Succession Planning in Corporate India: Successes & Failures

[00:00:14] [SPEAKER_00]: Hello and welcome to Reputation Matters, a show about corporate reputation, how companies

[00:00:19] [SPEAKER_00]: face crisis, survive crisis and what are the learnings from all of this.

[00:00:23] [SPEAKER_00]: My guest Mitu Samarnath, founder of Eminence Consulting, a strategy consulting firm, Mitu

[00:00:28] [SPEAKER_00]: welcome to the show.

[00:00:29] [SPEAKER_01]: Thank you Anupam.

[00:00:30] [SPEAKER_00]: Today we have got a very interesting topic, one that is very relevant to corporate India

[00:00:34] [SPEAKER_00]: Succession Planning.

[00:00:34] [SPEAKER_00]: A Deloitte reporter, early 2024 says that over 70% of companies in India have succession

[00:00:40] [SPEAKER_00]: planning in place but only 27% succeed.

[00:00:45] [SPEAKER_00]: While we believe that most challenges lie within family-owned companies, which is what

[00:00:48] [SPEAKER_00]: succession planning probably is about, handing over from one generation to another generation

[00:00:53] [SPEAKER_00]: but in today's episode, these two companies are not family-owned, both of them are professional

[00:00:58] [SPEAKER_00]: and they are very interesting because both of them faced a succession planning issue.

[00:01:03] [SPEAKER_00]: The first is Infosys, the second is Access Bank.

[00:01:06] [SPEAKER_00]: Let's start with Infosys, the storied bellwether of Indian IT companies, the poster boy for

[00:01:13] [SPEAKER_00]: a lot of things for middle-class aspirations.

[00:01:16] [SPEAKER_00]: What really happened out here?

[00:01:18] [SPEAKER_01]: Typically, Infosys we all know and have read things about it in terms of what great

[00:01:23] [SPEAKER_01]: things they have done, how they have got India onto the global map and so on,

[00:01:27] [SPEAKER_01]: So all positive things we ever read and heard about the company but this time around it was

[00:01:34] [SPEAKER_01]: hitting headline for the negative reasons and without doubt it will catch attention.

[00:01:41] [SPEAKER_01]: So let me just step back and give you a slight context of what really happened.

[00:01:45] [SPEAKER_01]: So since beginning, it's been run by or led by one of the founders.

[00:01:50] [SPEAKER_01]: So in 2011 when Shibu Lal took over the reins of the company, it started seeing couple of challenges.

[00:02:00] [SPEAKER_01]: So the revenues and profits started seeing a setback, there were some senior level exits as well

[00:02:07] [SPEAKER_01]: and while Narayan Moothee had retired in 2011 and he had very publicly announced his retirement

[00:02:17] [SPEAKER_01]: He was brought in back to set things in order in 2013 if I'm not wrong and he was brought in for about five years.

[00:02:28] [SPEAKER_01]: The mandate given to him was to get the company back on track.

[00:02:32] [SPEAKER_01]: However, while the performance improved to some extent but the exits continued,

[00:02:39] [SPEAKER_01]: the attrition was a challenge plus Rohan Moothee, Narayan Moothee's son who was brought in as the EA.

[00:02:45] [SPEAKER_01]: His entry also was precisely.

[00:02:49] [SPEAKER_01]: So all that confusion was going on in the organization.

[00:02:54] [SPEAKER_01]: During that time Vishal Sikha was brought in from SAP and his task was very clear.

[00:03:01] [SPEAKER_01]: He had to stand in the core of the company, he had to bring back the company in the leadership position

[00:03:10] [SPEAKER_01]: because during that time the margins between TCS and Infosys was actually widening.

[00:03:20] [SPEAKER_01]: So TCS was growing much faster and Infosys wasn't really growing as fast.

[00:03:25] [SPEAKER_01]: On the other hand, the margin with Cognizant was actually narrowing.

[00:03:30] [SPEAKER_01]: So again, Cognizant was catching up but Infy wasn't going that far.

[00:03:34] [SPEAKER_00]: And again here the founders, the original founders of Infosys had moved out completely.

[00:03:38] [SPEAKER_00]: So Mr. Sikha was given a complete free hand without any interference from anybody if I recall correctly.

[00:03:44] [SPEAKER_01]: So that was assumed that that would happen exactly.

[00:03:49] [SPEAKER_01]: And hence Mr. Narayan Moothee while he was brought in in 2013, he exited in the year 2014

[00:03:55] [SPEAKER_01]: as soon as Vishal Sikha joined into sometime around that.

[00:04:00] [SPEAKER_01]: So clearly it was assumed that now the promoters or the founders have completely

[00:04:06] [SPEAKER_01]: given the reins of the company to a new set of professional managers.

[00:04:12] [SPEAKER_01]: Right? And which is again in the textbook the way we read, that's the ideal way to go about it.

