Zoho co-founder and CEO, Sridhar Vembu, has developed a clear sense of ethics that guide social impact and corporate responsibility at Zoho. His perspective informs the products, culture, and philanthropy activities of this extraordinarily successful enterprise software company.

During this in-depth conversation, Sridhar Vembu explains how he runs Zoho and the social impact of “spiritual capitalism” and sustainability.

Read the transcript and watch the video to learn about these topics:

Transcript

Michael Krigsman: What is corporate social responsibility? We're talking with Sridhar Vembu, Co-founder and CEO of Zoho.

Sridhar Vembu: Zoho is now 25 years in business, and we are one of the most unusual cloud software companies with a very broad and deep product portfolio and a worldwide customer base—now approaching about half a million dollars—ranging in size, with about 10,000 employees now almost. That gives you a snapshot. It's never raised money. Profitable, private, and completed 25 years in business.

Michael Krigsman: You were bestowed the very prestigious Padma Shri Award, which is the fourth highest civilian award in India, so congratulations for that.

Sridhar Vembu: Thank you. Thank you.

What is spiritual capitalism?

Michael Krigsman: When we talk about corporate obligations and social responsibility, Sridhar, how does that ring for you? How do you react to that? What does that mean for you?

Sridhar Vembu: First of all, I want to actually test the notion, and this is a traditional notion in business circles where, in your daily life as a businessperson, you are a ruthless profit maximizer. Then you harness the profit and you act socially responsible.

There is a kind of dualism, a separation inherent in this. I am going to argue that we cannot act in a dualist way. We are to weave together our values and our business activities together, and weave together in a tapestry. That's what I've called spiritual capitalism or spiritual business because, ultimately, dualism comes back to hurt us in one way or another. So, we've got to be non-dualistic in our thinking.

Michael Krigsman: I'll ask you to elaborate on that because the term dualism is not something that we typically associate in any kind of business context at all.

Sridhar Vembu: This goes to philosophy, really. This is not something that a business school would teach. Really, this is a philosophy where, who you are and what your actions are, have to be aligned. This idea of non-dualism.

If we don't, then what happens is, eventually, you have a kind of dissonance. We hear the term cognitive dissonance that comes in. People are going to have burnout. People are going to get stressed out – all of that. All that stems from it.

If you look at our own 25-year history, the reason we are vibrant and still active, vibrant, and feel young as a company is because we have woven together this and it's non-dualistic. Our values and our actions are aligned. That's important. That's why I called it spiritual business or spiritual capitalism.

Michael Krigsman: You're talking about the bringing together of the values and then the actions.

Sridhar Vembu: Yes.

Michael Krigsman: Then what do you mean by the values? What are the values? What are the kinds of actions that you're referring to?

Sridhar Vembu: We have always fallen to the notion of serving the unserved and underserved as a very important part of our value system. That is whether it's customers or employees, we want to serve the unserved.

When you think of that, again, if you play a dualistic, traditional thinking on this, well, then in your business you will hire the best people possible in terms of coming from the best credentials. Often, those people are not the unserved. These people have already great opportunities.

Then you maximize profit out of it. Then you go take the money and maybe serve the unserved in a separate way. That's dualistic thinking.

What we do in Zoho, instead, is we have made creating skills, extending opportunity or, rather, finding the latent talent as a core part of our activity. This comes from the observation that a lot of people have that latent talent but lack the opportunity because no one will take a chance on them. No one will extend an opportunity to them.

To be consistent with our values, we extend that opportunity. That's where our Zoho Schools of Learning (what used to be called Zoho University) comes in. That's an example of weaving together our values along with our business activity, business actions.

Corporate social responsibility (CSR) at Zoho and sustainable development

Michael Krigsman: To what extent do you, at Zoho, practice this? You're a software development company, and so where does this come in? Where does the expression of this philosophy of the non-dualism, the bringing together of the values and the activities?

Sridhar Vembu: We have products like Zoho Mail that compete with Gmail. The temptation is to follow their business model, so an ad-supported business model. But we decided we are not going to go down that path because privacy is an extremely important value for us.

If we profess a strong belief in that, a strong faith in privacy as part of our business model, and then mixing advertising with it is going to cause conflict: conflict within us and conflict for our customers. In that case, our actions and our values would not be aligned.

We decided early on—this was more than 15 years ago—that we will not ever show ads. We will not monetize our software using advertising as a business model. This was not done with a calculus that this is going to be more profitable. This was done with the idea that if we do that this way, we are going to hate ourselves at some point, and we are going to get tired of doing this.

We wanted to just stay true to ourselves, so we will not use their business model. It took us time to find a successful business model and make it a success. But today, Zoho Mail is doing extremely well, and we are happy to report. It took us a decade to do that, but we were happy that we did that.

This is an example of that values and actions align. We try to do this in every activity we do.

Balancing cost vs. profit in charitable donations and philanthropy

Michael Krigsman: I guess a basic question that many people might have is, there is a perceived cost associated with acting in a values-driven manner. How do you think about balancing the approach of values against the cost of that or lower profitability, which is really the same thing?

Sridhar Vembu: There are two things here. First, in business, to do any good at all, you have to be smart. If we act very dumb—don't pay attention to the numbers, don't mind the store—we're going to go out of business and we cannot do any good.

To that extent, it's very important to be a business, that means a business that's able to pay its own way and make a profit. That's important to do any good at all.

The second aspect here is if you're constantly thinking of ourselves as we are making a sacrifice to do this, then again there is a mental energy expended to keep thinking we are making a sacrifice. That's going to wear us down and our resolve will weaken.

We actually don't believe, for example when we said we will not adopt advertising as a business model, we did not think we are foregoing profit by doing this. We instead thought this is what we believe in. We'll make this successful by acting on our beliefs. We want to show the world that it is actually possible to do that.

There was a positive energy, positive reason for doing this rather than the negative feeling of we are foregoing something, we are missing out on something, which will constantly eat us inside. That's why I always say don't make a sacrifice. Instead, act in accordance with your true inner values.

Zoho CEO: "We are not ruthlessly metrics-driven."

Michael Krigsman: You're the CEO of the company, so you can make that decision. You're a large company. For people who work inside the organization who are managing their budgets and so forth, how do you guide them to follow this approach and yet still meet whatever their KPIs and metrics are?

Sridhar Vembu: That phrase, KPI and metrics, that's where the action is, right? If I preach all this and practice ruthless KPIs and metrics, it's going to be hypocritical.

In reality, I'm not actually doing these KPIs and metrics-drive management. In fact, I think we spoke about this. The Tyranny of Metrics was a book I mentioned. It's worth paying attention to the book because it's actually fundamental to what I'm talking about here.

We are not ruthlessly metrics-driven. In fact, we believe human systems and an extreme focus on metrics don't mix well. That's where the answer is.

Our managers and our employees know this. They know that obviously, we have to make a profit. Otherwise, we won't be in business long-term. But at the same time, we are not going to be constantly driven by optimizing this metric or that metric. We're going to holistically think about our values and our actions.

Michael Krigsman: I'm smiling because, okay, how do you run your business then?

Sridhar Vembu: I can assure you we're in business. We are growing. We have 10,000 people. I'm not actually doing these KPIs and metrics like everybody is doing. That is something that is very interesting.

It ultimately comes from empowering people. That is 600, 700 managers. This is the core, middle management layer, right? There are maybe about 50 or 60 senior managers, right?

If you look at those people, the vast majority of them grew up in Zoho. They invite these values. They have lived these values all along.

They know how this company operates, and they know that, as an example, I'm never going to fire somebody because they missed a quarter. Okay? That has never happened, honestly. Well, because now we are private, we cannot afford to miss quarters. [Laughter]

But I'm going to actually -- and this happened today. I'll give you an example. There was some change a product made that upset some customers. The customers felt some pieces were being taken away. We were not doing that, but some customer perception was that.

