put together along with the community members.

Social impact and corporate culture

Michael Krigsman: Are you, through your social impact efforts, imposing your personal views that then have this impact on your employees and also on the surrounding communities?

Sridhar Vembu: Absolutely. There's definitely some proof to that but it's inevitable, right? If you are in a leadership position, your views do end up influencing your organization. That's another given, for good or bad. I mean both good and bad, right?

It's never true that you have a really strong leadership and the leadership doesn't end up actually doing something for their organization in terms of influencing the views. It's always going on one way or the other, right?

In this case, our employees actually only stay here if they agree broadly with these views. Most people self-select themselves into: I actually believe in these things; I don't believe in these things. If they don't believe in these things, they tend to leave early on, which works out great for them too. It's how it should be, really. [Laughter]

Michael Krigsman: [Laughter] You make a good point. There's a certain type of culture and values that exist inside the company, and you want to find people and people want to work at, hopefully, companies that match their own values.

Sridhar Vembu: Exactly. There could exist a company that believes in the opposite of everything I believe, and that could be very successful. Okay? They just have a very different culture.

This is not to say there's only exactly one way here that's my way. I'm just saying you've got to pick one way and stick to it and people who like that way come to you. That's how I think about it.

Corporate social responsibility examples

Michael Krigsman: We have a very interesting question from Arsalan Khan on Twitter. Arsalan is addressing this cultural aspect. He says that it seems that the definition of corporate social responsibility is changing, evolving over time and, now, really must involve employees at the individual level to be a part of it. It seems like that view corresponds precisely with what you're trying to do at Zoho.

Sridhar Vembu: That's exactly right, actually. That's why I said it's not just about writing checks. It's also about active participation.

In fact, as we open these rural centers, I've told the managers in these rural centers and the employees. I said, I expect each of you, over the next three- to five-year period, to become anchors, pillars of your community. Someday, even perhaps run for local election, local in your village, in your little town. You have to play an active role in your civic affairs too while being employees here.

I expect you to do all this because that's how you actually have a holistic, whole dimension of life. That's going to enrich you. That's going to enrich the company. Your experiences are valuable to us too. It's not just the corporate responsibility we have here but it's also a broader community responsibility you have.

Michael Krigsman: We have a comment from LinkedIn. You can tell I really like taking the comments and the questions. Very often, they're just great. Ayanar R says he is a placement officer from – and I won't even try to pronounce the name – Polytechnic College, Salem, Tamil Nadu. He says Zoho University is doing great work in polytechnic in placing outgoing students. He wants to mention that ten of their students have successfully completed Zoho University training and are currently working at Zoho as software engineers. He says, "All the selected candidates are from rural backgrounds and have extraordinary talent." He says, "I am so grateful to you, sir."

Sridhar Vembu: Thank you. I really appreciate it. Really, I'm so glad to hear this kind of report on the ground. I'm so glad because that means whatever we are doing is really working and I love that.

Michael Krigsman: Sridhar, what are the challenges that one faces, that you faced in the course of adopting, developing, and executing this strategy?

Sridhar Vembu: When you are really not successful yet, people would naturally question whether any of these things will actually work, right? That's normal. People should be skeptical. Any new effort is going to find both internal and external skeptics. Even your well-meaning well-wishers, maybe friends and family, could question whether your beliefs could really work or you just believe in your own idealist wishes without having a concrete reality … (indiscernible, 00:20:08).

The way I promote those challenges is I say, let's try a small experiment in this area. Let's not do something big, but let's do something small. Let's learn from this.

If the thing doesn't work, I'll admit that it doesn't work. If it works, let's scale it up and that way we have always, actually – we didn't directly confront the challenge, but you sidestep it by performing small experiments to resolve questions as we go. That's how I always promoted it.

Michael Krigsman: We have another question from Twitter. This is from Rex. Rex says, "On the other hand is what you're describing in terms of employment always a good thing because it's going to depress wages for Americans?"

Sridhar Vembu: Yeah, but you know the world is a lot bigger than only America, right? There's going to be a software market in India. There's a software market in Vietnam. There's a software market in Japan – all of these countries.

This question itself indicates, first of all, there is a zero-sum game that if somebody in India has a job, somebody in America does not have a job. That's not actually how economics work.

Though, lately, because of the Central Bank, the … (indiscernible, 00:21:29), and all of that, it appears that way but really, for example, if somebody in India has food it doesn't mean somebody else has to go hungry somewhere else. [Laughter] We can both have food and both have jobs. That's actually how I feel about it.

Sustainability and personal consumption

Michael Krigsman: We have another question from Twitter. This is from Madan Babu. He says, "What advice do you have for young people who want to create a startup and also for engineering students about their future endeavors?"

Sridhar Vembu: I would say, before you do a startup, ask yourself why do you want to do it. What is your core function? If that is that I would want to make quick money part of it, then think harder because the odds are low that you will make that quick money.

The odds are low. I mean have to accept that. The headline success stories you hear are actually a very small minority of startups. The vast majority of startups struggle for a long time.

The other end, if you actually want to solve a problem and you have some passion, be prepared for the long-haul. Even if you take off in the short-run and you actually grant success, the correct way to … (indiscernible, 00:22:47) that may not happen and I may have to stick to this long-haul. That is all I'll advise.

Have a long-term dream about this and go about it. Maybe you will achieve short-term success too, but don't count on it. That's how I think.

Michael Krigsman: Let's take another question from Twitter. I always give priority to the questions from Twitter and from LinkedIn. This is from Viraj Shah. "How can we make development more sustainable?"

Sridhar Vembu: That's a really important question, actually. I think about it a lot. My own lifestyle after moving to this village has dramatically changed where, for example, I don't use air conditioning now and I'm perfectly comfortable here. It's still a little hot, but nothing that you cannot get used to with a fan.

You could also build buildings so that they naturally cool off. For example, we had traditional technics we are providing, but you could cool buildings naturally without using air conditioning.

Similarly, I actually use bicycles a lot and use cars only on occasion when needed. A lot of these things, I've made changes and these are easy changes to make, personally. But I do believe that each of us have to think about it because it is extremely important now in the development and growth, particularly in the Indian context.

The world cannot afford India to become a China or the U.S. in terms of emissions and all of it. With our population base, if our per capita emissions reach American levels or even Chinese levels, the world will completely fried, so we have to have a sustainable development path around the world.

Americans have to come down on consumption. The Chinese have to come down on consumption. This absolutely is the need of the world.

Michael Krigsman: What I find particularly interesting, Sridhar, about you is you're actually living it. You're not planted. You've become extremely successful. You're not planted in Silicon Valley. You're in rural India and you've given up air conditioning, just as one example. I find that very fascinating and unusual.

Sridhar Vembu: That's actually a benefit. I used to suffer from asthma. After cutting air conditioning, actually, now my health is much better. There is a health reason for me to do it but, still, I wanted to give it up because also I felt that this is a more sustainable way and there are natural ways to cool yourself.

Michael Krigsman: But again, the model of social impact that you have is so different from the traditional philanthropy-based model—

Sridhar Vembu: Yes.

Michael Krigsman: –where the benefactor is quite separate from the recipients.

Sridhar Vembu: Yeah. Correct.

Michael Krigsman: And in your case, there's a mixing of the two.

Sridhar Vembu: There is a mixing. That mixing is very common throughout everything we do at Zoho.

I'll give you a different example. I actually don't like the English word "professional" because, to me, the word "professional" conveys a bundle of skills minus all the human personality, the emotion. Right? You have to keep all that out of your job.

Yet someone like Steve Jobs was full of emotion. He was crying in meetings. How many CEOs have cried in a meeting? Yet, Steve Jobs would cry in meetings, so he had that emotion. He had the passion he brought to work.

We cannot separate the two. If we separate that, we will actually produce suboptimal results.

To me, an employee who comes in is a holistic, whole person. They have their kids. They may have families. They have parents. All of those concerns do also play a role in how they perform in the company and we have to take that into account holistically.