[00:04:17] [SPEAKER_00]: That's also such a learning happens.

[00:04:19] [SPEAKER_01]: Correct. So the expectation was that the company will again start thriving,

[00:04:24] [SPEAKER_01]: the new infusion of energy will come in and so on.

[00:04:30] [SPEAKER_01]: However, Vishal Sikha he kept facing two big challenges.

[00:04:35] [SPEAKER_01]: Number one, of course the business environment was tough.

[00:04:38] [SPEAKER_01]: He was trying to like I mentioned that there were senior level exits.

[00:04:42] [SPEAKER_01]: So he had to rebuild the team.

[00:04:44] [SPEAKER_01]: Then he had to claim back some of the businesses and the leadership position like I mentioned.

[00:04:49] [SPEAKER_01]: So all those business related challenges he had to deal with.

[00:04:53] [SPEAKER_01]: He had to parallelly deal with public questioning of his conduct at various levels.

[00:05:01] [SPEAKER_01]: For instance, of course he was brought in at a very high salary.

[00:05:05] [SPEAKER_01]: And subsequently he got a very high raise as well.

[00:05:10] [SPEAKER_01]: So his salary was somewhere around 48-50 crores in those days which was way higher than

[00:05:15] [SPEAKER_01]: what a TCS or a Vipro CEO was getting at that point in time.

[00:05:20] [SPEAKER_01]: So certainly this was a matter of question for the founders who kind of grew the company

[00:05:27] [SPEAKER_01]: in a very frugal manner.

[00:05:28] [SPEAKER_01]: They talked about practicing simplicity and all.

[00:05:32] [SPEAKER_01]: Always they were known for that.

[00:05:33] [SPEAKER_01]: They were known for that right?

[00:05:34] [SPEAKER_01]: So for them at least the way Mr. Narayan Murti brought it out that it was not something

[00:05:41] [SPEAKER_01]: which is the infosys way of going about it.

[00:05:43] [SPEAKER_00]: The major change in personality of the top leadership.

[00:05:46] [SPEAKER_00]: Exactly.

[00:05:46] [SPEAKER_00]: Going from one set of thoughts to another set of thoughts, high salary, low salary,

[00:05:51] [SPEAKER_00]: frugality, extravagance so please yeah.

[00:05:53] [SPEAKER_01]: Totally.

[00:05:53] [SPEAKER_01]: So that was one challenge that his salary itself was questioned.

[00:05:58] [SPEAKER_01]: Secondly, the severance package that was given to the CFO at that point in time.

[00:06:03] [SPEAKER_01]: That was also quite handsome and again that came under question that why such a thing

[00:06:09] [SPEAKER_01]: happened and we all know that it's not only Vishal Sikha who would make such a decision.

[00:06:15] [SPEAKER_01]: So it was in tandem with the thought process of the board but the way questioning

[00:06:21] [SPEAKER_01]: was directed, it was directed personally on Mr. Vishal Sikha.

[00:06:25] [SPEAKER_00]: And of course then there was one of the most prominent headlines that that point in time

[00:06:30] [SPEAKER_00]: was the Panaya acquisition.

[00:06:31] [SPEAKER_00]: Correct absolutely.

[00:06:33] [SPEAKER_01]: So that was the third challenge that he had to deal with because there were two

[00:06:36] [SPEAKER_01]: whistleblower complaints on Panaya acquisition that it was not done with a completely

[00:06:44] [SPEAKER_01]: corporate governance practice which is again another cultural disconnect.

[00:06:48] [SPEAKER_00]: And all these three were playing out in the public eye.

[00:06:51] [SPEAKER_01]: Precisely and Infosys is known like you talked about the fact that having simple

[00:06:55] [SPEAKER_01]: lifestyle.

[00:06:56] [SPEAKER_01]: Second, about high standards of corporate governance.

[00:07:00] [SPEAKER_01]: So this episode actually was an absolute opposite of the standard perception of Infosys.

[00:07:06] [SPEAKER_00]: I'm going to just talk a little bit about the corporate governance out there because

[00:07:09] [SPEAKER_00]: Infosys listed I believe in 92 or 93 and before Sebi made it mandatory as part of

[00:07:16] [SPEAKER_00]: the listing agreement for listed companies, their level of disclosure in quarterly reports

[00:07:21] [SPEAKER_00]: in annual reports was teller.

[00:07:23] [SPEAKER_00]: Correct.

[00:07:24] [SPEAKER_00]: They set the standard and if the viewers want to just go and check out Infosys' website,

[00:07:30] [SPEAKER_00]: they have every annual report since 1993, the time that they were listed.

[00:07:35] [SPEAKER_00]: So if you want to know what we are talking about out here, check out those annual

[00:07:39] [SPEAKER_00]: reports of that era and see how they had audit committees, nomination committees,

[00:07:43] [SPEAKER_00]: all of this much before this became mandatory by Sebi for all listed companies.

