Year( PG II)
This is to certify that the project work “Succession Planning In Senior
Management” is a bona fide record of work done by Pooja Soni under
guidance of Ms. Avjeet Kaur in partial fulfillment of the
requirements for the project.
Ms. Avjeet Kaur
K. R. Mangalam
I take immense pleasure in thanking Ms. Avjeet Kaur our beloved Project
Coordinator for having permitted me to carry out this project work.
1. Executive Summary………………………………………………1
a) Introduction of human resource management…………………3
b) Introdution of succession planning…………………………….4-6
3. Importance of Succession planning………………………………….7-8
4. Succession Planning Process………………………………………..9-12
5. Leadership competencies for Succession planning…………………12-13
8. Organization commitement…………………………………………14-16
9. Service Orientation…………………………………………………..16
10.Advantages of Succession planning………………………………….17
11.Mistakes to be avoided in succession planning……………………..18-20
12.Succession planning: India Prespective……………………………..21-32
13.Study on Muruguppa group succession planning……………………33-42
14.Study on infosys succession planning………………………………..43-49
The project explains the concept of succession planning and how it is important for the
successful functioning of a business. It proceeds to highlight the business functioning trend
in India which mainly is about family businesses. But seeing the recent trend of few of the
big Indian businesses opting for proper professionally planned succession planning, it isn‘t
long when India will pick up this practice in every aspect.
Many recent examples of succession planning in the Indian businesses have been stated
such as axis bank, Tatas, Infosys, ONGC, Eicher etc. With main focus on Murugappa group
and Infosys succession planning. Murugappa group of companies is a great example of
family business training their heirs in a professional manner to lead the business where as
Infosys shows how a proper committee should be formed for looking out for a successor
well in advance.
INTRODUCTION TO HUMAN RESOURCE MANAGEMENT
Human resources are the most valuable and unique assets of an organization. The
successful management of an organization's human resources is an exciting, dynamic and
challenging task, especially at a time when the world has become a global village and
economies are in a state of flux. The scarcity of talented resources and the growing
expectations of the modern day worker have further increased the complexity of the human
resource function. Even though specific human resource functions/activities are the
responsibility of the human resource department, the actual management of human
resources is the responsibility of all the managers in an organization.
It is therefore necessary for all managers to understand and give due importance to the
different human resource policies and activities in the organization. Human Resource
Management outlines the importance of HRM and its different functions in an organization.
It examines the various HR processes that are concerned with attracting, managing,
motivating and developing employees for the benefit of the organization.
INTRODUCTION TO SUCCESSION PLANNING
“Thinking About Tomorrow Today”
In organizational development, succession planning is the process of identifying and
preparing suitable employees through mentoring, training and job rotation, to replace key
players — such as the chief executive officer (CEO) — within an organization as their terms
expire. From the risk management aspect, provisions are made in case no suitable internal
candidates are available to replace the loss of any key person. It is usual for an
organization to insure the key person so that funds are available if she or he dies and these
funds can be used by the business to cope with the problems before a suitable replacement
is found or developed.
Succession Planning involves having senior executives periodically review their top
executives and those in the next-lower level to determine several backups for each senior
position. This is important because it often takes years of grooming to develop effective
senior managers. There is a critical shortage in companies of middle and top leaders for the
next five years. Organizations will need to create pools of candidates with high leadership
Succession planning involves a careful balancing of the concerns and needs of a firm’s
founding and senior managers, on the one hand, and its more junior investment
professionals and managers, on the other hand. The founding and senior managers want to
be properly rewarded for their efforts in building and growing the firm, and this may include
rights to continue to participate in fund economics after these managers have begun to
wind down their active involvement. These desires must be balanced against the need to
provide increased economic benefits and firm governance rights to junior managers and
investment professionals in order to develop the next generation of managers for the firm.
Succession planning can be broadly defined as identifying future potential leaders to fill key
positions. Wendy Hirsh1 defines succession planning as 'a process by which one or more
successors are identified for key posts (or groups of similar key posts), and career moves
and/or development activities are planned for these successors. Successors may be fairly
ready to do the job (short-term successors) or seen as having longer-term potential (long-
According to Hirsh, succession planning sits inside a very much wider set of resourcing and
development processes called 'succession management', encompassing management
resourcing strategy, aggregate analysis of demand/supply (human resource planning and
auditing), skills analysis, the job filling process, and management development (including
graduate and high-flyer programs).
Enforcing the succession plan:
A careful and considered plan of action ensures the least possible disruption to the person’s
responsibilities and therefore the organization’s effectiveness. Examples include such a
person who is:
• suddenly and unexpectedly unable or unwilling to continue their role within the
• accepting an approach from another organization or external opportunity which will
terminate or lessen their value to the current organization;
• indicating the conclusion of a contract or time-limited project; or
• moving to another position and different set of responsibilities within the organization.