That is an example. That mixing is common in everything we do, Michael.

Ethical considerations of money

Michael Krigsman: Let me ask you a personal question and I hope you don't mind. How important is money to you, personally?

Sridhar Vembu: I actually spend very little money on myself, but money is important in the sense that, if there is an important cause that I want to support, having money around helps me, allows me to support that.

As an example, we started the school here in this village. It's a free school and there are about 75 kids now … (indiscernible, 00:27:12). We hired five teachers, all of that. I didn't just have to think about it. I just went and spent the money. Actually, money is useful.

Money, the way I say it is money is technology. Money is not a value system. How we use the technology is what matters and that has to be … (indiscernible, 00:27:28) by our value system and the value system itself has to come way after money or independent of money. You have to have some values for you to make use of the technology called money.

Michael Krigsman: I'm pausing. I'm trying to absorb what you just said about money being a technology rather than a value system. Please elaborate on that.

Sridhar Vembu: Money is an exchange medium and it's a technology. Money is like WhatsApp, in a way, right? We exchange messages. We exchange money or goods.

This is an old invention. WhatsApp is a new invention, a reasonably new invention, but money is a very old invention, so we take it for granted. But it still is an invention. It's an invention, right?

It came from somebody's mind as a technology. [Laughter] That is very useful. The economy, all of our prosperity could not exist without that technology called money.

At the very same time, an obsession for money indicates that it's like obsessing about … (indiscernible, 00:28:31) or obsessing about your Tesla car or something. It's a really good technology, but how much do you want to obsess about it?

It's useful. It's very useful, but it still has to play – there has to be a life beyond it. I'm telling you, make use of the technology to enhance that life. Money itself cannot create life.

That's the common misperception, right? People think once they make money I'll be happy. Most such people never find happiness because if you're not happy to begin with before you made money, you will not be happy after you've made the money. [Laughter]

Credential-signaling vs. skills-based recruitment

Michael Krigsman: Well, in all honesty, one of the main reasons that I enjoy talking with you is pretty much everybody says what you just said but you're actually doing it and that's unusual.

We have another question from LinkedIn and this is going back to the organizational aspects of what you're doing. This is from Kashyap Kompella. He says, "Zoho has been quite progressive in terms of not insisting on college degrees while hiring. On the other hand, many companies obviously do still insist on a degree even for entry-level jobs." His question is, "How can organizations move from "credential signaling" to skills-based recruitment?" In other words, what's your advice for other organizations, from an HR standpoint?

Sridhar Vembu: I would recommend to start small. Maybe take one division, one department, and move to a … (indiscernible, 00:30:14) hiring system, which does not emphasize credentials just so much, and evaluate your own results. Don't take our word for it. Evaluate yourself and whether it works for you.

Then you scale up that experiment within your organization. That is what I would suggest people do. This way, you keep again the impact of your experimentation model and you don't have to take a broad consensus across the organization to completely switch to a new system. You can take it one step at a time.

Michael Krigsman: To what extent are the lessons at Zoho transferrable to other organizations? Zoho is kind of unique because you've been around for a long time. You've been very successful. You're CEO and you're a private company. You own I don't know how much of the stock but probably most of the stock. How transferrable are the lessons to other types of organizations?

Sridhar Vembu: I recognize that. Public companies, companies that have to report to external investors and face other pressures, absolutely that's true. They may not have the freedom we have. The public company CEO certainly does not have the freedom I have in how I run my business. That's true.

Having said that, we still can incorporate aspects of all these. For example, relaxing the collegial requirements in hiring, that's not a very difficult thing to do and we can conduct these experiments.

Similarly, opening smaller, rural centers, that's not very difficult to do. Again, you can do these things.

It's not like it ought to be all or nothing. You can do parts of it. You can do parts that work for you. That's what I would do.

Michael Krigsman: Okay. Before I forget, subscribe to our newsletter. It's at the top. Click the subscribe button at the top.

Sridhar Vembu: Very important. Very important.

Social responsibility and business performance

Michael Krigsman: Very important. Thank you so much, Sridhar. [Laughter]

All right. We have a question from Tim Crawford. He is one of the leading influencers of CIOs in the world and he has been a guest on CXOTalk a couple of times. Tim says, "Why do you think more companies don't focus on social responsibility and what can we do to get more focused, to bring more focus on this topic?"

Sridhar Vembu: Actually, some of it is just superstition, right? Some of it is the prior belief that social responsibility and business performance don't go together.

Let me tell you where I come from on this. Take this belief in credentials, a college degree, and all of that, grades, all that. By now, there is considerable evidence, data to prove that the credential is not all that … (indiscernible, 00:32:57) to the on-the-job performance. Yet, most companies stick to it because it's just that they've always done it that way.

In a similar way, a lot of these things, new ideas, take a while to catch on because a generation of people grow up believing otherwise and they're not going to change their ways. They never want to change. They're just too comfortable in a particular way of operating, so that's really the reason.

How do you do this? I would say, target the younger generation because they don't have previous baggage, a prior belief system. They may be able to do it faster.

Michael Krigsman: We have another question from Twitter and this is from Constance Woodson. Constance says, "Is Zoho "a compliance culture"?"

Sridhar Vembu: Not really. Actually, Zoho is a very freewheeling culture inside. We have what we call townhalls or open halls where people post anonymous questions of me that can be pretty freewheeling, very harsh, critical of our own efforts inside. I mean employees can offer criticism of me and all of this, so it's a pretty freewheeling culture.

At the same time, people do recognize they have something special in this company and we want to be part of it. You would see that underlying current of, "Hey, we are really proud of being part of this company. But we have to be even better," so that's often the tone of discussion.

Michael Krigsman: Any CEO is insulated, potentially at least, from the real concerns that employees have and even possibly the customers have.

Sridhar Vembu: Correct. Correct.

Michael Krigsman: You have the intent and you say that you have, at Zoho, a free and open culture.

Sridhar Vembu: Yeah.

Michael Krigsman: How do you actually know?

Sridhar Vembu: Basically, who I talk to. Our company actually has very few formal meetings for the organization. A lot of it is informal.

I'll give you an example. Today, an employee visited me. He has been maybe three years in the company. He just came over to say hello. He lives nearby and he came over to say hello and we spent a half an hour.

He is not actually anywhere in my hierarchy. There may be three or four levels between him and me. But he just came over to say hello and we hung out for a half an hour. We talked and all that.

Tomorrow, an employee is coming on Saturday. Again, the same way. She just pinged me on chat and said, "Hey, I'll come over, and let's just talk about stuff."

That type of interaction – they don't need an appointment. They just ping me on chat and say, "Can I come over and talk?" Sometimes it's a call, a phone call, because they could be remote.

Then there is this open house, anonymous questions. I gave you a flavor. In effect, we are running our own internal glass door, our own glass door, in effect. A lot of issues get surfaced and then you go and if somebody reports an issue, you go around talking to people. Within two or three people, you discover what is going on, really.

There is informal interaction going on at all levels all the time. I myself don't insulate myself behind a lot of corporate … (indiscernible, 00:36:20). I'm accessible to employees. Anybody could chat with me. I'm also on Twitter, so customers' support tickets, all of that, I actually get to see. If … (indiscernible, 00:36:29) something isn’t done, I know very quickly.

Michael Krigsman: How do you have the time? You're running this major company. How do you have the time to just have an open-door policy?

Sridhar Vembu: By running the company with an open-door policy. There is no other running the company other than that. That means that I don't actually conduct too many formal meetings.

We don't have a lot of board meetings, high-level meetings, quality meetings, all of that. A lot of it happens on chat and all of that. Really, this informal interaction is the majority of my time. When you said, "How do you run the company and do this?" well, I run the company by doing this. [Laughter]

Michael Krigsman: You must have very strong managers who handle the day-to-day operations because, as you said—

Sridhar Vembu: Exactly. That's critical, absolutely critical. That's what actually is true.

