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PowerJobs | Keeping the seat warm

Do companies groom CEOs internally or import them from other firms? Garima Pant investigates.

india Updated: Apr 04, 2006 14:25 IST

We have all seen it happen — the company reins passing from one generation to the next.

But, if there is no heir apparent, organisational heads are groomed from within the organisation after a hectic round of talent scouting.

Times however, are a-changing and company owners are becoming more professional.

These days, even Chief Operating Officers (COOs) could be temps hired for a fixed tenure. Says Abhay Nagendra Rao, Senior Manager- Human Resources, SSA Global, "This recent trend can be observed within industry verticals and is often fuelled by the unprecedented growth in the whole industry."

The trend is more prevalent in IT and Management Consulting companies rather than in traditional brick and mortar companies. "Where a company has been growing at a steady pace it makes sense to hire from within. Rewarding deserving employees is very motivating for others, it also helps in retaining top management talent," informs Gautam Sinha, CEO, TVA Infotech.

What works best in which situation is ultimately up to the company to decide. "The important thing is that the decision should be communicated properly to all stake-holders," says Rao.

However, "If you have someone who fits the bill internally, ethics demand that you give this person the first chance. Hiring externally must only be considered as the last option," says Abhishek Khaitan, Managing Director, Radico Khaitan.

Good management practice favours internal growth.

"An exception can be made only when a company is diversifying into unrelated fields where there is a real crunch of in-house talent. The other exception is when a company is doing so badly that it desperately needs external help from a person who can think out-of-the-box and turn the company's sagging fortunes around," explains Dr CS Venkatratnam, Director, International Management Institute.

"In such a case, a CEO will bring a fresh perspective," agrees DK Srivastava, Vice President, Corporate HR, HCL Technologies. "His lateral thinking and his ability to take objective decisions can propel the company towards a new growth path," adds Khaitan.

This is one area where an external CEO has a clear advantage over home-grown talent. When he is brought in (usually at a crucial juncture) the company owners are in a mood to give him/her absolute freedom. "The person is brought on the Board to make a difference. He's hired on a clear mandate," says Harish Bhattiprolu, Director Sales - Kenexa Technologies.

"Some attrition may result from external hiring but in certain circumstances, this is unavoidable," says Dr Venkatratnam.

"Eventually it depends on the CEO as to how he responds to these challenges with a clear vision and a knowledge of the 'best practices' drawn from his rich and diverse experience," adds Khaitan.

In any such situation the need of the hour is to set clear targets and give the new incumbent a free hand.

Although the ideal situation would be to spot a successor internally and follow it up with rigorous grooming, this is not always possible.

That said, "An ideal succession plan is based not on a "what if" scenario but on well-designed future leadership plans. Anticipating organisational growth and keeping a pipeline of future talent ready are the best strategies to adopt in terms of succession planning.

Organisations that prepare people for higher responsibilities on a regular basis don't have to go to the drawing board every time a problem raises its head. For them, such events represent opportunities; not threats.

Khaitan believes that people who have exceeded their performance parameters must be promoted consistently from within. That's the least an organisation can do for its deserving employees.