Yet another year is on the verge of disappearing and we’re almost all set to welcome the new year 2018 with explosion and bash. While I set the plot for my further discussion, I must affirm that 2017 marked manifold stories unfolding, transforming and ultimately fading. Few of such stories belong to the corporate world which observed several papers put down by their leaders – some expectedly and some unexpectedly.
For the corporate world, 2017 has been a roller-coaster ride throughout. Tornados such as GST, Digitalization, political and economic whirls have affected the corporate coast significantly. But the peculiar storm was the unanticipated farewell of the upper echelons of many giant business houses which includes General Electric (GE), Uber, Ford, Equifax, HPE, ESPN at global pole and Infosys, TVF, PepsiCo India, Indian Hotels on Indian Harbor.
For different organisations, the reasons for the alteration in top-level management are different. For GE, the end to the 17-year reign of Jeff Immelt came because of his unexpected retirement; for Uber, the resignation of CEO came after tumultuous six months of scandals and stumbles; and the burning one in the Indian scenario being the leaving of corner room by Infosys’s Vishal Sikka because of continuous personal attacks on him by the board and founders. Very recently to join the exit club is the Airtel Payments Bank Chief Shashi Arora who resigned over Aadhar e-KYC controversy.
All this said and heard, the loss of this chaos was ultimately suffered by the organisations, their businesses, their reputation and most importantly - their board, for the board was burdened with the responsibility of filling up the position with a capable leader as soon as possible to bring the business on track. Say for Infosys, it lost Rs. 22400 Crore in terms of market value, hours after Sikka quit. More to that, it took four months and extortionate efforts (and costs) by the board to fill the corner office again with the opposition leadership.
Source: Mint Calculations & PwC Reports.
As per an article in Mint, the median tenure of the heads of the organisations in various countries/regions falls in the range of 4 years to 8 years – the least being in India and highest in The States. The median tenure of Indian CEOs who quit or asked to go was 4.1 years, even less than the global average, which implies that the CEOs of India’s biggest companies seldom last long to enough to see more than one Cricket WC. While on the other hand, their American and Canadian counterparts last long enough to witness two Presidential elections from the window of the same corner office.
Amid all these cadences arises the question of to what extent the organisations of today are ready with their Exec bench strength?
With the so-called heavy talent blitz in the era of IR 4.0, it has become imperative for the organisations to invest a substantial slice of their time, efforts and resources to build and reinforce an institute of executives to serve for emergency succession needs. A strong castle of would-be successors manifests organisation’s proactiveness and ensure the readiness to undergo a smooth transition in case of an unforeseen fiasco at leadership positions.
To grasp the preparedness quotient of succession planning, let’s talk about two IT majors of India which underwent the episodes of their CEO moving out – TCS and Infosys. On January 12, 2017, hours after N. Chandrasekaran was appointed as the Chairman of Tata Sons, he per se revealed the name of the new CEO-designate at TCS – Rajesh Gopinathan. Gopinathan, an IIM Ahmedabad graduate, who was serving as the CFO of TCS prior to becoming CEO. He has worked closely with Chandra for some two decades and had a vast experience on the business side. In an interview to ET when asked about this transition, Chandra’s words were – “TCS’s core strength is its strong leadership talent and this transition is just a formality. The entire leadership team, including Rajesh, has worked closely with me for some 20 odd years and they know every bits and piece of the business.” These words of Chandra per se demonstrates TCS’s proactiveness towards succession planning. It’s good succession plans helped its smooth transition from one leader to another without hampering the investor’s confidence in the organisation. It was ready with its future leaders and that’s why it had a smooth journey of filling the shoes of the outgoing CEO.
On the other hand, TCS’s counterpart Infosys had some dark nights post Vishal Sikka’s exit and prior to Salil Parekh’s appointment. Sikka, who quit Infosys amidst a miasma of acrimony and following continuous personal attacks row in August 2017 brought the dark clouds of doldrums for the IT darling. Post Sikka’s resignations, the shares plummeted by 9.6%. Investors’ confidence trembled. Happiness index of TCS, Wipro, Cognizant uplifted. And what more – an unending battle of words between Murthy and the Board. The antagonising Infosys waves finally found the shore after a wait of long-haul of four months after Parekh was brought at the helm. This entire scene showcases the unequipped and half-cocked philosophy of Infosys at Succession Planning end. If it had introspected, identified and developed its leadership talent, then it would not have to wait for four long months and maybe an insider would have taken the driving seat immediately. But poor succession planning leads to a dramatic fiasco which now the new CEO has to deal with and rebuild the organisation.
The above two cases belong to the same industry and from the same year yet differs at the distance of poles when it comes to succession planning. While TCS has a thoughtful and comprehensive strategy, Infosys has an off-road process. And end results of the two companies’ succession planning process are evident to us.
As the year of exits and resignations comes to an end, it is an evidence as well as a lesson for the organisations to invent, invest and ignite the talent, and make themselves ready with future leaders and vitalise their CXO bench.
On a personal note, I would recommend each and every organisation to take one of the New Year resolutions as Building a flowing pipeline of Take-over Leaders.
Happy New Year!