Organizations differ in size, scope and type, so it is difficult to point to any single model of
succession planning. However, it is most common for succession planning to cover only the
most senior jobs in the organization, plus short-term and longer-term successors for these
posts. The latter groups are in effect on a fast-track, and are developed through job moves
within various parts of the business. This focus on the most senior posts - perhaps the top
two or three levels of management - means that even in large organizations, only a few
hundred people at any given time will be subject to the succession planning process. It also
makes the process more manageable, because it is much easier to concentrate on a few
hundred individuals rather than (say) several thousand. That said, however, many large
organizations attempt to operate devolved models in divisions, sites or countries where the
same or similar processes are applied to a wider population.
The role of HR:
Succession planning needs to be owned by line managers, and should be actively led by
the chief executive who has a key role in ensuring that it is given the importance it deserves
by other senior managers; ensuring that there is a healthy pipeline of potential leaders is
about nothing less than the future of the organization. But it is not realistic for CEOs and
those around them to have sole responsibility for this; they have neither the time nor the
The HR function therefore has a critical role in supporting and facilitating the process, not
least in compiling all the necessary information on potential candidates. Any career move at
senior level is a process of multiple dialogues, in which a senior representative from HR will
collect views from senior line managers in an iterative fashion, testing, challenging and
amending them as the dialogue goes on, making sure that all possibilities are covered, and
maybe putting proposals for decision to a succession development committee. HR
departments are of course also heavily involved in giving career advice and information to
individuals, and assessing and advising on their development needs. The HR function is
also centrally concerned in the design and management of assessment processes and
information support, including the development and maintenance of computerized
IMPORTANCE OF SUCCESSION PLANNING
Succession planning is an essential part of doing business, no matter how certain your
future appears. It's easy to put off planning when everything seems to be going so well,
right? Wrong. Now is the time to begin succession planning. Here are some reasons why it
can't — and shouldn't — wait:
You can't plan for disaster. No matter how good you and your staff are at revenue
projections or economic predictions, no one can truly plan for disaster. Whether it's
an unforeseen illness, a natural disaster, or a CEO's decision to suddenly retire, the
reasons for having a succession plan in place before it is needed are endless. So
while you can't plan for disaster, you can put into place a series of contingencies that
will help your company stay afloat if, in fact, catastrophe occurs.
Succession planning benefits the business now. Just as business practices have
evolved over the years, succession planning has also grown and changed. It's no
longer a plan that can only be accessed when leadership is going to change; a
succession plan can be used before its "real" intent is necessary. It can be used to
build strong leadership, help a business survive the daily changes in the
marketplace, and force executives to review and examine the company's current
Succession planning gives your colleagues a voice. If you're running a family
business, the process of succession planning will give family members an
opportunity to express their needs and concerns. Giving them that voice will also
help create a sense of responsibility throughout the organization, which is critical for
successful succession planning. Resist the temptation to solely carry the entire
weight of creating and then sustaining a plan.
A succession plan can help sustain income and support expenses. Talking
about money should be a priority. People generally don't want to work for free and
things don't pay for themselves. A succession plan can provide answers as to what
you — and your staff — will need for future income, as well as what kinds of
expenses you may incur once you step out of the main leadership role. Ask yourself
questions about your annual income and other benefits including health and dental
insurance for you and your dependents, life insurance premiums paid for by the
company, your car, professional memberships, and other business-related
Succession planning gives you a big picture. Some companies mistakenly focus
solely on replacing high-level executives. A good succession plan can go further,
however, and force you to examine all levels of employees. The people who do the
day-to-day work are the ones keeping the business going. Neglecting to add them to
the succession planning mix could have dire consequences. As you develop your
plan, incorporate all layers of management and their direct reports.
Succession planning strengthens departmental relationships. When regular
communication occurs between departments you are more likely to experience
synergy, which breeds a culture of strength. Make sure that you link your succession
planning activities with human resources. After all, HR is about people. By including
HR in succession planning, you can incorporate elements like the employee-
evaluation process, which can help when deciding whether to fill vacancies with
Succession planning keeps the mood buoyant. Change — a major component of
a succession plan — is exciting and can bring a company unforeseen rewards. Still,
change can be a source of tremendous stress, especially when people's livelihoods
are at stake. As you put your succession plan together, consider its positive effects
on the business. Planning for the future is exciting and, if done correctly, can inspire
your workers to stay involved and maintain company loyalty. It's true that a plan is
often put into place to avert catastrophe, but it's also a company's way of embracing
the future — a business strategy that is essential for survival.