In fact, we have about 700 or so managers. I mean I call them employees. They are actually the foundation of the company and for the company with their active results, they're active involvement. Without their real day-to-day involvement, the company cannot run. I let them do their work without my undue interference. [Laughter]

Michael Krigsman: When somebody says that to me, I wonder what would the other folks say. Would they agree that it's hands-off? Would they agree?

Sridhar Vembu: They would probably agree except when they want to get involved sometimes.

Michael Krigsman: [Laughter]

Sridhar Vembu: They'll say, "Yeah, you'll be hands-off until one day when you want to get involved," but look. I cannot get involved in 200 projects. I may get involved in a couple of projects. [Laughter]

Michael Krigsman: We have another question from Josh Welsh. He would love to hear your favorite story from when you first started Zoho.

Sridhar Vembu: My favorite story is, we signed a customer up in 1998 or 1999. '98, I think. Yeah. It was one of our bigger deals at the time and I was a salesperson. A lot of roles were on my shoulder because we were a tiny company.

I commissioned a contract with this customer. After the deal was done he tells me, "You know, I'll give some advice. You are a lousy salesperson." [Laughter] "This deal would have been worth ten times to you if you had a proper salesperson. You don't know your software. So, one of the first things you should do is go hire a proper salesperson." [Laughter]

That's what he told me because he said, "I got a great deal, but you're an idiot, so go find yourself a good salesperson. You can make ten times the money on this software," so I did hire a salesperson. That's one of my favorite stories.

Sustainable development and business strategy

Michael Krigsman: That seems to have worked out.

Sridhar Vembu: Yeah, it did. [Laughter]

Michael Krigsman: [Laughter] Can you provide a few examples of how Zoho is doing sustainable development?

Sridhar Vembu: Sustainable has multiple dimensions. There's, of course, the green dimension, the environmental dimension. But for example, all of our data centers now we are calling renewable energy, solar, all of that, to not depend on the fossil fuel. That's one example.

Our offices, all of that now mostly now run on renewable energy, solar. In the Indian context, even solar and wind now, more and more – both.

The second dimension is sustainable from a human dimension where, for example, I mentioned the one thing, the topsoil erosion. In fact, this actually goes to even in terms of the green concern. I'll explain.

When you move a person from a small town or a rural person to a city, the energy consumption actually goes up because they ... (indiscernible, 00:40:10) and they commute – all of that. While their commute could be a five-minute bicycle ride, now it could be a car, a bus, a train, or whatever. Infrastructure remains relevant. There is that.

The second is that urban areas are also ego and prestige traps. It very much matters what my neighbor owns so that I can do better. [Laughter] While in rural areas, you don't have actually prestige traps for you, so you're consumption naturally goes down. Automatically, you consume less.

I've seen it in myself. I simply just don't have a desire to buy a lot of stuff. I always had less, but now I have even less after moving to a rural area. That is sustainable too. These are all, actually, factors that play into this.

Michael Krigsman: To what extent is Zoho a reflection of you as an individual, as a person?

Sridhar Vembu: There is a lot of my personal, the way I conduct my life, my value system because, actually, we are blessed with employees who really love and respect me, so quite a lot of them are trying to practice some of these ideas that I mentioned. For example, I tell them, you are never going to achieve happiness by being in your ego trap, prestige trap while you're competing with your neighbor – or this or that.

You're never going to be happy because there's always going to be ... (indiscernible, 00:41:33). Maybe their kids study better, their kids go to better schools or better colleges, or whatever. Somewhere, you're going to become short and you're going to feel bad about it, so quit competing. Quit being in the bad race. Those are the kinds of ideas that people do follow, so there is a lot of that philosophical element that ... (indiscernible, 00:41:50).

Metrics and measures

Michael Krigsman: We have another question from Twitter. This is from Arsalan Khan again. "Companies find it hard to measure and manage intangibles. Any tips or advice for other companies?" I think this relates directly to the culture.

Sridhar Vembu: Try not to measure intangibles. [Laughter] That's the first one, I think, because the very reason it's intangible is because it's not measurable. You're trying to come up with all these ... (indiscernible, 00:42:21) intangibles by coming up with…. Well, people game the metrics all the time, so you are going to have a situation where the very metrics you set up get gamed and you get contra-productive results.

How do you manage it? Well, you want to actually create a system of trust, a system of respect, a system where people do take care of things like this without actually somebody watching over their shoulder all the time. If you don't have that trust and you substitute it with this measurement system, metric system, you're going to create unhappiness in employees and stress in managers. Both are bad. That's why I think there's no substitute for trust, building trust.

Michael Krigsman: Again, I'm pausing here because I recognize the difficulty in doing that, in developing, cultivating that level of trust, and then to run a business the size of yours without specific metrics in place that cover these dimensions. It seems very, again, unusual to me.

Sridhar Vembu: We do have metrics like revenue, profitability, productivity, and all of those. Things that we can track, we do track.

Our software, of course, is highly tracked, meaning in the sense that we measure everything about the performance and all of that. We actually do use metrics where it makes sense.

Where we don't use metrics is when it comes to the human performance, what makes people tick. Those kinds of things, metrics are not useful at all.

Michael Krigsman: When we were talking earlier, you made a comment to me. You said, "You know, I'm a businessperson. I'm not a monk."

Sridhar Vembu: Oftentimes people assume. This is actually the reason I say this. The way we operate is not some outlandish, otherworldly, monkish experiment. I'm very much a businessman and our business, actually, is growing and makes a profit. We take care of our employees and our customers and all of that. Well, we are very much, in that sense, a business.

My point is, you don't have to be a monk. You don't have to be dropped from the world in order to do good.

I do want to avoid this whole, "Hey, somebody is saintly, so they can do this but it's not for me." That's the reason why I said I'm not a monk. I'm a regular person. I get angry sometimes and I have my flaws too. That's why I think it is important that all of us can try to be better selves and our business will be better because of it.

Advice to business leaders

Michael Krigsman: Sridhar, as we finish up, what have you learned that's applicable to other organizations that other people can take away from this approach to business that you've executed with Zoho?

Sridhar Vembu: I've been at this 25 years now. Probably long ... (indiscernible, 00:45:20). I'm still in the universe willing … all of that. I hope to go on another maybe 25, 20 years, however many years I'm granted.

Normally, a lot of people in business ... (indiscernible, 00:45:35) or I'm burnt out and I want to quit. A lot of people say this. I've actually met owners who have sold their company and they say, "I'm completely burnt out. I just cannot think of anything else."

Why does it happen? They ask me, "How are you doing this for 25 years and keep on going?" That's actually the benefit of our approach where it's really when you create happy employees, happy customers, that my job is less stressful than it otherwise would be.

It might have been a slower pace, but it's much more durable and so I can keep going. I don't have stress that many businesspeople are afflicted with. That is actually very important. The most important thing for me of all of this is that I can be at peace with myself.

Michael Krigsman: What advice do you have to businesspeople listening to this who say, "You know, I really like the social benefit. I think that's great. At the same time, I don't want to adopt his philosophy. I like material things. I want more material things. I have no intention of changing. But how, in my company, can I adopt a more expansive, socially inclusive view?"

Sridhar Vembu: Material things are good. Going in a private jet or a luxury car is better than the other experience, right? Obviously, that's why people like that. [Laughter] Objectively, it's better, right? A nice car is better than a lousy car.

The point I'm making is the key to happiness is not just how many such goods we accumulate. There is a point at which people get satiated. You're not excited by that new car or a new jet after maybe three months. Actually, this is really true. People have found this to be true.

On the other hand, when you actually – and this is seriously true for me. When I go spend time with the kids – and these are very poor kids from a very humble background and I spend time with them – there's something mysterious that goes on that makes me happier as a person.

I translate that happiness into work. Being happy, I'm actually treating our employees better because I'm happier and our customers get better software. That means it actually benefits our business, too, in a way. It does, actually.