[00:07:49] [SPEAKER_00]: So they set the standard for corporate governance, not just for IT companies,

[00:07:52] [SPEAKER_00]: for corporate India and for them to see this.

[00:07:55] [SPEAKER_00]: You're right.

[00:07:56] [SPEAKER_00]: Go on please.

[00:07:56] [SPEAKER_01]: Yeah.

[00:07:57] [SPEAKER_01]: So this happened in a lot of public outcry around this happened by Mr. Narayan Murti

[00:08:04] [SPEAKER_01]: because he kept questioning that this is not the Infosys way of doing things.

[00:08:10] [SPEAKER_01]: So much so that it went on for a few months, almost about a year that eventually Vishal

[00:08:17] [SPEAKER_01]: Sikha ended up resigning and in his resignation he clearly mentioned that the primary reason

[00:08:24] [SPEAKER_01]: of his exit is continuous personal attacks, interference, all of that.

[00:08:32] [SPEAKER_01]: So this suddenly then conversation took a completely different direction.

[00:08:36] [SPEAKER_01]: All experts started talking about how founders or family owned companies do not let go of the reins

[00:08:46] [SPEAKER_01]: of the company even when they're outside.

[00:08:49] [SPEAKER_01]: And Narayan Murti whom we all referred, we all started somewhere questioning, doubting

[00:08:56] [SPEAKER_01]: and thinking about it that how come he's trying to hold on so much.

[00:09:03] [SPEAKER_00]: Because the interesting part is that the board backed Mr. Sikha.

[00:09:08] [SPEAKER_00]: It's a good time for viewers to understand what exactly is the board of directors.

[00:09:13] [SPEAKER_00]: The board of directors are an appointed body that looks after the interest of all shareholders,

[00:09:19] [SPEAKER_00]: not shareholders like you, me who probably own shares in Infosys.

[00:09:23] [SPEAKER_00]: You could own 100 shares, I could own 10 shares but we are shareholders of the company

[00:09:26] [SPEAKER_00]: or we are the minority shareholders.

[00:09:28] [SPEAKER_00]: The board of directors acts as some kind of a buffer between the shareholders and the

[00:09:33] [SPEAKER_00]: executive management of the company.

[00:09:36] [SPEAKER_00]: They are there to ensure that the company is run in a sensible way, in a right way for

[00:09:42] [SPEAKER_00]: the benefit of all shareholders.

[00:09:44] [SPEAKER_00]: That is the job of the board of directors and whenever succession planning happens or

[00:09:48] [SPEAKER_00]: any corporate scandal happens which you would see in a lot of episodes of this

[00:09:52] [SPEAKER_00]: podcast, it's the board that always gets questioned and in this case the board backed Mr. Sikha.

[00:09:59] [SPEAKER_01]: In fact we were talking about the Raymond's case in one of the episodes also.

[00:10:04] [SPEAKER_01]: There also if you recall how independent directors called for a separate investigation so they

[00:10:10] [SPEAKER_01]: do step in and they do in fact we'll be talking about Axis Bank there too who had

[00:10:15] [SPEAKER_01]: a very interesting role.

[00:10:17] [SPEAKER_01]: So board was definitely backing Mr. Sikha and when Mr. Sikha resigned this was followed by

[00:10:25] [SPEAKER_01]: the chairman's resignation also eventually Mr. Sehshosai.

[00:10:29] [SPEAKER_01]: So and then Nandan Neelkani was brought in as the non-executive chairman.

[00:10:35] [SPEAKER_01]: So all that happened and interestingly Anupam, the Panaya case under the supervision of Mr.

[00:10:45] [SPEAKER_01]: Nandan Neelkani it was given a complete clean sheet for getting the right processes.

[00:10:51] [SPEAKER_01]: So actually speaking whether what was the problem only two people with whom the problem happens

[00:10:58] [SPEAKER_01]: will get to know but when it starts coming to a public platform unfortunately they

[00:11:04] [SPEAKER_01]: forget that while they are questioning based on their personal belief system it's

[00:11:13] [SPEAKER_01]: the organization that is suffering.

[00:11:15] [SPEAKER_00]: Always yeah.

[00:11:16] [SPEAKER_01]: Right so in this case also the exits when then we'll start coming in play more importantly

[00:11:23] [SPEAKER_01]: clients will start doubting the organization right if publicly the founder of the company

[00:11:30] [SPEAKER_01]: is questioning the organization on corporate governance practices goes without saying

[00:11:35] [SPEAKER_01]: that the clients will start doubting the organization right.

[00:11:38] [SPEAKER_00]: So who replaced Mr. Sikha?

[00:11:40] [SPEAKER_01]: In the interim COO took over the CEO role.