We immediately swung into action. I called the core team and said, "Let's put it back immediately. The customers believe that there is something the product is being degraded in that experience. Let's put it back the way it was."

We did that immediately. Our team went and apologized to the customers who had the issue, and we took care of it.

This is never going to be held against even the people who made the mistake because what I always stress is it is human to make a mistake. The way we earn our customer trust is by promptly fixing it and moving on. Never stand on ego. That's the principle.

That is, again, values and actions. So, our people are not afraid to make mistakes. All I say is that once we recognize we have made a mistake, let's just go fix it. Let's just get it right for the customer.

Ecosystem implications for Zoho software partners

Michael Krigsman: We have a really interesting question from Twitter. Arsalan Khan is a regular listener. He always contributes the most excellent questions. He says, "Even if you prioritize values over profits, your ecosystem might not. And so, how do you balance the needs of your ecosystem?" We haven't spoken about large consulting companies, but I have to assume that at this point they're looking over at Zoho, so it's a broad issue, potentially.

Sridhar Vembu: In the broad ecosystem, you have to select which ecosystem you play in. For example, we have chosen not to play in the VC ecosystem because we felt that our values may not align with theirs.

They have exit needs. They are to maximize their return on investment, which we may not be able to deliver using our approach. We decided not to participate in that ecosystem.

To an extent, we choose what playground we play in. The truth is this world is big. There are opportunities somewhere. There is always an opportunity to live in accordance with our values and match our actions.

If we are sitting in the most expensive real estate and we are constantly worried about meeting the next month's payroll, then we may not have the luxury of doing this. But then I question, why do we have the second most expensive real estate in the world? Why do we have to commit to that? Why do we have to accept the type of burden on our business?

The point I'm making is, you can pick your ecosystem. There is a freedom. You don't have to assume the ecosystem as a given for your business. We can create our own ecosystem, too.

Michael Krigsman: Serving as a center of influence over the various corporate activities, internal and (to the extent that you can) around it is—

Sridhar Vembu: Exactly.

Michael Krigsman: Mm-hmm.

Sridhar Vembu: That's possible. That's doable. Even at a relatively small scale, it's doable.

I'll give you an example. If you are a startup and let's say you want to align yourself. How do you employees who align to this? Well, go to a place where there are a lot of people who need jobs desperately, and there is a lot of that latent talent I'm talking about.

Give them an opportunity. Train them. Then they are naturally prone to come to your value system.

In that sense, you create an employee ecosystem that matches your values. This is possible.

On the other hand, if you say, "Well, I'm going to hire from the same pool everybody is hiring from, and I'm going to think all these people are not agreeing with my values," then I say, "Why don't you go to a place where people are more prone to agree with you?"

Michael Krigsman: Creating that value-driven ecosystem is something that you think about both inside the company as well as externally surrounding it.

Sridhar Vembu: It started as investors, it could even be customers and definitely employees. All of these, we have more influence than we think we do. That's what I predict.

Sustainability and local communities

Michael Krigsman: We have an interesting question from Twitter from Alejo Gonzalez. He says, "You have spoken about the rural revival. How do you define that and how can communities take advantage of this approach that you're describing?"

Sridhar Vembu: First of all, let me explain where this rural revival idea comes from. Primarily, two sources.

One, our large urban centers everywhere around the world—that's true in the U.S., that's true in India, and that true in Europe, everywhere—they've become massively overcrowded, extremely expensive. Particularly for new people, it's become very burdensome to live there, the cost of living.

Silicon Valley is a prime example. No one who has come in the last five or ten years could afford a home in Silicon Valley, not now and not maybe in the next 20 years at the current price of housing and salaries – all of that. That's not a good situation for young people.

Then the second part, we have massive depopulation going on in very smaller towns as talent leaves for lack of opportunity there. We can put these two. It's obvious that there is a solution to this problem by matching the two.

You leave these big urban centers and go to these smaller towns that need the jobs, need the income, need the opportunities. It's a kind of marriage made in heaven now. That is how I think about this problem.

The rural revival is coming from these two sides of this, matching these two sides. There's one side that is a push out of urban areas and there is a pull factor in rural areas.

It also is good for business because a lot of the things we worry about in terms of cost, particularly real estate—which is the prime driver of a lot of things, not only your rent for office space but also cost of living for employees—all that is better. Therefore, your business has a sounder basis, a financial basis when it operates from rural areas.

You'll find more loyal employees because you're extending opportunities in a place where there are no opportunities or very few opportunities. All of these go together holistically. That's what I call rural revival.

Michael Krigsman: You yourself did live in Silicon Valley. You founded Zoho in Pleasanton, which is in the heart of Silicon Valley. Tell us about where you live now.

Sridhar Vembu: I live in a fairly remote village in the southern part of India, and not far from the southern tip of India. It's about 50, 60 miles from the southern tip of India.

I moved here about a year and a half ago, well before the pandemic. About September or October 2019, I moved here. I've been living here since then.

Now I have a good fiber optic line. That's why I am able to do this now. But in the beginning, I only had a 4G LTE line and that connection wasn't very good, but I managed. And so, it has been an adventure.

Where can you have maximum impact?

Michael Krigsman: Why? Why did you move from the heart of Silicon Valley to rural India?

Sridhar Vembu: Silicon Valley is not going to miss me. There is a lot of talent. There are a lot of smart people there. One person leaving is not going to make a difference to Silicon Valley.

Here, I'm vitally needed. In fact, the people here tell me often, "Please, never leave us. Please never leave because your presence here means so much to us."

This is what I mentioned. There is the ... [indiscernible, 00:19:50] to this. That is, I am vitally missed here if I am not here. This whole region, this place is going to miss me.

In a sense, you are maximizing the place where you have the most impact. You are selecting a place where you can have the most impact.

This should be true for any start-up, too. Why not be in a place where you create maximum impact? Why select a place where you one of a thousand people contending for space?

Michael Krigsman: I'm smiling because I suppose the obvious answer is because it's nice to live in the lap of luxury and, for most entrepreneurs, that's the goal. Obviously, for you, you've made some different decisions that seem to be both business and personal decisions.

Sridhar Vembu: It's true, but I'll offer this. In Silicon Valley, a lot of people take affluence above maybe Los Angeles Hills or Santa Barbara, places like that, right? These are expensive places in Silicon Valley.

The thing that you see often, and you know this, affluent places in America, we often get into this sort of competitive bad place, right? A little bit. We have to match the neighbors.

 If they have an expensive car in their driveway, we cannot have an entry-level car in our driveway. We've got to match it, right? You know we have this experience, right?

I once went to a function where people said, "I thought you could afford a better car than this." If I hear this four times, I'm going to change my car, right? Even if I didn't want to. Even if I didn't want to.

There is that aspect and there is that whole rat race aspect of it. You're constantly on this treadmill.

Those are the things that wear down on you when you think about it deeply. At some point, you don't like it. A lot of people have their inner feeling.

Well, I never actually liked it. I always wanted to live for innocence. I wanted to live by my own values, and I didn't want to live for others' expectations. What car I drive is my business, and I really don't care to be judged by others on what car I drive.

Those are the reasons I chose this place, but it's ultimately a personal decision. People who don't realize it at first will realize it soon enough that maybe I don't want to be living for other people's expectations of me.

Michael Krigsman: Relating to this topic, Sandra Lowe says, "When Zoho was founded 25 years ago, did you and the other founders have these values baked in at that time, or did this approach, this philosophy develop gradually over time?"

Sridhar Vembu: I would say it developed gradually over time. I wouldn't say that when it got started there was any deep set of convictions about this.