All I ask is, find out what really makes you happy and do it. Often, you'll find that what really makes you happy is not a more luxurious car or a bigger house or whatever but also being of service to others, being useful to others. That's what most experiments have found.

Social impact of the pandemic

Michael Krigsman: How has the pandemic affected Zoho?

Sridhar Vembu: Initially, the first month, maybe March, we had a little bit of impact we saw after that because, basically, little impact, and our business has done reasonably nicely. I say this with some concern. I'll tell you why.

The world has split into two groups now. There are those of us who work online. They call us maybe the Zoom tribe. [Laughter] If you want to put a name, right? Then there are those people who work in the physical world.

The income distribution now is such that most of the Zoom tribe have suffered zero income erosion, maybe even have seen income growth, actually, while the people who work with logistics, restaurants, or movie theaters and all of that often have seen a dramatic drop in income. Those people already were making less money to begin with and now they've seen a serious erosion in income.

This effect, the pandemic has had the effect of worsening the already existing inequality, which was already bad to begin with. That was one of the burning political questions across the world, not just the United States, is inequality. There's inequality and the pandemic has made that worse.

This is one thing that ... (indiscernible, 00:49:39). We definitely have to fix this problem because the world cannot go on like this. That is my real concern. But our business has done well. The post-pandemic world has to be a more just one for all of us to be safe in it.

Michael Krigsman: Sridhar, any final thoughts as we close up right now?

Sridhar Vembu: I would exhort people to explore this type of life ... (indiscernible, 00:50:06) because a lot of people may actually like it. I mean the open space.

In fact, to be honest, I don't feel like I'm making any sacrifices. I’m gaining a lot of things: fresh air and nice, natural environment, surrounded by a lot of animals, all of that. It's actually a lot of things that I love about this.

It's not just I made some sacrifice to be here. I would urge a lot of other people to explore this possibility.

Michael Krigsman: Well, this has been a very inspiring conversation for me and, according to several people, the commentors on Twitter and LinkedIn who said the same thing. We've been speaking with Sridhar Vembu. He's the co-founder and the CEO of Zoho. Sridhar, thank you so much for taking time to speak with us.

Sridhar Vembu: Thank you. Thank you.

Michael Krigsman: Everybody, thank you for watching. Before you go, please subscribe on YouTube and hit the subscribe button at the top of our website.

Sridhar Vembu: Very important.

Michael Krigsman: Very important. [Laughter] Exactly.

Sridhar Vembu: [Laughter]

Michael Krigsman: There you go. Everybody, check out CXOTalk.com and we'll see you again soon. Have a great day. Bye-bye.

This transcript was lightly edited.

About Zoho Corporation and CEO Sridhar Vembu

Michael Krigsman: We are speaking about social impact, corporate social responsibility, and sustainability with Sridhar Vembu. He is the CEO of Zoho.

Sridhar Vembu: I'm really glad to be back, Michael. Thanks for having me back.

Michael Krigsman: Tell us about where you're situated, where you're located right now.

Sridhar Vembu: I am located in a small, tiny village about 400 miles, about 640 kilometers outside of Chennai, which is the major metro area in the southern part of India, about the same distance from Bangalore as well. It's a tiny village and a hamlet almost. That's where I am right now.

Michael Krigsman: As we talk, I definitely want to hear about why you're there and I think that's central to our conversation but tell us about Zoho and tell us about your role as CEO of Zoho.

Sridhar Vembu: Zoho is what we call the operating system for a business. It's a cloud-based suite of applications that provide you everything from CRM, the front-office, back-office, collaboration, productivity, main chat, and HR, accounting, financials, meeting software. It's a full suite.

We started out primarily in the small business. Now we have moved up to larger enterprises as well in the last five years. It's now about 15 million users worldwide and more than 500,000 paying customers, organizations, so that's the snapshot of Zoho, and about 9,000 employees.

Michael Krigsman: Your focus at Zoho has shifted over time. Where are you focused right now, primarily?

Sridhar Vembu: The school aspect of it. The product side, we are moving towards a fully integrated suite we call Zoho One, which launched a couple of years ago and it's gaining strength now. The trend in the cloud is towards consolidation of all these applications towards a broader suite. That is happening all over and we are very much leading the charge now on that.

From the company side, more than a year ago, actually, I designed it that we will shift our focus towards more rural locations, in terms of our offices, where our facilities are located. In fact, that happened pre-pandemic. Actually, we had the decision … (indiscernible, 00:02:33) the pandemic, so the pandemic has just accelerated all those.

For example, we actually had even our Austin office. We bought a farm and we were going to move a lot of our facilities to the farm. The same thing within India, and the same thing we're doing in Mexico. We're doing it in Germany. We're doing it in Japan. Everywhere, we were going to essentially do a reverse migration from the major metropolitan areas to smaller towns and even small villages. That was the plan.

Ethics and social responsibility: Building a distributed talent pool

Michael Krigsman: Why? What was the purpose of that?

Sridhar Vembu: Actually, there are multiple purposes and I'll list one by one. First, I felt that the major urban areas around the world – this is true about San Francisco. It's true about Bangalore. It's true about Chennai and it's true about Mumbai – all of them, they all have become super-expensive, cost of living-wise.

It's been studied. If you bring the new employee into San Francisco or in Mumbai, they are at a serious disadvantage to people who are already there. If they have not bought any real estate, which the new employee would not have bought, they are going to be in trouble for a long time. They cannot afford it.

This has a meaningful effect on their quality of life, their very perception of their milestones. They cannot form a family easily. All of those issues come up.

Once somebody puts down roots in an area, they would want to form a family and all of that. The Bay Area is too expensive for most people to do that now.

I felt that this doesn't have to be. How technology already enables us to work from anywhere, then we do we insist on working in that one square mile area? That was one of the conditions.

From the other side, I noticed pretty much around the world, and this is true in India and this is true in the U.S., the talent pool we are drawing from smaller towns, we are sucking the talent pool and sending them into the major metro areas: New York metro, San Francisco, or LA. The talent pool could be coming from Kansas, Colorado, or wherever, right?

I felt that this type of what I call topsoil erosion, the talent as the topsoil, is not good for culture. It's not good for national well-being, all of that. You need to have balance. You don't want to concentrate the talent wealth, all of it in one place, to a few places. In order to distribute talent, it means companies like us have to play a role in where we locate our employees. That was the second reason.

There was the cost of living. Then there was the talent topsoil erosion preventing that. Those are the two major reasons, really.

Sustainable connections to local communities

Michael Krigsman: Certainly, there are two aspects to what you just described. Number one is, simply, there is a practical business aspect of talent and talent availability at a reasonable cost for Zoho.

Sridhar Vembu: Correct.

Michael Krigsman: At the same time, clearly, there is a social dimension where it appears you're thinking beyond the narrow interests of Zoho.

Sridhar Vembu: Yes.

Michael Krigsman: Is that correct?

Sridhar Vembu: That's correct. In this case, the social dimension and the business dimension actually coincide remarkably well. If our employees can afford to live on their income, well, then they can also be pillars of their community. Their own needs are taken care of. Then naturally they'll do more voluntary work. A lot of things will benefit in the broader community.

On the other hand, if they are on this treadmill where they are constantly worried about their own future, they cannot really be contributing to their community. They become more self-centered. They have to be. There's no other way.

In that sense, I felt that just distributing the talent to smaller towns and locating our facilities there automatically cause a lot of other good things to happen and people will … (indiscernible, 00:06:47). We encourage people to get into organic, natural farming so that they become more rooted in their soil.

We have more people to volunteer in their communities, maybe in education, training, field development, all of that because, of course, when we go to a place, there's local talent that, with some training, could be employees for us. Our own employees could play a vital role in bringing the talent to the surface, exposing the talent.

That actually is not only beneficial to the company. It also benefits the employees who are doing this kind of work because they get a real kick out of it, like a psychic energy they get out of the kind of activity. Right? It feels good. It really does feel good. Those are the reasons, really.