[00:11:45] [SPEAKER_01]: However Mr. Salil Parekh was eventually brought in and he's been in the system since then

[00:11:51] [SPEAKER_01]: and the organization currently again has stabilized and is growing the way it could have.

[00:11:57] [SPEAKER_01]: So that's where the whole thing is but what really stood out for me were two very distinct observations.

[00:12:05] [SPEAKER_01]: Number one that always remember that organization is way beyond individuals and every time senior

[00:12:16] [SPEAKER_01]: leaders when they forget this that's when they start washing dirty linen in the public

[00:12:22] [SPEAKER_01]: platform and whatever they are fighting for which is very dear to them the organization.

[00:12:28] [SPEAKER_01]: Actually they're damaging that organization and hence they should be very mindful about it.

[00:12:32] [SPEAKER_00]: Very interesting right I mean this is a company which is which was known still is known for the

[00:12:37] [SPEAKER_00]: corporate governance for their transparency for their accountability for having committees of

[00:12:41] [SPEAKER_00]: for every possible area within and beyond what is required by SEBI and yet it went through so many

[00:12:48] [SPEAKER_00]: I think at least one or two crises when it came to succession planning.

[00:12:53] [SPEAKER_00]: Thankfully now those episodes are over I'm pretty sure that Infosys has even learned

[00:12:57] [SPEAKER_00]: from everything that happened to their everything that happened to their leadership

[00:13:02] [SPEAKER_00]: during the succession plan and hopefully this will not happen again. Totally yeah let's go to

[00:13:07] [SPEAKER_00]: the second case study because that is even more interesting it has to with an organization that

[00:13:12] [SPEAKER_00]: probably listed around the time as Infosys Infosys listed I think in 92 or 93 and Access Bank

[00:13:17] [SPEAKER_00]: then known as UTI bank listed probably somewhere after that and Access Bank also

[00:13:24] [SPEAKER_00]: has a very interesting succession planning issue that happened a couple of times. Let's go back

[00:13:29] [SPEAKER_00]: in history and start from Mr. P. J. Nayak's term right because he was a chairman and CEO

[00:13:36] [SPEAKER_00]: the man who turned around this organization. Absolutely. Go on please. Yeah in fact

[00:13:42] [SPEAKER_01]: he's credited for doing too many things for the bank right so it was less than 50 branches

[00:13:48] [SPEAKER_01]: when Mr. Nayak took over right he grew it to 800 plus branches across the D. He also initiated

[00:13:55] [SPEAKER_01]: the international foray of Access Bank in fact you know you and I will remember

[00:14:01] [SPEAKER_01]: due to the US 64 crisis etc UTI bank. The name yeah. Yeah it was very doubted.

[00:14:07] [SPEAKER_00]: Correct exactly. One of the biggest I can't recall any bank leave alone private or public

[00:14:14] [SPEAKER_00]: that had such a huge makeover of their brand change the name because now you guys you might not

[00:14:20] [SPEAKER_00]: realize this right when a bank changes its name checkbooks have to be replaced. Totally. Everything

[00:14:25] [SPEAKER_00]: has to be replaced it's very different from you know a company changing its signage or their logos

[00:14:30] [SPEAKER_00]: and stuff this was one of the most interesting case studies in change of name and change in

[00:14:34] [SPEAKER_01]: identity go on please. Completely and he not just was instrumental in the name change period

[00:14:40] [SPEAKER_01]: as well from UTI bank to Access Bank he actually grew the bank to become the third largest private

[00:14:47] [SPEAKER_01]: bank in the country. So definitely a lot of credit went to him and he believed that

[00:14:55] [SPEAKER_01]: he understands the company well according to him he is very consciously grown leaders under him

[00:15:02] [SPEAKER_01]: and recommended you know a suitable candidate when the time for succession came. Right right

[00:15:10] [SPEAKER_01]: however the board did not agree to that so that's where there was a disconnect.

[00:15:17] [SPEAKER_00]: So if I remember correctly me the word happened was that Mr. Naik had recommended

[00:15:21] [SPEAKER_00]: names of internal candidates to the board. Remember folks that we said about how the

[00:15:25] [SPEAKER_00]: board of directors is important because they approve this so while there was a strong

[00:15:31] [SPEAKER_00]: understanding of business particular to specialize areas of work for these internal candidates

[00:15:37] [SPEAKER_00]: the board thought differently and there again a succession planning episode happened.