I would argue that you really cannot have that many convictions when you do a start like that because they are not backed up by any reality, right? We have some model values, but we didn't have yet convictions on how the business should be. We found them over time and it's a journey of discovery, in a sense, a self-discovery going on.

Michael Krigsman: You must have obviously been very open, receptive, and interested in these values at the start. These are core, personal, foundational, psychological constructs. These don't just materialize.

Sridhar Vembu: Absolutely. For example, early on, from the beginning, I had this idea that we shouldn't be worried about trustees (constantly) because a lot of people get trapped by the need for trustees, social trustees, right?

Will my actions harm my job? If I go to a party, will people respect me? Those kinds of things, right?

That notion, it was early on I discovered it. I discovered it before we even got started, the company.

Even in Silicon Valley, I remember I lived in San Jose in a Mexican neighborhood. I was working in software. None of my neighbors, nobody was in software.

I lived in this neighborhood, and I would go to the local burrito joint. I hung out with the people there, and nobody worked in tech. This is San Jose in the heart of Silicon Valley. I personally lived in a neighborhood and hung out with people who were not into tech or software.

Again, because I felt I don't need the prestige of hanging out with the smart people, the best people around me. I'm satisfied with my own self. [Laughter] I hang out with who I want to hang out with. That's how I thought about it.

Michael Krigsman: The company and the activities, obviously, are a reflection of that.

Sridhar Vembu: Yes. That's how the company shaped up that we didn't worry about prestige. In our early days, we shipped products that were highly practical sort of painkiller tools. These weren't prestigious enterprise software in that time that would impress a CIO at that time.

But we were happy doing this. It paid the bills. It allowed us to build the company.

How to motivate employees?

Michael Krigsman: We have a couple of questions from LinkedIn on a more inward-looking, inward inside the company point of view about employees. Let me ask you both of these because I think they're very connected.

Number one, Vanessa Balderas asks, "What is your strategy to motivate employees to participate in these initiatives?" Priyadharshini asks, "How often do you meet with your employees? Do you encourage daily long meetings?"

Sridhar Vembu: How do you motivate employees? Well, it has to be by example, not by preaching. People have to be inspired by examples of leadership, examples of what their own immediate leadership managers are all doing. If we cannot do that, we are (in a way) failing in our mission.

You cannot preach this. You cannot force people to act these ways. It has to come from within, and it has to come from inspiration.

As far as how often do I meet, I meet with employees all the time. Of course, now a lot more virtually (in the last year or so). But even so, people pay a visit to this place where I am. Employees come and often stay with me here. All of that happens.

Meetings, long meetings, that's one thing we try not to do in Zoho. We are not a metric-driven culture, we are not a meeting-driven culture because those two really, really, really suck the soul out of a company.

Meetings are where people go to waste time. Metrics become a constant treadmill. That's where you hate your job, this constant metric obsession, so we don't do those two things in Zoho.

Michael Krigsman: Of course, metrics make it much easier to manage the company, in some respects, or do you not find that to be the case?

Sridhar Vembu: I don't know. We manage the company and let's say that I'm not stressed out. [Laughter] I sleep well at night. Only the peacocks keep me awake here.

After 25 years of running this company, I'm still fresh and still wake up thinking about new challenges, new problems to solve for the customer, new technologies, all of that. I feel blessed.

I take issue with this idea that metrics make it easier because that's an illusion. Metrics give us the illusion that we are in control. We are to give up that illusion of control, first.

In reality, it is the inspiration of the people who work for you that is the health of the business. If people are not passionate and inspired, your business is not healthy, even if it makes the numbers.

Michael Krigsman: You just made a couple of extremely provocative statements. You said metrics give us the illusion of control and we have to give up that idea of control, which is the complete antithesis to how hierarchical organizations, which are most businesses, are run.

Sridhar Vembu: Here's the problem with metrics. Humans are very good at gaining metrics. You know that. I know that.

We know once I set some particular metric, let's say I set a metric that our traffic has to double every six months, one year, or whatever. Traffic in our website, let's say I set this as a goal. Our metric, I keep tracking every day.

What tends to happen is we look at the graphic. We'll make our numbers. The quality of the traffic will be very poor.

Then you set the goal, okay, I'm going to set a quality metric on top. Then you will find that people are spending massive amounts of money to generate traffic.

Then I'm going to say, I'm going to set up spending controls. It goes on and on and on. Each metric needs another metric so that it cannot be gamed. Then you add another metric because then that would be gamed.

Humans are very good at gaming metrics. In fact, a lot of our school and college systems essentially teach us how to game those metrics called grades. We are good at this. We become good at this.

That's why I don't have a lot of faith in this metric-driven approach to management. The illusion of control is that we are watching these dashboards and everything feels good. Yet, internally, within people, there is a sense of alienation, a sense of lack of purpose, and none of those things can be measured.

None of those things can be measured and that's where your real challenge of business is. Are your people really inspired? Do they feel the passion to come to work (or log in to work, now I should say)? All these things are important.

Michael Krigsman: Well, certainly, every business leader wants employees to be engaged and happy. The question is, what sacrifices? I'm using that term "sacrifices" because that's the conventional way of looking at it. What sacrifices (in terms of profitability and giving back to the employees) is a business willing to make to balance employee well-being against corporate profit, ultimately?

Sridhar Vembu: Again, this is a false dualism dichotomy they set up, in reality, if the health of a business long-term is the health and wellbeing of its employees because if the employees are not doing well and happy, the business is not going to be really healthy long-term. It's obvious when you look at any periods like 15, 20 years, 25 years in business.

That's why it's important that business leaders think about the holistic wellbeing of employees. Are they feeling stressed out constantly in this rat race, this metrics treadmill we set up? It's something important to think about.

This is true also for leadership. We see all too often leaders burn out. People say, "I don't want to be doing this anymore. I'll step aside," or "I'll keep myself upstairs as a chairman and appoint somebody else as CEO." All this happens. The reason it happens is they get tired of this approach of managing.

Michael Krigsman: We have an interesting question on Twitter: "How have you developed such strength and trust in your convictions (over time) and what do you think others in your position should be doing to develop that same perspective on human impact?

Sridhar Vembu: I have to say, these are not things that I was born with or came to the business with on day one. These are things we've developed slowly over time.

I often urge people. Do not develop strong convictions without testing them against reality because otherwise, you could be living in your own illusions. I can have any conviction I want. But if it's not backed up by reality, then it's worthless. You have to test against reality.

The good news is, the reason why our convictions grew stronger is it seems to work. For example, our employees consistently report they are happy. It's backed up by, for example, our attrition statistics; one of the lowest in the industry.

It's backed up by the fact that our employees stay with us long-term. Similarly, our customer attrition, those numbers are very good. Our customers prefer to stay with us long-term. All of these tell us we are doing something right.

Again they will tell us, employees will tell us, "This company cares about me." Customers will tell us, "This company would sacrifice profit in order to serve my interests and take care of me."

That long-term, when they stabilize, it lowers our marketing spending to gain the customer and, in a way, that pays for itself. But we don't calculate that way. We act in the interest of the customer and then word of mouth spreads. Our marketing costs, therefore, come down. All that has helped the business. Then it tends to grow your commission, your model.

Michael Krigsman: One point that I just want to emphasize to people is that it's very evident that, for you, the approach to business you're taking is very rooted in both your philosophical values and ethics and, at the same time, very rooted in what are the practical impacts on the business: is the business doing well; how are our employees doing; and so forth? Those two are coming together in a very practical way.

Sridhar Vembu: That's why I said you cannot do good without being smart. That's very important because sometimes, again, there is the dualism involved in thinking about this because we have to be a business.