SUCCESSION PLANNING PROCESS
Succession planning recognizes that some jobs are the lifeblood of the organization and too
critical to be left vacant or filled by any but the best qualified persons. Effectively done,
succession planning is critical to mission success and creates an effective process for
recognizing, developing, and retaining top leadership talent.
There are several factors typically found in successful succession planning initiatives. For
Senior leaders are personally involved.
Senior leaders hold themselves accountable for growing leaders.
Employees are committed to their own self-development.
Success is based on a business case for long-term needs.
Succession is linked to strategic planning and investment in the future.
Workforce data and analysis inform the process.
Leadership competencies are identified and used for selection and development.
A pool of talent is identified and developed early for long-term needs.
Development is based on challenging and varied job-based experiences.
Senior leaders form a partnership with human resources.
Succession planning addresses challenges such as diversity, recruitment, and retention.
Effective succession planning
The following information includes:
• A graphic representation of a six-step process for effective succession planning
• A table with descriptions of each step in this process.
Step 1: Link Strategic and Workforce Planning Decisions
This step involves:
Identifying the long-term vision and direction
Analyzing future requirements for products and services
Using data already collected
Connecting succession planning to the values of the organization
Connecting succession planning to the needs and interests of senior leaders.
Step 2: Analyze Gaps
This step involves:
Identifying core competencies and technical competency requirements
Determining current supply and anticipated demand
Determining talents needed for the long term
Identifying “real” continuity issues
Developing a business plan based on long-term talent needs, not on position replacement.
Step 3: Identify Talent Pools
This step involves:
Using pools of candidates vs. development of positions
Identifying talent with critical competencies from multiple levels—early in careers and often
Assessing competency and skill levels of current workforce, using assessment
Using 360° feedback for development purposes
Analyzing external sources of talent.
Step 4: Develop Succession Strategies
This step involves:
• Identifying recruitment strategies:
- Recruitment and relocation bonuses
- Special programs
• Identifying retention strategies:
- Retention bonuses
- Quality of work life programs
• Identifying development/learning strategies:
- Planned job assignments
- Formal development
- Coaching and mentoring
- Assessment and feedback
- Action learning projects
- Communities of practice
Step 5: Implement Succession Strategies
This step involves:
Implementing recruitment strategies (e.g., recruitment and relocation bonuses)
Implementing retention strategies (e.g., retention bonuses, quality of work life programs)
Implementing development/learning strategies (e.g., planned job assignments, formal
development, Communities of Practice)
Determining and applying measures of success
Linking succession planning to HR processes
– Performance management
– Recruitment and retention
– Workforce planning
Implementing strategies for maintaining senior level commitment.
Step 6: Monitor and Evaluate
This step involves:
Tracking selections from talent pools
Listening to leader feedback on success of internal talent and internal hires
Analyzing satisfaction surveys from customers, employees, and stakeholders
Assessing response to changing requirements and needs.
LEADERSHIP COMPETENCIES FOR SUCCESSION PLANNING
COMMUNICATION [VERBAL & WRITTEN]
Communication with others in an open, timely and sensitive manner effectively
Demonstrates effective communication: listens generously, seeks to understand,
provides feedback and communicates in a positive manner, and ensures others
Establishes trust and credibility in working relationships through open, honest,
consistent and frequent dialogue.
Organizes, interprets and disseminates all information to internal and external
audiences including complex work and advice clearly, concisely and plainly.
Consults with everyone affected, listens to all views and considers them fairly.
Is proactive and demonstrates the ability to make informed, balanced decisions in a
timely manner and stand behind them.
Understands fully the effect and consequences of each decision and stands
accountable for decisions.
Deals with performance issues in a timely, fair and constructive manner
Demonstrates commitment to performance management in actions and words
Takes decisive action/is proactive in moving initiatives forward or solving problems.
Demonstrates good judgment
Shows consistency balanced with fairness
Ensures decisions are consistent with the directional focus of the University
Uses conflict resolution skills effectively
Considers all sides of an issue and balances all interests, including future impacts
LEADERSHIP OF THE DEPARTMENT/UNIT
Sets and communicates direction to further the Strategic University Plan, supports
the department or unit and provides appropriate opportunities for individual
Establishes scope for decisions by individuals and balances this with need to make
Administers and supports staff development in a proactive, equitable and consistent
Provides recognition to support teamwork and individual contribution
Communicates on behalf of the department/unit when required
Ensures the development and application of performance measures and targets to
Provides opportunities and promotes an environment that encourages continuous
Supports [coaches/mentors] others to take responsibility for achieving the highest
possible levels of performance
Builds effective communication links with other departments and effectively facilitates
resolution of issues/needs, which cross-departmental lines.
Pushes decision making down to the appropriate level and provides necessary
guidance and support to other decision makers.