[00:15:42] [SPEAKER_01]: Walk us through that please. So the board believed that while the names that were

[00:15:47] [SPEAKER_01]: recommended they were definitely credible but the names lacked you know well rounded

[00:15:53] [SPEAKER_01]: experience we have to understand that a CEO's role goes way beyond just the business

[00:15:58] [SPEAKER_01]: leader's role right. So you need to know your business right but then there are so many other

[00:16:04] [SPEAKER_01]: elements when you're a CEO. So you know need to understand how to engage with regulators you

[00:16:09] [SPEAKER_01]: need to understand how to inspire employees you need to understand how to engage with customers

[00:16:14] [SPEAKER_01]: and again while we are talking about a bank a retail bank but its business is not just retail

[00:16:21] [SPEAKER_01]: right it has a corporate banking space also. So again engaging with customers of

[00:16:27] [SPEAKER_01]: both scale right at a retail scale as well as at a corporate scale. So there were too many

[00:16:32] [SPEAKER_01]: dimensions to a CEO that is required beyond knowing the business well or beyond knowing the industry

[00:16:39] [SPEAKER_01]: well. So what happened Anupam is the board felt that while the candidates are you know

[00:16:46] [SPEAKER_01]: perfect in terms of their subject matter expertise they were not well rounded

[00:16:52] [SPEAKER_01]: to be a CEO and hence they recommended the name of Ms. Shikha Sharma who was the MD and CEO of

[00:16:59] [SPEAKER_01]: ICC Prudential Life Insurance at that point in time. Fairly well rounded personality as for media

[00:17:06] [SPEAKER_01]: reports it shows that Mr. Nayak believed that she lacks industry exposure to some extent

[00:17:13] [SPEAKER_01]: which I wonder how because she was a career ICC Banker too and in fact she was a contender

[00:17:18] [SPEAKER_01]: to the top role before becoming the CEO of ICC Prudential Life. So she did have good banking

[00:17:25] [SPEAKER_01]: industry understanding she did have a CEO role experience already and in those days

[00:17:32] [SPEAKER_01]: a personality to reckon with right. So her entry was really celebrated on various counts

[00:17:41] [SPEAKER_01]: again as per variety of you know online offline flow of information that was coming out of Mr.

[00:17:50] [SPEAKER_01]: Nayak actually you know like I was saying he proposed his internal candidate so what happened

[00:17:57] [SPEAKER_01]: board voted against his recommendation and they preferred to go with Ms. Shikha Sharma.

[00:18:03] [SPEAKER_01]: So then Mr. Nayak chose to resign before his term so his term I think was ending somewhere

[00:18:09] [SPEAKER_01]: in June-July he chose to resign in the month of Jan and that whole episode suddenly hit headline

[00:18:16] [SPEAKER_01]: and he kept talking about how you know this was not in the best interest of the organization.

[00:18:23] [SPEAKER_00]: So again a boardroom drama that played out in the public eye. Precisely. Again about succession

[00:18:27] [SPEAKER_00]: planning very much like Infosys the incumbent has to leave he resigned and you know a lot of

[00:18:32] [SPEAKER_00]: things came out in the public in in the form of news reports which would have at least

[00:18:37] [SPEAKER_00]: had some impact on the bank's reputation. Precisely. Go on please. Yeah and then when

[00:18:43] [SPEAKER_01]: Shikha Sharma came an important point I want to bring about is during Mr. Nayak's tenure

[00:18:50] [SPEAKER_01]: NPAs of Axis Bank was one of the lowest and like I said and he was credited for many such

[00:18:57] [SPEAKER_01]: great fundamental you know changes or strengthening that he had done for the bank.

[00:19:04] [SPEAKER_01]: When Mr. when Shikha Sharma took over the bank grew and again it had its own set of

[00:19:10] [SPEAKER_01]: business ups and downs however conversations around NPA going up started you know rising

[00:19:20] [SPEAKER_01]: and eventually I think she opted for an early retirement and she also moved out.

[00:19:28] [SPEAKER_00]: So that's two high profile exits. That's P. J. Nayak and Vishalma.

[00:19:32] [SPEAKER_01]: What amazes me or I would say what what really got to my attention was the fact that

[00:19:39] [SPEAKER_01]: once if an organization has gone through a challenge like this it'll learn from it.

[00:19:46] [SPEAKER_01]: It'll invest in it to ensure that the company doesn't go through a similar kind of challenge

[00:19:51] [SPEAKER_01]: again. However fortunately in this case there was no drama with the entry of

[00:19:57] [SPEAKER_01]: new MD and CEO plus the bank is thriving right now so all is good for the bank.

[00:20:04] [SPEAKER_01]: But if it imagine again if it had to go through something similar I failed to understand

[00:20:12] [SPEAKER_01]: NPA my organizations are not consciously investing in succession planning.

