Dec 8, 2006

Succession issues in Indian organizations

Business Today has a cover story on the impending succession issues in a lot of Indian firms. (subscription required)

At HDFC, the home loans giant, Chairman of 13 years, Deepak Parekh is 62, and although the company says there is no mandatory retirement age, it's reasonable to assume that Parekh must be grappling with the issue of identifying a successor. At the Tata group, the challenge is even more daunting. Not only does the board need to find and groom a successor to Chairman Ratan Tata, who retires in 2012, but also the CEOs of Tata Steel and Tata Motors, the two biggest group companies by revenues, B. Muthuraman and Ravi Kant are 62 years old and due for retirement in another three years (see Bombay House Blues). At HCL Technologies, Shiv Nadar said recently in a media interview that he wants to call it a day by 2010-11, and at Wipro, Chairman Azim Premji, 61, needs to get a successor in place too (see The Coming Change of Guards), although like HDFC, Wipro has no retirement age for the chairman. Even in south India, TVS Group companies such as Sundram Fasteners and Sundaram Brake Linings have Chairmen-MDS (brothers Suresh Krishna and K. Mahesh, respectively) well into their 60s. Says Shailesh Haribhakti, an independent director on the boards of several companies: "There is now talk in boardrooms of sustainability and how to keep the companies going." Admits Chairman & Managing Director of Larsen & Toubro, A.M. Naik: "The immediate big issue before me is succession planning."

I personally think that firms like ICICI and HDFC have done a good job of developing the second line of leadership. That's because they have group companies that they have managed. The Tatas however seem to be heading the wrong way. I don't think that Noel Tata is ready to step into Ratan's shoes.

Personally I think this retirement age thing is a lot of baloney. If a leader can contribute and has the ability to not get fossilised, then I think he/she should be allowed to continue. That might not be such a popular decision with the second level leadership though.

However, if they have maturity enough then I think they should try the "two in a box" model. Where joint leadership should be taken. That would support the younger person to ease into the role under the guidance of the senior professional as well as freeing him with the strain of lonely leadership.