Demonstrates identification with, support and commitment to the organization
Puts aside personal preconceptions and self-interests and concentrates on the
common goal and the betterment of the University.
Demonstrates pride in working for Athabasca University
Supports the University [e.g. Its plans, policies, programs] in a positive constructive
Promotes and acts with integrity in dealing with students and employees.
Works in all types of committees and groups, supports the committee or group and
contributes to its effectiveness.
Respects and anticipates the needs, feelings, and opinions of others
Encourages discussion of issues and concerns
Creates a sense of community; facilitates communication within the group
Recognizes the value of teamwork
Views current events and future possibilities from multiple perspectives, develops
future oriented scenarios and communicates these effectively to others in the
Suggests and embraces new methods and ideas that enhance the achievement of
Athabasca University’s vision.
Clearly understands and communicates the AU vision as it applies to the department
Keeps in mind the organization context and direction, looks beyond the immediate
environment for opportunities for improvements and enhancements.
Continually scans current and future environment and identifies themes and
Takes a logical approach to planning and problem solving and establishes priorities.
Analyzing issues and problems systematically and thoroughly and focusing on critical
details while maintaining a broad perspective.
Grasps complexities and critical details quickly and accurately
Develops well-defined, step-by-step approaches to analyze and solve complex
Identifies relevant alternative and evaluates the potential consequences of each
before taking action
Makes an effort to solve common problems by drawing from previous experience or
Assembles and integrates information from a variety of sources to present what is
relevant to a given issue or situation.
ACCURACY AND THOROUGHNESS
Makes sure that work is done correctly, completely and with high quality in a timely
Verifies assumptions and information by checking with credible sources, experts or
first hand experience.
Carefully reviews own work for accuracy and completeness
Carefully reviews other people’s work for accuracy and thoroughness.
Identifies and addresses all details that are needed to ensure smooth functioning
Follows up to make sure that tasks have been completed and others have met
Anticipates and responds to the needs of internal and external customers. Develops
and maintains strong relationships with internal and external customers.
Responds promptly to customer needs or requests of others
Expends significant time and effort to meet important commitments made to internal
or external customers
Offers unsolicited help to those in need.
Takes advantage of opportunities to present examples and scenarios illustrating
importance of client service
Presents examples and/or suggestions on how to improve services to customers
Presents arguments and/or suggestions that convince clients that their interests are
being well served.
Demonstrates a genuine belief in the likelihood of personal success and
communicates a positive self-esteem to others.
Creates a feeling of confidence in the department or units ability to provide timely
and quality service.
Shows strong assertiveness skills when dealing with customers and peers.
Demonstrates a genuine belief in the likelihood of personal success.
Continues steadfastly toward results/objectives until the desired result is achieved or is no
longer reasonably attainable.
Leads by example, ensuring actions are implemented and goals are achieved
Focuses on outcome, allows flexibility on how the outcome is achieved.
ADVANTAGES OF SUCCESSION PLANNING
Succession planning is an essential part of doing business, no matter how certain your
future appears. It's not easy to put off planning when everything seems to be going so well.
Here are some reasons why it can't — and shouldn't — wait:
You can't plan for disaster.
Succession planning benefits the business now.
Succession planning gives your colleagues a voice.
A succession plan can help sustain income and support expenses.
Succession planning gives you a big picture.
Succession planning strengthens departmental relationships.
Succession planning keeps the mood buoyant.
Besides the obvious benefit of not leaving your company in the lurch of proper Succession
Planning will help your company in other ways, too. Here’s a rundown of the benefits.
Remember, not all benefits will apply, depending on your specific situation. Succession
Reduce taxes, in some situations with family-owned businesses. For example, if a
company gets new ownership after an owner's death, lack of planning can result in
steep estate taxes. Other tax issues, such as transferring ownership to a child, might
Ensure continuity. Customers, clients, vendors, and employees all want and need
to know that a business will continue to function as they know it, even when there’s a
leadership change. Choosing and grooming a successor who fits your mold will help
Provide training plan for possible successors. If you identify who you might choose
as a successor early, you’ll know that that person needs more training and one-on-
one time with your current leader to gain as much knowledge for the position while
it’s still possible.
Help you plan for the future direction of the company.
MISTAKES TO BE AVOIDED IN SUCCESSION PLANNING
Many mistakes are commonly made in establishing succession planning programs. They
are worth enumerating. It is also worthwhile to describe some ways to avoid these common
Assuming that Success at One Level Will Guarantee Success at Higher Levels.
An individual’s success at one level is no guarantee of success at higher levels of
responsibility. The reason is simple: the competencies required for success at each
level are different. Hence, it is important to separate thinking about how well
someone does his or her current job and how well he or she might do a job at a
higher responsibility level.