We have to have to be profitable. We have to take care of customers. We have to take care of employees. We have to pay our employees competitive wages and take care of them well. We have to have products that are competitive in the market and priced correctly.

All these are important. Nobody gets to escape the gravitational loss of business, sort of natural loss here.

Within that, then how does your value system operate? That's a key question. Our example shows that it is very possible to do it.

One key thing is to realize that whatever ecosystem that you have influence over, that you don't think you have influence over. That's how I put it.

Corporate culture and values at Zoho

Michael Krigsman: Okay. We have another couple of questions from Twitter that I think are again kind of linked. Karthik Bala says, "Do you foresee this same kind of rural revival mindset possible in America, the deemphasis on living in the lap of luxury mindset?" Arsalan Khan asks, "Do your values at Zoho encourage people to ignore that rat race?"

I think both of these questions are getting to the possibility of, is this possible in the United States?

Sridhar Vembu: It's already happening. You know there has been an exodus out of Silicon Valley in the last year (in the pandemic world). A lot of people are discovering, in the Zoom world we live in right now, that the work itself can be done from anywhere. It's even easier to do it in America because the basic infrastructure is there pretty much everywhere. Your roads and your systems, the infrastructure is there.

A reasonably good life is possible in most places in America. You know that. Even rural communities have infrastructure. The roads and the housing is nice – all of that. It's even more possible in America. The key is for employers, companies, to invest in these places.

In fact, Raju, our chief evangelist, can talk about this a lot, and he often talks about this. We are finding a lot of small towns neglected, which are very good, a good quality of life, and large number of people who are eager to work, eager to be trained, and develop the skills.

We are finding these towns. In Texas and all over, we are now finding these towns, and we are investing. We ourselves are doing these things in America. In the next maybe year or two, you will find us maybe in six or seven such locations we are going to do.

Update on Zoho University and Zoho Schools

Michael Krigsman: We have another question from LinkedIn. Priyadharshini asks, "What's going on with Zoho University and where do you anticipate that going?"

Sridhar Vembu: Zoho University has now become very mainstream in the company in the sense that it's now part of our institutional landscape. It's there. It's part of the background of Zoho. Zoho and Zoho University go together.

We call it Zoho School of Learning. We have rebranded it Zoho School of Learning.

Fifteen percent of our workforce now has come from Zoho School of Learning. We are going to raise that percentage over time. In fact, I want it to go up to 50% of our workforce coming from Zoho School of Learning longer-term, so we are growing.

We are also finding that increasingly a lot of students – and we are getting this, actually, this year, I'm told – that a good number of the students who are coming are dropping out of conventional college (after a year or two) and joining us in Zoho School of Learning, which is a huge vote of confidence in this model. They are already in college. They are already in a digital program, and they are deciding to drop out of it and come to Zoho School of Learning. That's also happening right now.

We are seeing this model now take wings and take flight. We are also seeing that other companies are starting to adopt these models. I believe that this is going to be a big moment in the next ten years. We will see this.

This very much fits with the idea of rural revival and all of that because, again, we have to train the talent pool. I believe employers should take this up as the core activity of training staff. That's important.

Michael Krigsman: Of course, all of this stems from the fact that employees want to be treated well, want to be respected, want to have opportunities for education and advancement, so what you're describing is completely in accord with human nature. It's really, like I said before, what every business leader talks about to some degree.

Sridhar Vembu: Exactly. When you take care of employees, when you invest in them, when you invest in skill creation, talent creation, actually, human beings, the way we are, they are going to give back something in return. What do employees give back in return? Their commitment. Their loyalty. Their love and affection.

That's how human beings do it. That's natural human instinct. You cannot ask for it, but you receive it. That's what we find in our business.

Sustainable business practices and personal values

Michael Krigsman: We haven't spoken about sustainability. Where does sustainability fit into this broader picture?

Sridhar Vembu: I think of it as, today, we have burdened our planet too much. The events in the last couple of years in terms of the fires, the droughts, the floods, and all of these tell us we are to be very mindful of what impact we are having on the planet.

All our actions, our way of life, our consumption, all of that have to be thought of from the sustainability perspective. The key thing for us is, we have to avoid this competitive consumption-itis where we are defining ourselves by our consumption. That's important because if you don't do this and you ask me, "Why do you adopt a modest personal lifestyle?" that's because of this issue. I don't want to be trapped in this, consume to impress others, and then they consume to impress me. This rat race is going to destroy the planet.

Rural areas, again, give us an escape from this because, in this particular village where I am in, nobody cares what car I drive. Nobody cares about all of this. Nobody is impressed by any of that. They're impressed by me as a human being, a friend, colleague, mentor, all of that here and not by what kind of car I drive.

It's very important that sustainability has to also come from getting back to nature, closer to nature, reducing our footprint, reducing our consumption—reducing our commute, for example. All of this goes together.

Michael Krigsman: As we finish up, what advice do you have, personal advice, for people that are listening and saying, "You know this rat race is really tough but, in my job, I can't let it go. I have to do these things. I have all these bills to pay and so forth. But I like what he's saying"? What advice do you have for folks?

Sridhar Vembu: The one advice I give young people is to keep in mind prestige is a trap. Chasing prestige is a trap. It traps you in a particular pattern of thinking.

You mentioned, well, I have bills to pay – all of that. Rethink all those priorities. Maybe get rid of some of the consumption that created those bills to pay. What do I really need?

A lot of young people these days are embracing a minimalist lifestyle. I've always practiced this where I avoid buying things that I know that I'm going to use for a couple of days and never use again.

You know that feeling, right? The only time you used it is probably the day you purchased it. That's the kind of consumption a lot of us tend to do, so I avoid that.

When you avoid that, you have fewer bills to pay. Then you have more personal freedom. You can follow your heart. That's the one advice I give to young people. If you don't get into this trap of prestige, then you have more possibilities in your life.

Michael Krigsman: What advice do you give to businesspeople who are listening to this and who say, "You know I like the fact that they're not metrics-driven to that extent. There are a lot of good things. The business has been around for 25 years, it's profitable, it's got all of these employees, and it's very, very successful. I'd like to take those tactics, but I'm not so much interested. I like living in the lap of luxury. I like living in Silicon Valley (what have you). But I want those tactics"? What advice do you have for those folks?

Sridhar Vembu: This is where it's not easy to separate out all of these. There is a whole tapestry. I mentioned there are a lot of threads here. It's difficult to pull apart one thread and just say, "I like that."

The Silicon Valley location is a good example. You are necessarily burdening every new employee with the cost structure inherent to this. They are now suddenly in a rat race because how can they afford a home, even to rent? Even after the pandemic, homes are super expensive (both to rent and to buy) in Silicon Valley. They are going to constantly be worrying about the problem.

If you are a businessperson, if your employees are worrying about this problem, and you don't pay attention to this because, "It's not my problem. It's their problem," well, it becomes your problem because they are going to constantly chase, you know, "Is somebody else going to pay me higher, because I have to pay these bills?"

You cannot choose a location like that and then later complain, "Nobody gives me loyalty." Ask the businessperson, "What have you done to earn the loyalty?"

It's all linked together. It's a single woven fabric. You cannot separate the threads here.

Michael Krigsman: You can't just pick and choose the pieces you like or that are convenient for you at the moment.

Sridhar Vembu: Exactly. You can do that, but you make a very suboptimal business.

Michael Krigsman: Okay. With that, unfortunately, we are out of time. I would like to thank Sridhar Vembu, Co-founder and CEO of Zoho, for taking your time to speak with us today. Sridhar, it's great to have you back. Thank you again.

Sridhar Vembu: Thank you, Michael. Namaste. Thank you.

Michael Krigsman: Everybody, thank you for watching, especially those folks who asked the great questions and left such great comments on LinkedIn and Twitter. Before you go, please subscribe to our YouTube channel and hit the subscribe button at the top of our website so you can get our newsletter. Tell your friends, too, please.