[00:20:19] [SPEAKER_01]: A big challenge is that they look at it just like an event that whenever it'll happen we will

[00:20:24] [SPEAKER_00]: work towards it while it should be a continuous process. There's one important point for our listeners

[00:20:31] [SPEAKER_00]: to understand is that the difference between Infosys and Access Bank CEOs is that the bank CEO or bank

[00:20:39] [SPEAKER_00]: CEO any bank CEO in India has to be approved by the RBI Infosys of course free to choose

[00:20:44] [SPEAKER_00]: whoever they want in their transition otherwise a very different thing but banks in India

[00:20:48] [SPEAKER_00]: their chairman or whatever the top positions in the bank are usually approved by the RBI if I've

[00:20:54] [SPEAKER_00]: gotten that right and they go through there have been many instances in India's banking

[00:21:00] [SPEAKER_00]: history where the RBI has not approved the appointment of a certain CEO. In some cases they've

[00:21:06] [SPEAKER_00]: also put in an interim CEO when the bank goes under crisis so for a bank to have succession

[00:21:12] [SPEAKER_00]: planning issues in India it's a little bit rare because these things are planned in advance

[00:21:18] [SPEAKER_00]: getting RBI as approval and now and some of this happens behind the public's eye. You don't come

[00:21:23] [SPEAKER_00]: to know that a bank has sent a certain list to the RBI or the RBI has approved one so but when

[00:21:28] [SPEAKER_00]: this comes out and it plays out and it's happened twice in case of access first from Mr.

[00:21:33] [SPEAKER_00]: Nike to Mr. Sharma and second from Mr. Sharma to Mr. Chaudhary. So you know that I think was

[00:21:39] [SPEAKER_00]: it was quite interesting and the similarity to me in both the cases was that once this crisis was

[00:21:44] [SPEAKER_00]: put back and it was over and done with everything went back to normal.

[00:21:49] [SPEAKER_01]: Correct. The organization thrives like I keep saying it's something which is eternal right

[00:21:54] [SPEAKER_01]: and we forget that. We bring about our you know mortal human interest way ahead of the immortal

[00:22:02] [SPEAKER_01]: organization and that's the challenge. And one important thing is while the second time around

[00:22:10] [SPEAKER_01]: access banks you know new CEO coming in wasn't like I said wasn't stop me but the fact that

[00:22:19] [SPEAKER_01]: it was not well planned in advance is something we need to be mindful of and I think here

[00:22:26] [SPEAKER_01]: I would like to take names of two organizations whose succession planning I truly admire which is the

[00:22:33] [SPEAKER_01]: ICSA bank and HDFC bank right both of them. Mr. Aditya Puri was at the helm for such a long time

[00:22:39] [SPEAKER_01]: right but the transition was so very smooth and the organization is not at all suffering.

[00:22:47] [SPEAKER_01]: ICSA bank also succession planning from Mr. Kamat to Chandakochir was very very

[00:22:53] [SPEAKER_01]: smooth. Even Miss Kochir's exit while it was talked about heavily but more importantly Mr.

[00:23:01] [SPEAKER_01]: Sandeep Bakshi's entry again it was pretty seamless and from the group companies right so

[00:23:07] [SPEAKER_01]: it is important for organizations to take a slightly larger than life perspective than going

[00:23:14] [SPEAKER_00]: by personal interest. And even in case of infosys it's compared to like a TCS their succession

[00:23:20] [SPEAKER_00]: planning was also precisely better. We do let's get into the final part of our episode

[00:23:26] [SPEAKER_00]: and talk about the key learnings from this okay like what would you say are the common lessons

[00:23:33] [SPEAKER_01]: from both of these episodes for our listeners to take away from. So first and foremost we need

[00:23:40] [SPEAKER_01]: to remember that CEOs are in that role for a particular period of time. The exits happen the

[00:23:51] [SPEAKER_01]: reason of exit can be anything it could be unfortunately it could even be death it could

[00:23:55] [SPEAKER_01]: also be choice of them moving for a better opportunity in fact the research report shows

[00:24:01] [SPEAKER_01]: that average tenure of CEOs in India is three and a half years. So broadly we know that

[00:24:08] [SPEAKER_01]: that's the kind of direction. So organizations need to really have and here board plays a very

[00:24:14] [SPEAKER_01]: critical role a good succession planning framework in place and when I say framework and I'm not

[00:24:21] [SPEAKER_01]: only referring to the CEO role CEO minus one at least that role there has to be a good shadow

[00:24:31] [SPEAKER_01]: you know a role parallely running extremely important in fact couple of companies whom we

[00:24:37] [SPEAKER_01]: advise I have seen that play out beautifully well. So when one of the CEOs choose to move out

[00:24:43] [SPEAKER_01]: and it's a listed company I'm referring to there was not even a single jerk in the organization

[00:24:50] [SPEAKER_01]: that what happened so that's the beauty of transition that happens. The one thing that

[00:24:55] [SPEAKER_00]: I'm getting from what you're saying is that grooming is important none of this happens overnight

[00:24:59] [SPEAKER_00]: this has to start at least maybe one two three years before the actual transition the actual

[00:25:04] [SPEAKER_01]: succession takes place. Totally so two key messages here number one you need to start