Assuming that Bosses Are Always the Best Judges of Who Is Promotable. A
second mistake is to assume that, for purposes of succession planning, bosses are
always the best judges of who is promotable. That is not always true. Bosses are
self-interested players in the succession game. They have a stake in what happens
to people. Indeed, some bosses do not want to see their best people promoted for
fear of an inability to replace them. Some bosses grade people by their own
standards - with the result that some individuals who are quite unlike the boss are
not considered for promotion. While the support of a boss is useful in developing
individuals, more objective assessments, such as multi-rater assessment are
excellent in aiding the manager’s assessment.
Assuming that Promotions Are Rewards. Some employees have an entitlement
mentality in which they feel that long service with an organization should always be
rewarded with promotions. But business decisions must be based on who will do the
best job, not who is “owed” a promotion because of greatest seniority. Workers must
continually be reminded that doing jobs at each level requires different
competencies, and the best way for them to compete is to prepare for future
challenges rather than expect promotions for past performance at a different level of
Trying to Do Too Much Too Fast. The strong results-orientation of many
organizations today emphasizes quick results. Senior leaders expect to see all the
components of a comprehensive succession system in place immediately. That is
not always realistic. It is advisable to think of implementing systematic succession in
a phased way - either from the top down or else starting in specific divisions or
locations with greatest need.
Giving No Thought to What to Call It. A fifth mistake is to devote no time to
considering what to call the succession program. As any marketer knows, product
names do matter. It is not necessary to call a spade a spade. Many organizations
choose alternative names–such as “leadership development program,” “human
capital management program,” or even “talent program.”
Assuming that Everyone Wants a Promotion. A sixth mistake is to assume that
everyone wants a promotion. That is not always true today. In many downsized
organizations, workers have seen what pressures their bosses have to deal with.
Some say “leave me out of that.” Hence, it is unwise to assume that everyone wants
a promotion–or even to assume that money will convince everyone. It will not. Check
first. Find out what people want to do. For that reason, many organizations launch
both a top-down succession planning program and a bottom-up career planning
program to galvanize development
Lack of understanding how it works and how it benefits the organization.
Lack of a formal written plan for the person or position(s).
Lack of availability of human and financial resources; lack of budgetary commitment.
Superficial approach; lack of real understanding of the procedures, processes and
requirements of each area the individual is exposed to during the process.
The requirements of the Managers/Executives are not fulfilled in providing dedicated
instructions, guidance regarding skills, knowledge and abilities needed for the
candidates to be successful.
Failure to identify key employees who may have concerns with your succession plan.
Failure to plan for disability.
A rigid, inflexible plan NOT tailored to the needs and abilities of the personnel
Too long a wait for real movement/promotion, disillusionment, may result in some
people leaving due to apparent inertia in the system.
Selection of unqualified or unmotivated people for inclusion in the Succession Plan.
Quality of the individuals selected is paramount to the success of the process.
Complex program, requiring considerable paper work, follow-up, reporting
SUCCESSION PLANNING: THE INDIAN PERSPECTIVE
Companies in India have approached succession planning in different ways and experience
has shown that few have built strategies that encompass the three critical facets of the
exercise: board succession, CEO succession and building a leadership pipeline.
Three categories of company exist in India: first, the widely held and professionally
managed companies; second, the family-promoted/family-controlled companies, but with
significant holding by minority shareholders; third, government companies where there is a
significant minority holding. Owing to the differences in structure and functioning of these
companies, succession planning strategies could differ, though the issues tend to remain
The roundtable discussion detailed here addressed each of the above facets; it contains
numerous insights as well as questions regarding the state of succession planning in India.
Succession planning is a challenge across the globe – but particularly so in India. Indian
leaders, while highly adaptable and strongly entrepreneurial, generally perform poorly in
terms of teamwork and succession planning. In fact, the KFI/Economist survey ranked
Indian leaders among the lowest performers on this count. This is evident in the fact that
today, fewer than 20% of Indian businesses work to develop future leadership, or to engage
actively in succession planning. Strong Indian leadership has been emerging across
multinational companies (both Indian and foreign), but these competitive traits, and the
drive to succeed in global markets, have not yet been focused on developing people. India
now requires its leaders to work towards nurturing its pool of future managers, instead of
merely driving their companies.
According to the ABB (Asocham Business Barometer)report of 2007
Corporate India not ready with succession plan, says Assocham Business
India Inc. has a long way to go for putting in place its succession plan at top level, which
has an important bearing on the market valuations of the companies, confidence of the
business associates and morale of their employees, an Assocham Business Barometer
Survey has revealed.
The ABB Survey of 275 leading management consultants, corporate, academicians and
professionals on ‘Missing Link in Succession Plan’ found that a select few companies in
India formulate and effectively implement succession plan for the key positions in their
organization structure. This was confirmed by 75 per cent of the ABB respondents.