We have great shows coming up. We'll see you again next time. Have a great day, everybody. Bye-bye.

Michael Krigsman: What is corporate social responsibility? We're talking with Sridhar Vembu, Co-founder and CEO of Zoho.

Sridhar Vembu: Zoho is now 25 years in business, and we are one of the most unusual cloud software companies with a very broad and deep product portfolio and a worldwide customer base—now approaching about half a million dollars—ranging in size, with about 10,000 employees now almost. That gives you a snapshot. It's never raised money. Profitable, private, and completed 25 years in business.

Michael Krigsman: You were bestowed the very prestigious Padma Shri Award, which is the fourth highest civilian award in India, so congratulations for that.

Sridhar Vembu: Thank you. Thank you.

What is spiritual capitalism?

Michael Krigsman: When we talk about corporate obligations and social responsibility, Sridhar, how does that ring for you? How do you react to that? What does that mean for you?

Sridhar Vembu: First of all, I want to actually test the notion, and this is a traditional notion in business circles where, in your daily life as a businessperson, you are a ruthless profit maximizer. Then you harness the profit and you act socially responsible.

There is a kind of dualism, a separation inherent in this. I am going to argue that we cannot act in a dualist way. We are to weave together our values and our business activities together, and weave together in a tapestry. That's what I've called spiritual capitalism or spiritual business because, ultimately, dualism comes back to hurt us in one way or another. So, we've got to be non-dualistic in our thinking.

Michael Krigsman: I'll ask you to elaborate on that because the term dualism is not something that we typically associate in any kind of business context at all.

Sridhar Vembu: This goes to philosophy, really. This is not something that a business school would teach. Really, this is a philosophy where, who you are and what your actions are, have to be aligned. This idea of non-dualism.

If we don't, then what happens is, eventually, you have a kind of dissonance. We hear the term cognitive dissonance that comes in. People are going to have burnout. People are going to get stressed out – all of that. All that stems from it.

If you look at our own 25-year history, the reason we are vibrant and still active, vibrant, and feel young as a company is because we have woven together this and it's non-dualistic. Our values and our actions are aligned. That's important. That's why I called it spiritual business or spiritual capitalism.

Michael Krigsman: You're talking about the bringing together of the values and then the actions.

Sridhar Vembu: Yes.

Michael Krigsman: Then what do you mean by the values? What are the values? What are the kinds of actions that you're referring to?

Sridhar Vembu: We have always fallen to the notion of serving the unserved and underserved as a very important part of our value system. That is whether it's customers or employees, we want to serve the unserved.

When you think of that, again, if you play a dualistic, traditional thinking on this, well, then in your business you will hire the best people possible in terms of coming from the best credentials. Often, those people are not the unserved. These people have already great opportunities.

Then you maximize profit out of it. Then you go take the money and maybe serve the unserved in a separate way. That's dualistic thinking.

What we do in Zoho, instead, is we have made creating skills, extending opportunity or, rather, finding the latent talent as a core part of our activity. This comes from the observation that a lot of people have that latent talent but lack the opportunity because no one will take a chance on them. No one will extend an opportunity to them.

To be consistent with our values, we extend that opportunity. That's where our Zoho Schools of Learning (what used to be called Zoho University) comes in. That's an example of weaving together our values along with our business activity, business actions.

Corporate social responsibility (CSR) at Zoho and sustainable development

Michael Krigsman: To what extent do you, at Zoho, practice this? You're a software development company, and so where does this come in? Where does the expression of this philosophy of the non-dualism, the bringing together of the values and the activities?

Sridhar Vembu: We have products like Zoho Mail that compete with Gmail. The temptation is to follow their business model, so an ad-supported business model. But we decided we are not going to go down that path because privacy is an extremely important value for us.

If we profess a strong belief in that, a strong faith in privacy as part of our business model, and then mixing advertising with it is going to cause conflict: conflict within us and conflict for our customers. In that case, our actions and our values would not be aligned.

We decided early on—this was more than 15 years ago—that we will not ever show ads. We will not monetize our software using advertising as a business model. This was not done with a calculus that this is going to be more profitable. This was done with the idea that if we do that this way, we are going to hate ourselves at some point, and we are going to get tired of doing this.

We wanted to just stay true to ourselves, so we will not use their business model. It took us time to find a successful business model and make it a success. But today, Zoho Mail is doing extremely well, and we are happy to report. It took us a decade to do that, but we were happy that we did that.

This is an example of that values and actions align. We try to do this in every activity we do.

Balancing cost vs. profit in charitable donations and philanthropy

Michael Krigsman: I guess a basic question that many people might have is, there is a perceived cost associated with acting in a values-driven manner. How do you think about balancing the approach of values against the cost of that or lower profitability, which is really the same thing?

Sridhar Vembu: There are two things here. First, in business, to do any good at all, you have to be smart. If we act very dumb—don't pay attention to the numbers, don't mind the store—we're going to go out of business and we cannot do any good.

To that extent, it's very important to be a business, that means a business that's able to pay its own way and make a profit. That's important to do any good at all.

The second aspect here is if you're constantly thinking of ourselves as we are making a sacrifice to do this, then again there is a mental energy expended to keep thinking we are making a sacrifice. That's going to wear us down and our resolve will weaken.

We actually don't believe, for example when we said we will not adopt advertising as a business model, we did not think we are foregoing profit by doing this. We instead thought this is what we believe in. We'll make this successful by acting on our beliefs. We want to show the world that it is actually possible to do that.

There was a positive energy, positive reason for doing this rather than the negative feeling of we are foregoing something, we are missing out on something, which will constantly eat us inside. That's why I always say don't make a sacrifice. Instead, act in accordance with your true inner values.

Zoho CEO: "We are not ruthlessly metrics-driven."

Michael Krigsman: You're the CEO of the company, so you can make that decision. You're a large company. For people who work inside the organization who are managing their budgets and so forth, how do you guide them to follow this approach and yet still meet whatever their KPIs and metrics are?

Sridhar Vembu: That phrase, KPI and metrics, that's where the action is, right? If I preach all this and practice ruthless KPIs and metrics, it's going to be hypocritical.

In reality, I'm not actually doing these KPIs and metrics-drive management. In fact, I think we spoke about this. The Tyranny of Metrics was a book I mentioned. It's worth paying attention to the book because it's actually fundamental to what I'm talking about here.

We are not ruthlessly metrics-driven. In fact, we believe human systems and an extreme focus on metrics don't mix well. That's where the answer is.

Our managers and our employees know this. They know that obviously, we have to make a profit. Otherwise, we won't be in business long-term. But at the same time, we are not going to be constantly driven by optimizing this metric or that metric. We're going to holistically think about our values and our actions.

Michael Krigsman: I'm smiling because, okay, how do you run your business then?

Sridhar Vembu: I can assure you we're in business. We are growing. We have 10,000 people. I'm not actually doing these KPIs and metrics like everybody is doing. That is something that is very interesting.

It ultimately comes from empowering people. That is 600, 700 managers. This is the core, middle management layer, right? There are maybe about 50 or 60 senior managers, right?

If you look at those people, the vast majority of them grew up in Zoho. They invite these values. They have lived these values all along.

They know how this company operates, and they know that, as an example, I'm never going to fire somebody because they missed a quarter. Okay? That has never happened, honestly. Well, because now we are private, we cannot afford to miss quarters. [Laughter]

But I'm going to actually -- and this happened today. I'll give you an example. There was some change a product made that upset some customers. The customers felt some pieces were being taken away. We were not doing that, but some customer perception was that.