Michael Krigsman: Sridhar, this approach to both business and broader well-being, well, broader well-being, in a way, we could call philanthropy. That's the traditional term.

Sridhar Vembu: Right.

Michael Krigsman: This is very different from traditional philanthropy because usually what happens is somebody has a certain amount of money. They run their business. They form a foundation and the foundation writes checks.

Sridhar Vembu: Correct.

Cultivating talent with Zoho University

Michael Krigsman: This is quite a very different approach.

Sridhar Vembu: This is a different approach – very different. I'll explain why I actually don't particularly believe in that model, that writing checks model, because the problems of places like these are just not, weirdly, money. It's about attention. It's about talent retention. It's about people who care about their community, people who are rooted.

In other words, you cannot fix a lot of these problems by just writing checks, however big those checks may be. I felt that by putting our own facilities, our own employees in these places, we could actually play a vital role. That's actually why I don't consider this traditional philanthropy at all.

There is a … (indiscernible, 00:08:51) to it. We actually have this thing called Zoho University. We now call it Zoho School of Learning. This program has always taken high school graduates and put them through our own training program.

For a year, year and a half, we actually pay them to attend this. We pay them a stipend. At the end of this, they finish it successfully, and they go through a battery of a sort of project and all of us evaluate them. Almost 90%, 95% of them do finish. They get absorbed into the company as employees, full time.

That program, we don't actually call it philanthropy even though we pay the students, we invest in them, all of that. The reason for that is, if you look at it over a five-year period, those employees become very valuable to us in terms of their skills, the skills they have gained. They become really major assets to the company.

In effect, there's also an investment going on. But if you look at it from that perspective, here's a company that came in and invested in them. They did not have the skills.

They look at the company as doing some philanthropic or charity work. But in reality, we are also investing in them because they will actually be really valuable for us in four or five years. Both are true. Both are true.

Combining profit and positive impact

Michael Krigsman: You look at both dimensions. You're trying to—

Sridhar Vembu: Exactly.

Michael Krigsman: –integrate this social impact, sustainability approach with the traditional profit-making business.

Sridhar Vembu: Correct. In fact, I don't believe that there should be any separation at all because if we conduct our profit-making operation unmindful of the social consequences and then guilt trip ourselves into writing big checks for the social impact things, that's never going to be good because our business life and our philanthropic life don't mesh together well. That duality, that separation itself causes a problem and I actually don't believe in it.

I think it has to be holistically integrated. The business activity and doing good for society have to go together.

Michael Krigsman: Is there a conflict between these two that you see at all?

Sridhar Vembu: At least in my point of view, there is no conflict because when you actually conduct your business in a kind of ruthless manner where you don't take care of your communities, all of that, a business does have a built-in expiry date. Maybe employees, maybe the community, there's always a built-in (indiscernible, 00:11:18).

I'm a believer in this law of karma or cause and effect, really. Really, in English, what goes around comes around. If you are not holistically taking care of your employees, your customers, your community, you're going to reap what you sow. It's going to happen.

It's not even good in a long-term perspective, long-term meaning here maybe a 20-, 25-year, 30-year perspective. Only in the very short-term, say your perspective is five years or seven years to enable it, maybe you can get away with this behavior. But if you intend to be a long-term corporate citizen, you really have to be citizen in order to take part holistically in your community. There really is no contradiction from that … (indiscernible, 00:12:01).

Nurturing local talent

Michael Krigsman: I think, from the popular perspective, there is a disconnect because we don't see these two parts integrated together.

Sridhar Vembu: Correct.

Michael Krigsman: How have you overcome that?

Sridhar Vembu: It starts with how we hire people. We look at hiring differently than most companies do. For example, I always say that we prefer to hire people to whom our existence would make a vital difference in their life.

What I mean by that is, many companies chase after that one percent or headhunted heavily. While there's one percent who has seven competing offers, they want to add an eighth competing offer. That's very common, right? Let's go talent hunting that way.

We say that's actually detrimental to all those people being offered every month, really, where even the person with the seven offers doesn't really appreciate the eighth offer that much. They don't particularly care.

Instead, why not actually take people to whom your existence makes a difference? I am now finding is that there is a lot of talent that does not get an opportunity because people won't take a chance on them. They won't really be willing to take a chance, and business is all about risk-taking. Keep in mind that we seem to have forgotten that. Business is all about risk-taking and we ought to take a risk on people too because that's an essential part of our business and that's what we do, really.

Michael Krigsman: Raghul TG says, "Moving the workforce from urban centers to rural areas may prevent them from accessing other facilities such as educational institutions for their family and other types of arts – whatever it might be." Basically, the advantages of cultural centers.

Sridhar Vembu: Yeah.

Michael Krigsman: What's your take on that?

Sridhar Vembu: I mean I am in a remote village in India. Even here, there do exist educational facilities within maybe a five-, ten-mile radius. There's even a hospital, a decent one, within about a 15-mile radius. So, it's not completely devoid of all those.

There are some cultural and artistic facilities and, actually, the way I say it to our own employees, for example, we have next week a cultural program going on right in this village. We put that together. The kids here are enacting a play.

These kinds of things, we can do it. We can bootstrap. There are artists and there are actors. There are all that, musicians, inside us, a lot of us. We can do these cultural things ourselves.

This again goes to that area that I'm not a big believer of this mass-consumed culture. Culture has to come from within. Locally, what is produced is culture too, and that's the part that I encourage our own employees to put together along with the community members.

Social impact and corporate culture

Michael Krigsman: Are you, through your social impact efforts, imposing your personal views that then have this impact on your employees and also on the surrounding communities?

Sridhar Vembu: Absolutely. There's definitely some proof to that but it's inevitable, right? If you are in a leadership position, your views do end up influencing your organization. That's another given, for good or bad. I mean both good and bad, right?

It's never true that you have a really strong leadership and the leadership doesn't end up actually doing something for their organization in terms of influencing the views. It's always going on one way or the other, right?

In this case, our employees actually only stay here if they agree broadly with these views. Most people self-select themselves into: I actually believe in these things; I don't believe in these things. If they don't believe in these things, they tend to leave early on, which works out great for them too. It's how it should be, really. [Laughter]

Michael Krigsman: [Laughter] You make a good point. There's a certain type of culture and values that exist inside the company, and you want to find people and people want to work at, hopefully, companies that match their own values.

Sridhar Vembu: Exactly. There could exist a company that believes in the opposite of everything I believe, and that could be very successful. Okay? They just have a very different culture.

This is not to say there's only exactly one way here that's my way. I'm just saying you've got to pick one way and stick to it and people who like that way come to you. That's how I think about it.

Corporate social responsibility examples

Michael Krigsman: We have a very interesting question from Arsalan Khan on Twitter. Arsalan is addressing this cultural aspect. He says that it seems that the definition of corporate social responsibility is changing, evolving over time and, now, really must involve employees at the individual level to be a part of it. It seems like that view corresponds precisely with what you're trying to do at Zoho.

Sridhar Vembu: That's exactly right, actually. That's why I said it's not just about writing checks. It's also about active participation.

In fact, as we open these rural centers, I've told the managers in these rural centers and the employees. I said, I expect each of you, over the next three- to five-year period, to become anchors, pillars of your community. Someday, even perhaps run for local election, local in your village, in your little town. You have to play an active role in your civic affairs too while being employees here.

I expect you to do all this because that's how you actually have a holistic, whole dimension of life. That's going to enrich you. That's going to enrich the company. Your experiences are valuable to us too. It's not just the corporate responsibility we have here but it's also a broader community responsibility you have.

Michael Krigsman: We have a comment from LinkedIn. You can tell I really like taking the comments and the questions. Very often, they're just great. Ayanar R says he is a placement officer from – and I won't even try to pronounce the name – Polytechnic College, Salem, Tamil Nadu. He says Zoho University is doing great work in polytechnic in placing outgoing students. He wants to mention that ten of their students have successfully completed Zoho University training and are currently working at Zoho as software engineers. He says, "All the selected candidates are from rural backgrounds and have extraordinary talent." He says, "I am so grateful to you, sir."