They rated Indian companies four on a scale of 10 in terms of long term planning and
grooming of the successor to the head of a firm.
Ninety two per cent of those surveyed said a considerable weightage is being given to the
companies, which have a hierarchy in place top-down. The analysts rate succession
planning as a crucial component of an impeccable management structure.
The leadership acts as a catalyst in building goodwill and brand valuation of an
organization. Such factors play deciding role in determining the worth of a company in the
bourses. The share market has rewarded the corporate entities having properly structured
succession plan with higher valuations.
Eighty-nine of the management consultants and academicians said a well-placed
succession plan is an important component of corporate governance. Non-existence of a
second in command of a business entity could harm the interests of minority and widely
dispersed shareholders as an element of ‘uncertainty’ prevails.
“Leadership performs an instrumental role in laying down the long-term foundation and
imparts strength to the organization. As a good corporate governance practice the board of
directors and management should set up a clearly defined succession policy defining the
number two and three positions in an enterprise, even among the family-owned and
run businesses”, Mr. Venugopal Dhoot, President, ASSOCHAM said.
Corporate governance calls for setting of guidelines to be followed by the Board of Directors
and the management of the company in order to safeguard the interest of stakeholders,
which include shareholders, investors, employees, consumers, suppliers and the society.
The long-term competitiveness and efficiency level of a firm could get adversely affected
due to lack of a succession plan, according to 83 per cent of the experts surveyed by ABB.
The performance of a company gets hampered without a well-defined hierarchy and affects
the team spirit of the staff.
As many as 67 per cent of the respondents expressed their concern that employees' morale
gets affected in the absence of uncertain management chart. They feel that a question
mark is put after a stage in the growth path of even the best performing official due to the
absence of clearly laid succession policies.
Management line of command becomes highly concentrated in a company with a single
individual at the helm. It does not trickle down through a well-defined structure. Fifty-nine
per cent experts felt that in a highly concentrated command structure, a ''coterie'' is
established among the CEO who is not fed the true picture by those who benefit from such
a situation. Well performing employees with self-dignity get demoralized lot and become
vulnerable to high attrition.
About 55 per cent of the consultants were convinced that the movement of professionals
across the companies is to some extent influenced by the succession plan and overall
hierarchy structure of these organizations.
Family run business is a way of life for India Inc. However, it has not come as a
hindrance for the growth of these business concerns. Although it is easy to define
succession planning in such firms, off late instances of intra-family disputes are being
increasingly witnessed. This could hurt the interest of minority shareholders, as this is an
evidence of gaps in corporate governance among such companies, 72 per cent of the ABB
Around 60 per cent of the survey respondents were optimistic that the family run
businesses in India are moving fast towards professionalizing their organization set up.
Twenty five per cent of them believed that the change in the management set up of these
companies is taking place at very slow pace. Some of the IT companies in India have set
excellent example of timely identifying, planning and grooming of the successor to the key
person leading the organization.
The factors like lack of long-term vision, self-confidence of existing CEO, majority
shareholders exercising control over management, are responsible for absence of
successors at top position in large number of Indian companies, the ABB found.
When asked about the performance of India vis-à-vis other mature economies like US, UK,
Germany, Japan in terms of corporate head selection, 59 per cent of the ABB respondents
said that India Inc is catching up fast . As the Indian companies are going global making
their presence is felt around the world with large number of overseas mergers and
acquisitions taking place, it is imperative for the Indian business houses to realize the need
and importance of identification and grooming of the heir to their leaders.
The management of a business enterprise is not driven by an individual. Companies
commanded solely by one person holding top position can run into the risk of ill health,
natural disaster, possibility of frauds, dispute with the Board.
According to reports in 2010 Indian companies are more ready to have succession
Economic Developments in India have put the focus on how to develop and prepare
leaders to manage in a growing economy. The primary business priorities for Indian
organizations according to their top executives are growth and improving and leveraging
DDI India Leadership Report findings
o About 4 in 10 leaders in India identified themselves being as in a high-potential program,
a greater proportion than being in the global sample.
o Organizations in India were more likely to have succession plan for higher-level managers
compared to the average organization worldwide.
o Although 44 percent of multinational organizations in India had a process to identify
multinational leaders, only 26 percent had a process to develop them.
The number of businesses in India having intra-company succession plans for their mid-
level managers is decidedly more than anywhere else in the world, reveals the India
Leadership Forecast launched by talent management expert, Development Dimensions
The report reflects an increased demand for internal leadership development due to the
high growth rateof organizations in the recent years. The statistics suggest that 61% of
Indian organizations have a process to identify high-potential Leaders compared with 50%
of the global organizations. High-potential leaders that are placed in accelerated
development programs are more positive and confident about their future roles. Nearly 42%
of Indian organizations have such special programs in place to help leaders face future
These frameworks enable leaders to identify the areas that they find challenging, discover
what is expected of them in their new roles and help new leaders implement a development
plan, which can be applied in their daily activities. They also aim at developing effective
decision-making skills managing relationships for greater impact.
