E-Paper
A return that merits mention
The Infosys story shows that the lack of a succession plan can even derail industry giants.
NR Narayana Murthy’s return to the top job at Infosys, a company he had co-founded with six others in 1981, is actually an admission of faulty succession planning at what was, till recently, India’s most feted information technology company. Infosys has had four chief executive officers so far — and all of them have been co-promoters. This seems to suggest the existence of a glass ceiling for non-promoters. Over the last five years several senior and much-feted executives who enjoyed star billing within the IT community have left the company. In every case, there were whispers that lack of growth opportunities beyond a certain level forced them to look for greener pastures elsewhere. Contrast this with companies like Google, Yahoo! and even Apple where the founders have stepped aside (either voluntarily or otherwise) to make space for professional (i.e. non-promoter) managers to run the companies. A caveat will be in order here: not for once are we suggesting that promoter-managers are less competent than professional ones. Far from it! About 35% of Fortune 500 companies are controlled by their promoter families. The percentage is much higher in India. By all accounts, many of them are doing an excellent job.
The issue here is one of getting the best man for the job. Many family-run businesses also appoint professional (non-promoter) managing directors and CEOs to run the show. This benefits everyone: the promoters and other shareholders get the benefit of having (in theory at least) the best man to manage their company; and professional managers have the incentive to give their best, knowing that they can aspire to get to the top on the basis of their performance. There is a feeling that this principle was ignored at Infosys. There were whispers that many talented (and ambitious) professionals were not considered for the top job only to give the promoters a shot at running the company. And therein lay Infosys’s failure.
Succession planning is not only about ensuring that a chosen executive slips smoothly into the role he/she is being promoted to. It is also about choosing wisely — to ensure that the best person, and not the one standing longest in the queue, gets the job. This is an area where many companies, both in India and around the world, sometimes fail. Far too often, what is judged is the competence of the anointed successor in his existing role; not his suitability for the position he/she is being promoted to. Brilliant deputies don’t always become successful leaders. How can companies — and, indeed, all organisations — ensure that they choose right? There is no one rule that can cover every situation. But merit should always count for much more than entitlement.