We immediately swung into action. I called the core team and said, "Let's put it back immediately. The customers believe that there is something the product is being degraded in that experience. Let's put it back the way it was."

We did that immediately. Our team went and apologized to the customers who had the issue, and we took care of it.

This is never going to be held against even the people who made the mistake because what I always stress is it is human to make a mistake. The way we earn our customer trust is by promptly fixing it and moving on. Never stand on ego. That's the principle.

That is, again, values and actions. So, our people are not afraid to make mistakes. All I say is that once we recognize we have made a mistake, let's just go fix it. Let's just get it right for the customer.

Ecosystem implications for Zoho software partners

Michael Krigsman: We have a really interesting question from Twitter. Arsalan Khan is a regular listener. He always contributes the most excellent questions. He says, "Even if you prioritize values over profits, your ecosystem might not. And so, how do you balance the needs of your ecosystem?" We haven't spoken about large consulting companies, but I have to assume that at this point they're looking over at Zoho, so it's a broad issue, potentially.

Sridhar Vembu: In the broad ecosystem, you have to select which ecosystem you play in. For example, we have chosen not to play in the VC ecosystem because we felt that our values may not align with theirs.

They have exit needs. They are to maximize their return on investment, which we may not be able to deliver using our approach. We decided not to participate in that ecosystem.

To an extent, we choose what playground we play in. The truth is this world is big. There are opportunities somewhere. There is always an opportunity to live in accordance with our values and match our actions.

If we are sitting in the most expensive real estate and we are constantly worried about meeting the next month's payroll, then we may not have the luxury of doing this. But then I question, why do we have the second most expensive real estate in the world? Why do we have to commit to that? Why do we have to accept the type of burden on our business?

The point I'm making is, you can pick your ecosystem. There is a freedom. You don't have to assume the ecosystem as a given for your business. We can create our own ecosystem, too.

Michael Krigsman: Serving as a center of influence over the various corporate activities, internal and (to the extent that you can) around it is—

Sridhar Vembu: Exactly.

Michael Krigsman: Mm-hmm.

Sridhar Vembu: That's possible. That's doable. Even at a relatively small scale, it's doable.

I'll give you an example. If you are a startup and let's say you want to align yourself. How do you employees who align to this? Well, go to a place where there are a lot of people who need jobs desperately, and there is a lot of that latent talent I'm talking about.

Give them an opportunity. Train them. Then they are naturally prone to come to your value system.

In that sense, you create an employee ecosystem that matches your values. This is possible.

On the other hand, if you say, "Well, I'm going to hire from the same pool everybody is hiring from, and I'm going to think all these people are not agreeing with my values," then I say, "Why don't you go to a place where people are more prone to agree with you?"

Michael Krigsman: Creating that value-driven ecosystem is something that you think about both inside the company as well as externally surrounding it.

Sridhar Vembu: It started as investors, it could even be customers and definitely employees. All of these, we have more influence than we think we do. That's what I predict.

Sustainability and local communities

Michael Krigsman: We have an interesting question from Twitter from Alejo Gonzalez. He says, "You have spoken about the rural revival. How do you define that and how can communities take advantage of this approach that you're describing?"

Sridhar Vembu: First of all, let me explain where this rural revival idea comes from. Primarily, two sources.

One, our large urban centers everywhere around the world—that's true in the U.S., that's true in India, and that true in Europe, everywhere—they've become massively overcrowded, extremely expensive. Particularly for new people, it's become very burdensome to live there, the cost of living.

Silicon Valley is a prime example. No one who has come in the last five or ten years could afford a home in Silicon Valley, not now and not maybe in the next 20 years at the current price of housing and salaries – all of that. That's not a good situation for young people.

Then the second part, we have massive depopulation going on in very smaller towns as talent leaves for lack of opportunity there. We can put these two. It's obvious that there is a solution to this problem by matching the two.

You leave these big urban centers and go to these smaller towns that need the jobs, need the income, need the opportunities. It's a kind of marriage made in heaven now. That is how I think about this problem.

The rural revival is coming from these two sides of this, matching these two sides. There's one side that is a push out of urban areas and there is a pull factor in rural areas.

It also is good for business because a lot of the things we worry about in terms of cost, particularly real estate—which is the prime driver of a lot of things, not only your rent for office space but also cost of living for employees—all that is better. Therefore, your business has a sounder basis, a financial basis when it operates from rural areas.

You'll find more loyal employees because you're extending opportunities in a place where there are no opportunities or very few opportunities. All of these go together holistically. That's what I call rural revival.

Michael Krigsman: You yourself did live in Silicon Valley. You founded Zoho in Pleasanton, which is in the heart of Silicon Valley. Tell us about where you live now.

Sridhar Vembu: I live in a fairly remote village in the southern part of India, and not far from the southern tip of India. It's about 50, 60 miles from the southern tip of India.

I moved here about a year and a half ago, well before the pandemic. About September or October 2019, I moved here. I've been living here since then.

Now I have a good fiber optic line. That's why I am able to do this now. But in the beginning, I only had a 4G LTE line and that connection wasn't very good, but I managed. And so, it has been an adventure.

Where can you have maximum impact?

Michael Krigsman: Why? Why did you move from the heart of Silicon Valley to rural India?

Sridhar Vembu: Silicon Valley is not going to miss me. There is a lot of talent. There are a lot of smart people there. One person leaving is not going to make a difference to Silicon Valley.

Here, I'm vitally needed. In fact, the people here tell me often, "Please, never leave us. Please never leave because your presence here means so much to us."

This is what I mentioned. There is the ... [indiscernible, 00:19:50] to this. That is, I am vitally missed here if I am not here. This whole region, this place is going to miss me.

In a sense, you are maximizing the place where you have the most impact. You are selecting a place where you can have the most impact.

This should be true for any start-up, too. Why not be in a place where you create maximum impact? Why select a place where you one of a thousand people contending for space?

Michael Krigsman: I'm smiling because I suppose the obvious answer is because it's nice to live in the lap of luxury and, for most entrepreneurs, that's the goal. Obviously, for you, you've made some different decisions that seem to be both business and personal decisions.

Sridhar Vembu: It's true, but I'll offer this. In Silicon Valley, a lot of people take affluence above maybe Los Angeles Hills or Santa Barbara, places like that, right? These are expensive places in Silicon Valley.

The thing that you see often, and you know this, affluent places in America, we often get into this sort of competitive bad place, right? A little bit. We have to match the neighbors.

 If they have an expensive car in their driveway, we cannot have an entry-level car in our driveway. We've got to match it, right? You know we have this experience, right?

I once went to a function where people said, "I thought you could afford a better car than this." If I hear this four times, I'm going to change my car, right? Even if I didn't want to. Even if I didn't want to.

There is that aspect and there is that whole rat race aspect of it. You're constantly on this treadmill.

Those are the things that wear down on you when you think about it deeply. At some point, you don't like it. A lot of people have their inner feeling.

Well, I never actually liked it. I always wanted to live for innocence. I wanted to live by my own values, and I didn't want to live for others' expectations. What car I drive is my business, and I really don't care to be judged by others on what car I drive.

Those are the reasons I chose this place, but it's ultimately a personal decision. People who don't realize it at first will realize it soon enough that maybe I don't want to be living for other people's expectations of me.

Michael Krigsman: Relating to this topic, Sandra Lowe says, "When Zoho was founded 25 years ago, did you and the other founders have these values baked in at that time, or did this approach, this philosophy develop gradually over time?"

Sridhar Vembu: I would say it developed gradually over time. I wouldn't say that when it got started there was any deep set of convictions about this.

I would argue that you really cannot have that many convictions when you do a start like that because they are not backed up by any reality, right? We have some model values, but we didn't have yet convictions on how the business should be. We found them over time and it's a journey of discovery, in a sense, a self-discovery going on.