Organizations in India are more effective at clearly communicating the importance of such
leadership modules by monitoring them at regular levels and intervals. Commenting on the
Report findings, Richard Wellins, Senior Vice President, DDI, said,” Leadership transition
can be one of the most stressful experiences in a person’s life, most notably because
leaders are expected to be successful in the new role. Good leadership will be important in
the future, to help control costs, cope with increasing change and tackle the expected
Economic Developments in India have put the focus on how to develop and prepare
leaders to manage in a growing economy. The primary business priorities for Indian
organizations according to their top executives are growth and improving and leveraging
DDI has spent the last 40 years developing leaders at every level—nearly 6.3 million
worldwide—and helping organizations optimize their leadership talent.
In a well-funded, high growth economic environment, it is imperative for India Inc. to
craft effective leadership transfer mechanisms. Be it family-run businesses, PSUs or
professionally-managed companies, the responsibility for effective succession
planning and its implementation rests with shareholders’ representatives – the
January 2005: Reliance Group, India’s largest private sector enterprise, is split as the two
Ambani brothers agree on a legal segregation of assets. While Anil Ambani would take over
the telecom, infrastructure, media and power businesses, elder brother Mukesh Ambani
would take charge of Reliance Industries, which operates in petrochemicals, oil and gas
exploration, refining and textiles. The death of business monarch Dhirubhai Ambani in 2002
without leaving a will triggered a drama that resulted in the division of assets between the
two estranged brothers.
April 2009: P. J. Nayak, Chairman & Managing Director of Axis Bank resigns after losing 1-
8 in the voting for appointment of Shikha Sharma, Head of ICICI Prudential Life Insurance,
as the new MD of Axis Bank. While the members of the Bank’s Board submitted that
Sharma had experience in banking and insurance industry, Nayak vehemently disagreed
with the Board’s decision stating that an insider should take over as his successor. Despite
the Board’s several recommendations previously to groom and develop a successor, Nayak
paid no heed and was vocal with his views that advance succession planning was not
practiced at public sector banks.
April 2010: Infosys Technologies reconstitutes its CEO Nominations Committee to include
K. V. Kamath, Non-Executive Director of ICICI Bank, along with previous members Jeffrey
Lehman, Professor at Cornell University (Chairman) and Deepak M. Satwalekar, CEO of
HDFC Standard Life Insurance, to hunt for Narayan Murthy’s successor – a candidate who
not only should have deep understanding of the IT Industry and Infosys, but should also
possess Murthy’s ‘personal style of leadership’.
One of the most overwhelming challenges faced by organizations in India and across the
globe is CEO Succession Planning. The recent turn of economic events has posed a
serious threat to the corporate health of organizations as stakeholders in even the most
stable and successful organizations questioned the business acumen, ability to sustain
confidence and decision-making capabilities of its business leaders. Although the world
economy is emerging from the aftermath of this recession, there is still the dagger of
‘establishing a strong leadership bench’ hanging over companies who are struggling
towards a post-downturn recovery.
Dr. Shalini Sarin, Country HR Partner & Director – HR, Schneider Electric India
emphasizes this point - “‘Do we have an effective succession planning process to assess
and develop future leaders?’ – it is precisely at this critical juncture of global economic
recovery that such a question is gaining prominence.” After a brief but torrid, financial
downturn, India is back on a growth trajectory and is reckoned as the second largest
growing economy with a GDP of $1.4 trillion and an 8.8% GDP growth rate. In such a well-
funded and high growth economic environment, it has become almost compelling for
companies to have a well-defined and articulated succession plan and an able leadership
pipeline to sustain future growth.
Succession Planning in India
The Indian business environment is largely driven by family-run businesses, public sector
enterprises and professionally managed companies (mostly MNCs). Without doubt, family-
run businesses make for a huge percentage of business houses in India. Family-run
companies account for roughly 50%* of the market capitalization of publicly traded
companies in India and contribute to around 55%* of GDP; hence, the relevance of these
companies for the overall economy.