[00:25:09] [SPEAKER_01]: planning in advance and there has to be a structure or a framework for succession planning

[00:25:15] [SPEAKER_01]: in place then when you're training people or grooming people like you said for the role

[00:25:23] [SPEAKER_01]: don't forget that a CEO's role or a CXO's role go way beyond knowing their business or

[00:25:31] [SPEAKER_01]: knowing their activity right. What is called subject matter expertise or technical expertise

[00:25:36] [SPEAKER_01]: absolutely much more than that. Precisely so that's definitely a must you can't reach this level if

[00:25:42] [SPEAKER_01]: you don't know your subject matter but then the plus plus the essential skills what we call

[00:25:48] [SPEAKER_01]: they have to be there and if by any chance any of that is missing organizations must invest in

[00:25:54] [SPEAKER_00]: broad basing that. One example of a skill that comes from a man's consensus building within

[00:26:01] [SPEAKER_00]: the organization you have to be a people's person when you reach that role what do you say about

[00:26:05] [SPEAKER_01]: that. So not just within the organization right outside as well all stakeholders

[00:26:11] [SPEAKER_01]: and very important you have to take people along when you take such a large role yes in that

[00:26:20] [SPEAKER_01]: one has to again be cognizant which we are assuming that at that level they'll be cognizant that they

[00:26:24] [SPEAKER_01]: don't get drawn into hence pleasing people it's not about pleasing people it's about

[00:26:31] [SPEAKER_01]: building consensus and the two things are very different. Two specific aspects here that I want

[00:26:35] [SPEAKER_00]: to talk about I want you to mention out here first internal versus external candidates because

[00:26:41] [SPEAKER_00]: that's always a hot topic for all you know boards and second is actually the role of the board in

[00:26:46] [SPEAKER_00]: this. Let's start with the role of the board because in both examples today both of them played

[00:26:50] [SPEAKER_00]: a very key role so first the role of the board in succession planning what do you say about that.

[00:26:56] [SPEAKER_01]: Extremely critical right and they have to ensure that it's a critical matter of NRC

[00:27:02] [SPEAKER_01]: the nomination and remuneration committee that the succession planning is the whole framework

[00:27:09] [SPEAKER_01]: is defined and the mapping is in place. If a board is not doing that I think it's a challenge

[00:27:16] [SPEAKER_01]: and they have to remember it cannot be event based it has to be a process. So that's the

[00:27:22] [SPEAKER_01]: biggest role that the board can play also board has to take another step ahead because

[00:27:31] [SPEAKER_01]: as board members we don't have exposure to what's exactly happening in the company so a lot can be

[00:27:37] [SPEAKER_01]: shown on paper or on slides as they say but actual reality can be different. So again investing

[00:27:44] [SPEAKER_01]: slightly more time and trying to get to know and engage and interact with the minus one levels

[00:27:52] [SPEAKER_01]: to actually experience that what's on play papers what's on slide is actually in the making

[00:27:57] [SPEAKER_00]: as well is very critical. My suggestion to our viewers would be that if you want to know

[00:28:03] [SPEAKER_00]: what exactly the NRC the nomination and remuneration committee does specifically in terms of succession

[00:28:09] [SPEAKER_00]: planning please pick up an annual report and if you're in PDF just do a control find on succession

[00:28:15] [SPEAKER_00]: and you'll find the philosophy out there we are in the year 2024 not in 2004 not in 1994

[00:28:21] [SPEAKER_00]: succession planning has to be mentioned as you know whatever the policy is of the company

[00:28:26] [SPEAKER_00]: will be mentioned in an annual report and you can know the good companies which believe in

[00:28:31] [SPEAKER_00]: corporate governance and transparency from their philosophy and framework on succession planning

[00:28:35] [SPEAKER_00]: it will be mentioned in the annual report. Should be. Let's move to internal candidate versus

[00:28:41] [SPEAKER_00]: external candidate because this to me is a fascinating discussion first there's no consensus

[00:28:46] [SPEAKER_00]: out here. Get it. We have enough examples of external candidates doing really well

[00:28:50] [SPEAKER_00]: internal candidates also doing really well both the bank that you mentioned ICSA bank and

[00:28:54] [SPEAKER_00]: HDFC bank the people who replaced the outgoing CEO were have been there in the company for quite

[00:29:00] [SPEAKER_00]: some time. ICSA banks and the Bakshi in case of HDFC bank Sashita Jyadishan have been around

[00:29:05] [SPEAKER_00]: so what's your view on this internal versus external debate? There's no right answer

[00:29:11] [SPEAKER_01]: you know like you rightly pointed out that it's pretty much you know either can work either

[00:29:19] [SPEAKER_01]: may fail right what is important is the cultural fit. Cultural fitment definitely needs to be

[00:29:28] [SPEAKER_01]: evaluated and again that's one of the important roles of NRC to pay attention to that the candidate

[00:29:35] [SPEAKER_01]: which is in question what is the cultural fitment that the candidate brings to the table and if

[00:29:42] [SPEAKER_01]: there is even slight disconnect in that I would say that should be looked upon as a red flag.