Michael Krigsman: You must have obviously been very open, receptive, and interested in these values at the start. These are core, personal, foundational, psychological constructs. These don't just materialize.

Sridhar Vembu: Absolutely. For example, early on, from the beginning, I had this idea that we shouldn't be worried about trustees (constantly) because a lot of people get trapped by the need for trustees, social trustees, right?

Will my actions harm my job? If I go to a party, will people respect me? Those kinds of things, right?

That notion, it was early on I discovered it. I discovered it before we even got started, the company.

Even in Silicon Valley, I remember I lived in San Jose in a Mexican neighborhood. I was working in software. None of my neighbors, nobody was in software.

I lived in this neighborhood, and I would go to the local burrito joint. I hung out with the people there, and nobody worked in tech. This is San Jose in the heart of Silicon Valley. I personally lived in a neighborhood and hung out with people who were not into tech or software.

Again, because I felt I don't need the prestige of hanging out with the smart people, the best people around me. I'm satisfied with my own self. [Laughter] I hang out with who I want to hang out with. That's how I thought about it.

Michael Krigsman: The company and the activities, obviously, are a reflection of that.

Sridhar Vembu: Yes. That's how the company shaped up that we didn't worry about prestige. In our early days, we shipped products that were highly practical sort of painkiller tools. These weren't prestigious enterprise software in that time that would impress a CIO at that time.

But we were happy doing this. It paid the bills. It allowed us to build the company.

How to motivate employees?

Michael Krigsman: We have a couple of questions from LinkedIn on a more inward-looking, inward inside the company point of view about employees. Let me ask you both of these because I think they're very connected.

Number one, Vanessa Balderas asks, "What is your strategy to motivate employees to participate in these initiatives?" Priyadharshini asks, "How often do you meet with your employees? Do you encourage daily long meetings?"

Sridhar Vembu: How do you motivate employees? Well, it has to be by example, not by preaching. People have to be inspired by examples of leadership, examples of what their own immediate leadership managers are all doing. If we cannot do that, we are (in a way) failing in our mission.

You cannot preach this. You cannot force people to act these ways. It has to come from within, and it has to come from inspiration.

As far as how often do I meet, I meet with employees all the time. Of course, now a lot more virtually (in the last year or so). But even so, people pay a visit to this place where I am. Employees come and often stay with me here. All of that happens.

Meetings, long meetings, that's one thing we try not to do in Zoho. We are not a metric-driven culture, we are not a meeting-driven culture because those two really, really, really suck the soul out of a company.

Meetings are where people go to waste time. Metrics become a constant treadmill. That's where you hate your job, this constant metric obsession, so we don't do those two things in Zoho.

Michael Krigsman: Of course, metrics make it much easier to manage the company, in some respects, or do you not find that to be the case?

Sridhar Vembu: I don't know. We manage the company and let's say that I'm not stressed out. [Laughter] I sleep well at night. Only the peacocks keep me awake here.

After 25 years of running this company, I'm still fresh and still wake up thinking about new challenges, new problems to solve for the customer, new technologies, all of that. I feel blessed.

I take issue with this idea that metrics make it easier because that's an illusion. Metrics give us the illusion that we are in control. We are to give up that illusion of control, first.

In reality, it is the inspiration of the people who work for you that is the health of the business. If people are not passionate and inspired, your business is not healthy, even if it makes the numbers.

Michael Krigsman: You just made a couple of extremely provocative statements. You said metrics give us the illusion of control and we have to give up that idea of control, which is the complete antithesis to how hierarchical organizations, which are most businesses, are run.

Sridhar Vembu: Here's the problem with metrics. Humans are very good at gaining metrics. You know that. I know that.

We know once I set some particular metric, let's say I set a metric that our traffic has to double every six months, one year, or whatever. Traffic in our website, let's say I set this as a goal. Our metric, I keep tracking every day.

What tends to happen is we look at the graphic. We'll make our numbers. The quality of the traffic will be very poor.

Then you set the goal, okay, I'm going to set a quality metric on top. Then you will find that people are spending massive amounts of money to generate traffic.

Then I'm going to say, I'm going to set up spending controls. It goes on and on and on. Each metric needs another metric so that it cannot be gamed. Then you add another metric because then that would be gamed.

Humans are very good at gaming metrics. In fact, a lot of our school and college systems essentially teach us how to game those metrics called grades. We are good at this. We become good at this.

That's why I don't have a lot of faith in this metric-driven approach to management. The illusion of control is that we are watching these dashboards and everything feels good. Yet, internally, within people, there is a sense of alienation, a sense of lack of purpose, and none of those things can be measured.

None of those things can be measured and that's where your real challenge of business is. Are your people really inspired? Do they feel the passion to come to work (or log in to work, now I should say)? All these things are important.

Michael Krigsman: Well, certainly, every business leader wants employees to be engaged and happy. The question is, what sacrifices? I'm using that term "sacrifices" because that's the conventional way of looking at it. What sacrifices (in terms of profitability and giving back to the employees) is a business willing to make to balance employee well-being against corporate profit, ultimately?

Sridhar Vembu: Again, this is a false dualism dichotomy they set up, in reality, if the health of a business long-term is the health and wellbeing of its employees because if the employees are not doing well and happy, the business is not going to be really healthy long-term. It's obvious when you look at any periods like 15, 20 years, 25 years in business.

That's why it's important that business leaders think about the holistic wellbeing of employees. Are they feeling stressed out constantly in this rat race, this metrics treadmill we set up? It's something important to think about.

This is true also for leadership. We see all too often leaders burn out. People say, "I don't want to be doing this anymore. I'll step aside," or "I'll keep myself upstairs as a chairman and appoint somebody else as CEO." All this happens. The reason it happens is they get tired of this approach of managing.

Michael Krigsman: We have an interesting question on Twitter: "How have you developed such strength and trust in your convictions (over time) and what do you think others in your position should be doing to develop that same perspective on human impact?

Sridhar Vembu: I have to say, these are not things that I was born with or came to the business with on day one. These are things we've developed slowly over time.

I often urge people. Do not develop strong convictions without testing them against reality because otherwise, you could be living in your own illusions. I can have any conviction I want. But if it's not backed up by reality, then it's worthless. You have to test against reality.

The good news is, the reason why our convictions grew stronger is it seems to work. For example, our employees consistently report they are happy. It's backed up by, for example, our attrition statistics; one of the lowest in the industry.

It's backed up by the fact that our employees stay with us long-term. Similarly, our customer attrition, those numbers are very good. Our customers prefer to stay with us long-term. All of these tell us we are doing something right.

Again they will tell us, employees will tell us, "This company cares about me." Customers will tell us, "This company would sacrifice profit in order to serve my interests and take care of me."

That long-term, when they stabilize, it lowers our marketing spending to gain the customer and, in a way, that pays for itself. But we don't calculate that way. We act in the interest of the customer and then word of mouth spreads. Our marketing costs, therefore, come down. All that has helped the business. Then it tends to grow your commission, your model.

Michael Krigsman: One point that I just want to emphasize to people is that it's very evident that, for you, the approach to business you're taking is very rooted in both your philosophical values and ethics and, at the same time, very rooted in what are the practical impacts on the business: is the business doing well; how are our employees doing; and so forth? Those two are coming together in a very practical way.

Sridhar Vembu: That's why I said you cannot do good without being smart. That's very important because sometimes, again, there is the dualism involved in thinking about this because we have to be a business.

We have to have to be profitable. We have to take care of customers. We have to take care of employees. We have to pay our employees competitive wages and take care of them well. We have to have products that are competitive in the market and priced correctly.

All these are important. Nobody gets to escape the gravitational loss of business, sort of natural loss here.