Sridhar Vembu: Thank you. I really appreciate it. Really, I'm so glad to hear this kind of report on the ground. I'm so glad because that means whatever we are doing is really working and I love that.

Michael Krigsman: Sridhar, what are the challenges that one faces, that you faced in the course of adopting, developing, and executing this strategy?

Sridhar Vembu: When you are really not successful yet, people would naturally question whether any of these things will actually work, right? That's normal. People should be skeptical. Any new effort is going to find both internal and external skeptics. Even your well-meaning well-wishers, maybe friends and family, could question whether your beliefs could really work or you just believe in your own idealist wishes without having a concrete reality … (indiscernible, 00:20:08).

The way I promote those challenges is I say, let's try a small experiment in this area. Let's not do something big, but let's do something small. Let's learn from this.

If the thing doesn't work, I'll admit that it doesn't work. If it works, let's scale it up and that way we have always, actually – we didn't directly confront the challenge, but you sidestep it by performing small experiments to resolve questions as we go. That's how I always promoted it.

Michael Krigsman: We have another question from Twitter. This is from Rex. Rex says, "On the other hand is what you're describing in terms of employment always a good thing because it's going to depress wages for Americans?"

Sridhar Vembu: Yeah, but you know the world is a lot bigger than only America, right? There's going to be a software market in India. There's a software market in Vietnam. There's a software market in Japan – all of these countries.

This question itself indicates, first of all, there is a zero-sum game that if somebody in India has a job, somebody in America does not have a job. That's not actually how economics work.

Though, lately, because of the Central Bank, the … (indiscernible, 00:21:29), and all of that, it appears that way but really, for example, if somebody in India has food it doesn't mean somebody else has to go hungry somewhere else. [Laughter] We can both have food and both have jobs. That's actually how I feel about it.

Sustainability and personal consumption

Michael Krigsman: We have another question from Twitter. This is from Madan Babu. He says, "What advice do you have for young people who want to create a startup and also for engineering students about their future endeavors?"

Sridhar Vembu: I would say, before you do a startup, ask yourself why do you want to do it. What is your core function? If that is that I would want to make quick money part of it, then think harder because the odds are low that you will make that quick money.

The odds are low. I mean have to accept that. The headline success stories you hear are actually a very small minority of startups. The vast majority of startups struggle for a long time.

The other end, if you actually want to solve a problem and you have some passion, be prepared for the long-haul. Even if you take off in the short-run and you actually grant success, the correct way to … (indiscernible, 00:22:47) that may not happen and I may have to stick to this long-haul. That is all I'll advise.

Have a long-term dream about this and go about it. Maybe you will achieve short-term success too, but don't count on it. That's how I think.

Michael Krigsman: Let's take another question from Twitter. I always give priority to the questions from Twitter and from LinkedIn. This is from Viraj Shah. "How can we make development more sustainable?"

Sridhar Vembu: That's a really important question, actually. I think about it a lot. My own lifestyle after moving to this village has dramatically changed where, for example, I don't use air conditioning now and I'm perfectly comfortable here. It's still a little hot, but nothing that you cannot get used to with a fan.

You could also build buildings so that they naturally cool off. For example, we had traditional technics we are providing, but you could cool buildings naturally without using air conditioning.

Similarly, I actually use bicycles a lot and use cars only on occasion when needed. A lot of these things, I've made changes and these are easy changes to make, personally. But I do believe that each of us have to think about it because it is extremely important now in the development and growth, particularly in the Indian context.

The world cannot afford India to become a China or the U.S. in terms of emissions and all of it. With our population base, if our per capita emissions reach American levels or even Chinese levels, the world will completely fried, so we have to have a sustainable development path around the world.

Americans have to come down on consumption. The Chinese have to come down on consumption. This absolutely is the need of the world.

Michael Krigsman: What I find particularly interesting, Sridhar, about you is you're actually living it. You're not planted. You've become extremely successful. You're not planted in Silicon Valley. You're in rural India and you've given up air conditioning, just as one example. I find that very fascinating and unusual.

Sridhar Vembu: That's actually a benefit. I used to suffer from asthma. After cutting air conditioning, actually, now my health is much better. There is a health reason for me to do it but, still, I wanted to give it up because also I felt that this is a more sustainable way and there are natural ways to cool yourself.

Michael Krigsman: But again, the model of social impact that you have is so different from the traditional philanthropy-based model—

Sridhar Vembu: Yes.

Michael Krigsman: –where the benefactor is quite separate from the recipients.

Sridhar Vembu: Yeah. Correct.

Michael Krigsman: And in your case, there's a mixing of the two.

Sridhar Vembu: There is a mixing. That mixing is very common throughout everything we do at Zoho.

I'll give you a different example. I actually don't like the English word "professional" because, to me, the word "professional" conveys a bundle of skills minus all the human personality, the emotion. Right? You have to keep all that out of your job.

Yet someone like Steve Jobs was full of emotion. He was crying in meetings. How many CEOs have cried in a meeting? Yet, Steve Jobs would cry in meetings, so he had that emotion. He had the passion he brought to work.

We cannot separate the two. If we separate that, we will actually produce suboptimal results.

To me, an employee who comes in is a holistic, whole person. They have their kids. They may have families. They have parents. All of those concerns do also play a role in how they perform in the company and we have to take that into account holistically.

That is an example. That mixing is common in everything we do, Michael.

Ethical considerations of money

Michael Krigsman: Let me ask you a personal question and I hope you don't mind. How important is money to you, personally?

Sridhar Vembu: I actually spend very little money on myself, but money is important in the sense that, if there is an important cause that I want to support, having money around helps me, allows me to support that.

As an example, we started the school here in this village. It's a free school and there are about 75 kids now … (indiscernible, 00:27:12). We hired five teachers, all of that. I didn't just have to think about it. I just went and spent the money. Actually, money is useful.

Money, the way I say it is money is technology. Money is not a value system. How we use the technology is what matters and that has to be … (indiscernible, 00:27:28) by our value system and the value system itself has to come way after money or independent of money. You have to have some values for you to make use of the technology called money.

Michael Krigsman: I'm pausing. I'm trying to absorb what you just said about money being a technology rather than a value system. Please elaborate on that.

Sridhar Vembu: Money is an exchange medium and it's a technology. Money is like WhatsApp, in a way, right? We exchange messages. We exchange money or goods.

This is an old invention. WhatsApp is a new invention, a reasonably new invention, but money is a very old invention, so we take it for granted. But it still is an invention. It's an invention, right?

It came from somebody's mind as a technology. [Laughter] That is very useful. The economy, all of our prosperity could not exist without that technology called money.

At the very same time, an obsession for money indicates that it's like obsessing about … (indiscernible, 00:28:31) or obsessing about your Tesla car or something. It's a really good technology, but how much do you want to obsess about it?

It's useful. It's very useful, but it still has to play – there has to be a life beyond it. I'm telling you, make use of the technology to enhance that life. Money itself cannot create life.

That's the common misperception, right? People think once they make money I'll be happy. Most such people never find happiness because if you're not happy to begin with before you made money, you will not be happy after you've made the money. [Laughter]

Credential-signaling vs. skills-based recruitment

Michael Krigsman: Well, in all honesty, one of the main reasons that I enjoy talking with you is pretty much everybody says what you just said but you're actually doing it and that's unusual.

We have another question from LinkedIn and this is going back to the organizational aspects of what you're doing. This is from Kashyap Kompella. He says, "Zoho has been quite progressive in terms of not insisting on college degrees while hiring. On the other hand, many companies obviously do still insist on a degree even for entry-level jobs." His question is, "How can organizations move from "credential signaling" to skills-based recruitment?" In other words, what's your advice for other organizations, from an HR standpoint?