[00:29:49] [SPEAKER_01]: Whether it is a family owned business whether it is a professionally managed business whether it is

[00:29:54] [SPEAKER_01]: listed whether it is unlisted whatever be the size scale anything but if cultural mismatch is there

[00:30:02] [SPEAKER_01]: definitely you know it's not going to last longer so that's the first thing organizations

[00:30:08] [SPEAKER_01]: should pay attention to and the second thing that they need to pay attention to is

[00:30:16] [SPEAKER_01]: you know some homework one will have to do in advance as well right so what is it that you're

[00:30:21] [SPEAKER_01]: expecting from this role and then define like I think Axis Bank did it right when they said that

[00:30:28] [SPEAKER_01]: from this role we are expecting a well-rounded professional and if the internal candidate

[00:30:34] [SPEAKER_01]: is not meeting that requirement we will bring somebody from outside and then you know give

[00:30:40] [SPEAKER_01]: them the environment which is conducive for it to work so that's also very important having clarity

[00:30:46] [SPEAKER_01]: in terms of what is it that you want from the candidate because for every organization what a

[00:30:52] [SPEAKER_01]: tech led organization requires in a CEO is very different from what a you know a textile

[00:30:58] [SPEAKER_01]: you know company needs from a CEO the requirements are different so that clarity is

[00:31:04] [SPEAKER_00]: very critical let's wrap up me to challenges and learning now when it comes to succession

[00:31:10] [SPEAKER_00]: planning in India there are some inbuilt you know very challenges or hurdles or obstacles

[00:31:15] [SPEAKER_01]: what are they first and foremost in case of family-owned businesses and in fact in even

[00:31:23] [SPEAKER_01]: in case of profession professionally run organization people fear letting go right so

[00:31:31] [SPEAKER_01]: they have their own fears in terms of what if this next person you know doesn't give me the kind of

[00:31:40] [SPEAKER_01]: you know role that I'm currently playing predecessor is always very of you know who's

[00:31:46] [SPEAKER_01]: going to replace him or her next because that to some extent also defines his or her role in

[00:31:54] [SPEAKER_01]: the system and in both organization whether it is family-owned or professionally run this challenge

[00:32:01] [SPEAKER_00]: becomes very critical the second challenge I believe is how India compares in succession

[00:32:06] [SPEAKER_00]: planning to the west where I think it's more institutionalized what do you think yeah it's

[00:32:09] [SPEAKER_01]: very institutionalized in fact all these proxy advisory firms etc are also very mature in those

[00:32:16] [SPEAKER_01]: and active mature and active you're right in those economies and hence the conversation around these

[00:32:23] [SPEAKER_01]: are you know very are at a different scale and a different level however it's not that you know

[00:32:32] [SPEAKER_01]: countries in the west they don't have such a challenge in the modern battles there also

[00:32:35] [SPEAKER_01]: we've seen that there too right so so these challenges I feel the third and the most

[00:32:42] [SPEAKER_01]: important challenge hence is the humans inability to process that you know they are not bigger than

[00:32:52] [SPEAKER_01]: the organization the organizations are way bigger than them and the day you know the leadership or

[00:32:59] [SPEAKER_01]: the board members and all of these critical decision makers in an organization they start

[00:33:05] [SPEAKER_01]: making decisions with organizational lens and not from the individual lens I feel

[00:33:12] [SPEAKER_01]: the whole succession planning outcome will be very different some learnings and takeaways for our

[00:33:18] [SPEAKER_01]: listeners to wrap up this episode please three key learnings number one don't treat

[00:33:25] [SPEAKER_01]: succession planning as an event it should be an ongoing process with clear mapping of roles

[00:33:31] [SPEAKER_01]: and with clear definition of the skills and the knowledge and the expertise that you require

[00:33:38] [SPEAKER_01]: learning number two always you know go beyond your personal interest look at the organizational

[00:33:47] [SPEAKER_01]: interest and you will you know be able to make decision more objectively than getting engaged

[00:33:55] [SPEAKER_01]: into it in an emotional manner and getting into the courtroom drama and public spats

[00:34:00] [SPEAKER_01]: the third thing look for cultural fitment anybody who's able to culturally fit into the organization

[00:34:10] [SPEAKER_01]: will be able to build consensus with all the other stakeholders and grow the organization

[00:34:16] [SPEAKER_00]: which is the primary objective and folks that is a wrap on this episode of repetition matter

[00:34:21] [SPEAKER_00]: where we spoke about succession planning for more such episodes as always please subscribe

[00:34:25] [SPEAKER_00]: to our channel me too thank you so much for being so nice