Within that, then how does your value system operate? That's a key question. Our example shows that it is very possible to do it.

One key thing is to realize that whatever ecosystem that you have influence over, that you don't think you have influence over. That's how I put it.

Corporate culture and values at Zoho

Michael Krigsman: Okay. We have another couple of questions from Twitter that I think are again kind of linked. Karthik Bala says, "Do you foresee this same kind of rural revival mindset possible in America, the deemphasis on living in the lap of luxury mindset?" Arsalan Khan asks, "Do your values at Zoho encourage people to ignore that rat race?"

I think both of these questions are getting to the possibility of, is this possible in the United States?

Sridhar Vembu: It's already happening. You know there has been an exodus out of Silicon Valley in the last year (in the pandemic world). A lot of people are discovering, in the Zoom world we live in right now, that the work itself can be done from anywhere. It's even easier to do it in America because the basic infrastructure is there pretty much everywhere. Your roads and your systems, the infrastructure is there.

A reasonably good life is possible in most places in America. You know that. Even rural communities have infrastructure. The roads and the housing is nice – all of that. It's even more possible in America. The key is for employers, companies, to invest in these places.

In fact, Raju, our chief evangelist, can talk about this a lot, and he often talks about this. We are finding a lot of small towns neglected, which are very good, a good quality of life, and large number of people who are eager to work, eager to be trained, and develop the skills.

We are finding these towns. In Texas and all over, we are now finding these towns, and we are investing. We ourselves are doing these things in America. In the next maybe year or two, you will find us maybe in six or seven such locations we are going to do.

Update on Zoho University and Zoho Schools

Michael Krigsman: We have another question from LinkedIn. Priyadharshini asks, "What's going on with Zoho University and where do you anticipate that going?"

Sridhar Vembu: Zoho University has now become very mainstream in the company in the sense that it's now part of our institutional landscape. It's there. It's part of the background of Zoho. Zoho and Zoho University go together.

We call it Zoho School of Learning. We have rebranded it Zoho School of Learning.

Fifteen percent of our workforce now has come from Zoho School of Learning. We are going to raise that percentage over time. In fact, I want it to go up to 50% of our workforce coming from Zoho School of Learning longer-term, so we are growing.

We are also finding that increasingly a lot of students – and we are getting this, actually, this year, I'm told – that a good number of the students who are coming are dropping out of conventional college (after a year or two) and joining us in Zoho School of Learning, which is a huge vote of confidence in this model. They are already in college. They are already in a digital program, and they are deciding to drop out of it and come to Zoho School of Learning. That's also happening right now.

We are seeing this model now take wings and take flight. We are also seeing that other companies are starting to adopt these models. I believe that this is going to be a big moment in the next ten years. We will see this.

This very much fits with the idea of rural revival and all of that because, again, we have to train the talent pool. I believe employers should take this up as the core activity of training staff. That's important.

Michael Krigsman: Of course, all of this stems from the fact that employees want to be treated well, want to be respected, want to have opportunities for education and advancement, so what you're describing is completely in accord with human nature. It's really, like I said before, what every business leader talks about to some degree.

Sridhar Vembu: Exactly. When you take care of employees, when you invest in them, when you invest in skill creation, talent creation, actually, human beings, the way we are, they are going to give back something in return. What do employees give back in return? Their commitment. Their loyalty. Their love and affection.

That's how human beings do it. That's natural human instinct. You cannot ask for it, but you receive it. That's what we find in our business.

Sustainable business practices and personal values

Michael Krigsman: We haven't spoken about sustainability. Where does sustainability fit into this broader picture?

Sridhar Vembu: I think of it as, today, we have burdened our planet too much. The events in the last couple of years in terms of the fires, the droughts, the floods, and all of these tell us we are to be very mindful of what impact we are having on the planet.

All our actions, our way of life, our consumption, all of that have to be thought of from the sustainability perspective. The key thing for us is, we have to avoid this competitive consumption-itis where we are defining ourselves by our consumption. That's important because if you don't do this and you ask me, "Why do you adopt a modest personal lifestyle?" that's because of this issue. I don't want to be trapped in this, consume to impress others, and then they consume to impress me. This rat race is going to destroy the planet.

Rural areas, again, give us an escape from this because, in this particular village where I am in, nobody cares what car I drive. Nobody cares about all of this. Nobody is impressed by any of that. They're impressed by me as a human being, a friend, colleague, mentor, all of that here and not by what kind of car I drive.

It's very important that sustainability has to also come from getting back to nature, closer to nature, reducing our footprint, reducing our consumption—reducing our commute, for example. All of this goes together.

Michael Krigsman: As we finish up, what advice do you have, personal advice, for people that are listening and saying, "You know this rat race is really tough but, in my job, I can't let it go. I have to do these things. I have all these bills to pay and so forth. But I like what he's saying"? What advice do you have for folks?

Sridhar Vembu: The one advice I give young people is to keep in mind prestige is a trap. Chasing prestige is a trap. It traps you in a particular pattern of thinking.

You mentioned, well, I have bills to pay – all of that. Rethink all those priorities. Maybe get rid of some of the consumption that created those bills to pay. What do I really need?

A lot of young people these days are embracing a minimalist lifestyle. I've always practiced this where I avoid buying things that I know that I'm going to use for a couple of days and never use again.

You know that feeling, right? The only time you used it is probably the day you purchased it. That's the kind of consumption a lot of us tend to do, so I avoid that.

When you avoid that, you have fewer bills to pay. Then you have more personal freedom. You can follow your heart. That's the one advice I give to young people. If you don't get into this trap of prestige, then you have more possibilities in your life.

Michael Krigsman: What advice do you give to businesspeople who are listening to this and who say, "You know I like the fact that they're not metrics-driven to that extent. There are a lot of good things. The business has been around for 25 years, it's profitable, it's got all of these employees, and it's very, very successful. I'd like to take those tactics, but I'm not so much interested. I like living in the lap of luxury. I like living in Silicon Valley (what have you). But I want those tactics"? What advice do you have for those folks?

Sridhar Vembu: This is where it's not easy to separate out all of these. There is a whole tapestry. I mentioned there are a lot of threads here. It's difficult to pull apart one thread and just say, "I like that."

The Silicon Valley location is a good example. You are necessarily burdening every new employee with the cost structure inherent to this. They are now suddenly in a rat race because how can they afford a home, even to rent? Even after the pandemic, homes are super expensive (both to rent and to buy) in Silicon Valley. They are going to constantly be worrying about the problem.

If you are a businessperson, if your employees are worrying about this problem, and you don't pay attention to this because, "It's not my problem. It's their problem," well, it becomes your problem because they are going to constantly chase, you know, "Is somebody else going to pay me higher, because I have to pay these bills?"

You cannot choose a location like that and then later complain, "Nobody gives me loyalty." Ask the businessperson, "What have you done to earn the loyalty?"

It's all linked together. It's a single woven fabric. You cannot separate the threads here.

Michael Krigsman: You can't just pick and choose the pieces you like or that are convenient for you at the moment.

Sridhar Vembu: Exactly. You can do that, but you make a very suboptimal business.

Michael Krigsman: Okay. With that, unfortunately, we are out of time. I would like to thank Sridhar Vembu, Co-founder and CEO of Zoho, for taking your time to speak with us today. Sridhar, it's great to have you back. Thank you again.

Sridhar Vembu: Thank you, Michael. Namaste. Thank you.

Michael Krigsman: Everybody, thank you for watching, especially those folks who asked the great questions and left such great comments on LinkedIn and Twitter. Before you go, please subscribe to our YouTube channel and hit the subscribe button at the top of our website so you can get our newsletter. Tell your friends, too, please.

We have great shows coming up. We'll see you again next time. Have a great day, everybody. Bye-bye.