Sridhar Vembu: I would recommend to start small. Maybe take one division, one department, and move to a … (indiscernible, 00:30:14) hiring system, which does not emphasize credentials just so much, and evaluate your own results. Don't take our word for it. Evaluate yourself and whether it works for you.

Then you scale up that experiment within your organization. That is what I would suggest people do. This way, you keep again the impact of your experimentation model and you don't have to take a broad consensus across the organization to completely switch to a new system. You can take it one step at a time.

Michael Krigsman: To what extent are the lessons at Zoho transferrable to other organizations? Zoho is kind of unique because you've been around for a long time. You've been very successful. You're CEO and you're a private company. You own I don't know how much of the stock but probably most of the stock. How transferrable are the lessons to other types of organizations?

Sridhar Vembu: I recognize that. Public companies, companies that have to report to external investors and face other pressures, absolutely that's true. They may not have the freedom we have. The public company CEO certainly does not have the freedom I have in how I run my business. That's true.

Having said that, we still can incorporate aspects of all these. For example, relaxing the collegial requirements in hiring, that's not a very difficult thing to do and we can conduct these experiments.

Similarly, opening smaller, rural centers, that's not very difficult to do. Again, you can do these things.

It's not like it ought to be all or nothing. You can do parts of it. You can do parts that work for you. That's what I would do.

Michael Krigsman: Okay. Before I forget, subscribe to our newsletter. It's at the top. Click the subscribe button at the top.

Sridhar Vembu: Very important. Very important.

Social responsibility and business performance

Michael Krigsman: Very important. Thank you so much, Sridhar. [Laughter]

All right. We have a question from Tim Crawford. He is one of the leading influencers of CIOs in the world and he has been a guest on CXOTalk a couple of times. Tim says, "Why do you think more companies don't focus on social responsibility and what can we do to get more focused, to bring more focus on this topic?"

Sridhar Vembu: Actually, some of it is just superstition, right? Some of it is the prior belief that social responsibility and business performance don't go together.

Let me tell you where I come from on this. Take this belief in credentials, a college degree, and all of that, grades, all that. By now, there is considerable evidence, data to prove that the credential is not all that … (indiscernible, 00:32:57) to the on-the-job performance. Yet, most companies stick to it because it's just that they've always done it that way.

In a similar way, a lot of these things, new ideas, take a while to catch on because a generation of people grow up believing otherwise and they're not going to change their ways. They never want to change. They're just too comfortable in a particular way of operating, so that's really the reason.

How do you do this? I would say, target the younger generation because they don't have previous baggage, a prior belief system. They may be able to do it faster.

Michael Krigsman: We have another question from Twitter and this is from Constance Woodson. Constance says, "Is Zoho "a compliance culture"?"

Sridhar Vembu: Not really. Actually, Zoho is a very freewheeling culture inside. We have what we call townhalls or open halls where people post anonymous questions of me that can be pretty freewheeling, very harsh, critical of our own efforts inside. I mean employees can offer criticism of me and all of this, so it's a pretty freewheeling culture.

At the same time, people do recognize they have something special in this company and we want to be part of it. You would see that underlying current of, "Hey, we are really proud of being part of this company. But we have to be even better," so that's often the tone of discussion.

Michael Krigsman: Any CEO is insulated, potentially at least, from the real concerns that employees have and even possibly the customers have.

Sridhar Vembu: Correct. Correct.

Michael Krigsman: You have the intent and you say that you have, at Zoho, a free and open culture.

Sridhar Vembu: Yeah.

Michael Krigsman: How do you actually know?

Sridhar Vembu: Basically, who I talk to. Our company actually has very few formal meetings for the organization. A lot of it is informal.

I'll give you an example. Today, an employee visited me. He has been maybe three years in the company. He just came over to say hello. He lives nearby and he came over to say hello and we spent a half an hour.

He is not actually anywhere in my hierarchy. There may be three or four levels between him and me. But he just came over to say hello and we hung out for a half an hour. We talked and all that.

Tomorrow, an employee is coming on Saturday. Again, the same way. She just pinged me on chat and said, "Hey, I'll come over, and let's just talk about stuff."

That type of interaction – they don't need an appointment. They just ping me on chat and say, "Can I come over and talk?" Sometimes it's a call, a phone call, because they could be remote.

Then there is this open house, anonymous questions. I gave you a flavor. In effect, we are running our own internal glass door, our own glass door, in effect. A lot of issues get surfaced and then you go and if somebody reports an issue, you go around talking to people. Within two or three people, you discover what is going on, really.

There is informal interaction going on at all levels all the time. I myself don't insulate myself behind a lot of corporate … (indiscernible, 00:36:20). I'm accessible to employees. Anybody could chat with me. I'm also on Twitter, so customers' support tickets, all of that, I actually get to see. If … (indiscernible, 00:36:29) something isn’t done, I know very quickly.

Michael Krigsman: How do you have the time? You're running this major company. How do you have the time to just have an open-door policy?

Sridhar Vembu: By running the company with an open-door policy. There is no other running the company other than that. That means that I don't actually conduct too many formal meetings.

We don't have a lot of board meetings, high-level meetings, quality meetings, all of that. A lot of it happens on chat and all of that. Really, this informal interaction is the majority of my time. When you said, "How do you run the company and do this?" well, I run the company by doing this. [Laughter]

Michael Krigsman: You must have very strong managers who handle the day-to-day operations because, as you said—

Sridhar Vembu: Exactly. That's critical, absolutely critical. That's what actually is true.

In fact, we have about 700 or so managers. I mean I call them employees. They are actually the foundation of the company and for the company with their active results, they're active involvement. Without their real day-to-day involvement, the company cannot run. I let them do their work without my undue interference. [Laughter]

Michael Krigsman: When somebody says that to me, I wonder what would the other folks say. Would they agree that it's hands-off? Would they agree?

Sridhar Vembu: They would probably agree except when they want to get involved sometimes.

Michael Krigsman: [Laughter]

Sridhar Vembu: They'll say, "Yeah, you'll be hands-off until one day when you want to get involved," but look. I cannot get involved in 200 projects. I may get involved in a couple of projects. [Laughter]

Michael Krigsman: We have another question from Josh Welsh. He would love to hear your favorite story from when you first started Zoho.

Sridhar Vembu: My favorite story is, we signed a customer up in 1998 or 1999. '98, I think. Yeah. It was one of our bigger deals at the time and I was a salesperson. A lot of roles were on my shoulder because we were a tiny company.

I commissioned a contract with this customer. After the deal was done he tells me, "You know, I'll give some advice. You are a lousy salesperson." [Laughter] "This deal would have been worth ten times to you if you had a proper salesperson. You don't know your software. So, one of the first things you should do is go hire a proper salesperson." [Laughter]

That's what he told me because he said, "I got a great deal, but you're an idiot, so go find yourself a good salesperson. You can make ten times the money on this software," so I did hire a salesperson. That's one of my favorite stories.

Sustainable development and business strategy

Michael Krigsman: That seems to have worked out.

Sridhar Vembu: Yeah, it did. [Laughter]

Michael Krigsman: [Laughter] Can you provide a few examples of how Zoho is doing sustainable development?

Sridhar Vembu: Sustainable has multiple dimensions. There's, of course, the green dimension, the environmental dimension. But for example, all of our data centers now we are calling renewable energy, solar, all of that, to not depend on the fossil fuel. That's one example.

Our offices, all of that now mostly now run on renewable energy, solar. In the Indian context, even solar and wind now, more and more – both.

The second dimension is sustainable from a human dimension where, for example, I mentioned the one thing, the topsoil erosion. In fact, this actually goes to even in terms of the green concern. I'll explain.

When you move a person from a small town or a rural person to a city, the energy consumption actually goes up because they ... (indiscernible, 00:40:10) and they commute – all of that. While their commute could be a five-minute bicycle ride, now it could be a car, a bus, a train, or whatever. Infrastructure remains relevant. There is that.

