The importance of succession planning

What Infosys hasn't done and what Tech Mahindra is doing should offer some dos and don'ts to companies that are wise enough to think about who is going to lead them in the years ahead.

Indian companies may have woken up to the realization that the way in which you manage your succession plan has an important correlation to your financial fortunes.

Indian IT services giant Infosys is a company that should have learned this lesson a long time ago, and its bleak, relative underperformance, including missed guidances in the last few years (except for very recently), which stripped it of the title "industry bellweather" is a testimony to the fact that it dealt with the issue of who was to lead the company much in the same way that the Politburo would decide on who next was to steer the great Soviet ship forward.

Tech Mahindra
Tech Mahindra has led by example in the area of succession planning.

So, just like Soviet Politburo supremo Khrushchev was succeeded by Brezhnev, who was in turn succeeded by Andropov, only the founding members of the company have led Infosys, one by one, for the past 32 years of its existence to date: Narayana Murthy, Nandan Nilekani, S Gopalkrishnan and SD Shibulal. Apparently, as this article details, when Murthy spent five years as non-executive chairman recently, there was hardly anything "non-executive" in the way that he performed his role. Letting go of their baby was apparently tougher than it seemed for the four founders.

Could the company have done this well without able guidance from these men? Perhaps not. Could they have done better to ensure that the future of the company would be safe in the hands of a stable of younger executives who learned the ropes from their icons? Undoubtedly.

After all, they let younger stars like Mohandas Pai, Ashok Vemuri, and Subash Dhar go. In the six months leading up to December last year, eight top-level people apparently left Infosys. Meanwhile, in the middle of last year, Narayana Murthy resurrected himself from retirement, despite his own clause that prevented a founder from continuing with the company beyond the mandatory retirement age of 65, something that I wrote about here.

Maybe it would only have taken a wily fox like Murthy, a consummate salesman with an impeccable reputation, to woo customers and rescue Infosys from its self-made mess. However, the unmistakable message that the company was giving out was that it simply had no next rung of managers that it believed capable of running the company, which many could ultimately view as irresponsible behavior towards shareholders.

So, it's a good sign to see a newcomer and rising power on the IT block, Tech Mahindra, taking this issue very seriously, even if its efforts come across as a little overdone. The company has appointed 14 young "CEOs" as heads of certain businesses or initiatives, even if they ultimately have to report to other vertical heads.

"We need more youth, because ultimately, it's a fast-changing technology, along with complexities and high rate of cross currents. We chose seven in the first round [as] part of the young CEO program, and are in the process of choosing another seven," said CEO CP Gurnani in the Mint article. Gurnani stressed the fact that this is about mentoring and coaching, not just talent management.

One CEO, for instance, is in charge of Mahindra Ecole Centrale (MEC), a new initiative in education and finance. Another heads up a new platform to provide remote technical support services for telecom companies and internet service providers.

It's too early to say how many of tomorrow's leaders Mahindra's process will cough up, but it still is a good enough model for others to follow.