The second is that urban areas are also ego and prestige traps. It very much matters what my neighbor owns so that I can do better. [Laughter] While in rural areas, you don't have actually prestige traps for you, so you're consumption naturally goes down. Automatically, you consume less.

I've seen it in myself. I simply just don't have a desire to buy a lot of stuff. I always had less, but now I have even less after moving to a rural area. That is sustainable too. These are all, actually, factors that play into this.

Michael Krigsman: To what extent is Zoho a reflection of you as an individual, as a person?

Sridhar Vembu: There is a lot of my personal, the way I conduct my life, my value system because, actually, we are blessed with employees who really love and respect me, so quite a lot of them are trying to practice some of these ideas that I mentioned. For example, I tell them, you are never going to achieve happiness by being in your ego trap, prestige trap while you're competing with your neighbor – or this or that.

You're never going to be happy because there's always going to be ... (indiscernible, 00:41:33). Maybe their kids study better, their kids go to better schools or better colleges, or whatever. Somewhere, you're going to become short and you're going to feel bad about it, so quit competing. Quit being in the bad race. Those are the kinds of ideas that people do follow, so there is a lot of that philosophical element that ... (indiscernible, 00:41:50).

Metrics and measures

Michael Krigsman: We have another question from Twitter. This is from Arsalan Khan again. "Companies find it hard to measure and manage intangibles. Any tips or advice for other companies?" I think this relates directly to the culture.

Sridhar Vembu: Try not to measure intangibles. [Laughter] That's the first one, I think, because the very reason it's intangible is because it's not measurable. You're trying to come up with all these ... (indiscernible, 00:42:21) intangibles by coming up with…. Well, people game the metrics all the time, so you are going to have a situation where the very metrics you set up get gamed and you get contra-productive results.

How do you manage it? Well, you want to actually create a system of trust, a system of respect, a system where people do take care of things like this without actually somebody watching over their shoulder all the time. If you don't have that trust and you substitute it with this measurement system, metric system, you're going to create unhappiness in employees and stress in managers. Both are bad. That's why I think there's no substitute for trust, building trust.

Michael Krigsman: Again, I'm pausing here because I recognize the difficulty in doing that, in developing, cultivating that level of trust, and then to run a business the size of yours without specific metrics in place that cover these dimensions. It seems very, again, unusual to me.

Sridhar Vembu: We do have metrics like revenue, profitability, productivity, and all of those. Things that we can track, we do track.

Our software, of course, is highly tracked, meaning in the sense that we measure everything about the performance and all of that. We actually do use metrics where it makes sense.

Where we don't use metrics is when it comes to the human performance, what makes people tick. Those kinds of things, metrics are not useful at all.

Michael Krigsman: When we were talking earlier, you made a comment to me. You said, "You know, I'm a businessperson. I'm not a monk."

Sridhar Vembu: Oftentimes people assume. This is actually the reason I say this. The way we operate is not some outlandish, otherworldly, monkish experiment. I'm very much a businessman and our business, actually, is growing and makes a profit. We take care of our employees and our customers and all of that. Well, we are very much, in that sense, a business.

My point is, you don't have to be a monk. You don't have to be dropped from the world in order to do good.

I do want to avoid this whole, "Hey, somebody is saintly, so they can do this but it's not for me." That's the reason why I said I'm not a monk. I'm a regular person. I get angry sometimes and I have my flaws too. That's why I think it is important that all of us can try to be better selves and our business will be better because of it.

Advice to business leaders

Michael Krigsman: Sridhar, as we finish up, what have you learned that's applicable to other organizations that other people can take away from this approach to business that you've executed with Zoho?

Sridhar Vembu: I've been at this 25 years now. Probably long ... (indiscernible, 00:45:20). I'm still in the universe willing … all of that. I hope to go on another maybe 25, 20 years, however many years I'm granted.

Normally, a lot of people in business ... (indiscernible, 00:45:35) or I'm burnt out and I want to quit. A lot of people say this. I've actually met owners who have sold their company and they say, "I'm completely burnt out. I just cannot think of anything else."

Why does it happen? They ask me, "How are you doing this for 25 years and keep on going?" That's actually the benefit of our approach where it's really when you create happy employees, happy customers, that my job is less stressful than it otherwise would be.

It might have been a slower pace, but it's much more durable and so I can keep going. I don't have stress that many businesspeople are afflicted with. That is actually very important. The most important thing for me of all of this is that I can be at peace with myself.

Michael Krigsman: What advice do you have to businesspeople listening to this who say, "You know, I really like the social benefit. I think that's great. At the same time, I don't want to adopt his philosophy. I like material things. I want more material things. I have no intention of changing. But how, in my company, can I adopt a more expansive, socially inclusive view?"

Sridhar Vembu: Material things are good. Going in a private jet or a luxury car is better than the other experience, right? Obviously, that's why people like that. [Laughter] Objectively, it's better, right? A nice car is better than a lousy car.

The point I'm making is the key to happiness is not just how many such goods we accumulate. There is a point at which people get satiated. You're not excited by that new car or a new jet after maybe three months. Actually, this is really true. People have found this to be true.

On the other hand, when you actually – and this is seriously true for me. When I go spend time with the kids – and these are very poor kids from a very humble background and I spend time with them – there's something mysterious that goes on that makes me happier as a person.

I translate that happiness into work. Being happy, I'm actually treating our employees better because I'm happier and our customers get better software. That means it actually benefits our business, too, in a way. It does, actually.

All I ask is, find out what really makes you happy and do it. Often, you'll find that what really makes you happy is not a more luxurious car or a bigger house or whatever but also being of service to others, being useful to others. That's what most experiments have found.

Social impact of the pandemic

Michael Krigsman: How has the pandemic affected Zoho?

Sridhar Vembu: Initially, the first month, maybe March, we had a little bit of impact we saw after that because, basically, little impact, and our business has done reasonably nicely. I say this with some concern. I'll tell you why.

The world has split into two groups now. There are those of us who work online. They call us maybe the Zoom tribe. [Laughter] If you want to put a name, right? Then there are those people who work in the physical world.

The income distribution now is such that most of the Zoom tribe have suffered zero income erosion, maybe even have seen income growth, actually, while the people who work with logistics, restaurants, or movie theaters and all of that often have seen a dramatic drop in income. Those people already were making less money to begin with and now they've seen a serious erosion in income.

This effect, the pandemic has had the effect of worsening the already existing inequality, which was already bad to begin with. That was one of the burning political questions across the world, not just the United States, is inequality. There's inequality and the pandemic has made that worse.

This is one thing that ... (indiscernible, 00:49:39). We definitely have to fix this problem because the world cannot go on like this. That is my real concern. But our business has done well. The post-pandemic world has to be a more just one for all of us to be safe in it.

Michael Krigsman: Sridhar, any final thoughts as we close up right now?

Sridhar Vembu: I would exhort people to explore this type of life ... (indiscernible, 00:50:06) because a lot of people may actually like it. I mean the open space.

In fact, to be honest, I don't feel like I'm making any sacrifices. I’m gaining a lot of things: fresh air and nice, natural environment, surrounded by a lot of animals, all of that. It's actually a lot of things that I love about this.

It's not just I made some sacrifice to be here. I would urge a lot of other people to explore this possibility.

Michael Krigsman: Well, this has been a very inspiring conversation for me and, according to several people, the commentors on Twitter and LinkedIn who said the same thing. We've been speaking with Sridhar Vembu. He's the co-founder and the CEO of Zoho. Sridhar, thank you so much for taking time to speak with us.

Sridhar Vembu: Thank you. Thank you.

Michael Krigsman: Everybody, thank you for watching. Before you go, please subscribe on YouTube and hit the subscribe button at the top of our website.

Sridhar Vembu: Very important.

Michael Krigsman: Very important. [Laughter] Exactly.

Sridhar Vembu: [Laughter]

Michael Krigsman: There you go. Everybody, check out CXOTalk.com and we'll see you again soon. Have a great day. Bye-bye.