If numbers are to be believed, only 13% of family-run businesses survive till the 3rd
generation and only 4% go on to the 4th generation. Additionally, one third of the business
families disintegrate because of generational conflict at the leadership levels. Professionally
run succession planning is key for the sustainability of businesses. Family disputes and the
lack of succession planning have triggered the decline in fortunes of many business
families. Traditionally, succession planning in family-run businesses has always been a
hush-hush affair, clearly depending upon the life expectancy of the founding chairman or
patriarch. Succession planning in family-run businesses is generally an intuitive process
with the family patriarch taking the decision as to who will take charge of the business
empire. Dr. Ganesh Shermon, Partner & Country Head - People and Change Practice,
KPMG says, “Traditionally, family-run businesses focused on dividing the silver among the
next generation rather than grooming the right person to take up the job. However, with
changing times, family-run businesses need to ensure that the chosen successor has
necessary education and skills and should be made to work his / her way up the
management. Alternatively, companies should be bold enough to appoint a professional
manager when there is no suitable candidate within the family. Companies such as
Ranbaxy, Murugappa Group and Eicher have set a precedent in this regard.” In 1998, when
Dabur India realized the might of behemoth MNCs and their scale of operations, it valued
the need for a professional to run the operations of the company in order to build a
professionally-managed company with strategic business outlook. And that’s when Dabur
India roped in an outsider as its CEO, Ninu Khanna, rather than passing the reins to a
family-member. Sunil Duggal, Dabur’s CEO since 2000 has taken the business to new
heights by strategic acquisitions and has expanded the product portfolio to make Dabur a
comprehensive FMCG company from an Ayurvedic products seller. Today, majority of the
Board members at Dabur do not belong to the Promoter family. The Tata Group too is on
the lookout for a successor to Ratan Tata, who retires in 2012, and for other group
companies too, as the Heads of Tata Steel and Tata Motors head toward retirement.
Passing on the reins of the organization to a family member has a lot of legal implications
too. Hiralal Walchand, Director, Walchand Associates, which deals in will trust services and
family law, says “Family members (sometimes even far-off relatives) join companies as
employees but demand legal ownership rights during division of assets. This should be
avoided as dividing assets amongst so many claimants completely devalues the company.”
In case of listed family-run business houses, the first step towards planning a strategic
succession is to increase the holdings in various group companies. Walchand explains that,
“Increasing holding by the parent company wards off the risk of future acquisition. B. K.
Birla, for instance has been working toward increasing the family’s stake in its group
companies of cement, textiles, et al.” Once that is achieved, the patriarch can appoint either
family members or internal and external candidates to take on the mantle. This ensures that
when the patriarch steps down, there is no change in the way business is done. In the
recent succession plan chalked out by RPG Enterprises, Group Chairman R. P. Goenka
segregated the ownership and control of various group companies amongst his sons Harsh
Goenka and Sanjiv Goenka where the former was named the Chairman and the latter Vice
Chairman. The business will, however, continue to run the same way with each brother
continuing to control and run the companies they were handling previously.
In the case of PSUs, many of the appointments are guided by political considerations. The
fact that quite a few of the top jobs at PSUs are either unfilled or manned by acting CEOs
indicate the lack of importance attached to the process of top management succession
In spite of the political stifling, some PSUs have formulated very strong succession planning
practices. Prakash, Managing Director - India, Leadership and Talent Consulting,
Korn/Ferry International, says, “PSUs are unique in that almost invariably grow their own
timber. Public sector companies really do not have a succession planning system per se,
they have an internal promotion system.” Companies like Indian Oil, Bharat Petroleum,
Hindustan Petroleum, BHEL, NTPC, ONGC, State Bank of India have worked on
establishing leadership competency frameworks, assessed managers for development and
taken follow up actions in terms of internal training and developed courses in collaboration
with the IIMs.
Some of these practices can be compared to the best in the private sector. For instance,
ONGC conducts succession planning three levels below the Board and NTPC conducts
rigorous succession planning two levels below the Board. NTPC has constituted a high
level Succession Planning Committee (SPC) comprising of the Chairman and the
Functional Directors to own the process of succession planning. NTPC has identified 28
unique leadership positions for succession planning. Most of the positions fall under the two
top executive levels - General Managers and Executive Directors. Against each position at
least three potential successors are identified for grooming. This is done to ensure that
sufficient depth is maintained in the leadership pipeline at all times. Succession planning is
a shared responsibility of the HR function and the organization’s leadership. NTPC’s CMD,
R. S. Sharma was recently succeeded by Arup Roy Choudhary, former CMD of National
Buildings Construction Corporation (NBCC).
The search for a successor for CMD (Chairman & Managing Director) is done pretty much
the same way as the search for other Board level appointments where an advertisement is
put up for the vacancy by the Enterprise Selection Board and shortlisted candidates sent to
the ministry. The final decision for appointment is made by the Cabinet Committee. The
concurrent CMD is not involved at all in this process. In July, state-owned telecom units,
Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telecom Nigam Ltd. (MTNL)
advertised vacancies for the post of CMD. The Enterprise Selection Board, formed under
the leadership of K. M. Chandrashekhar, Cabinet Secretary, has received close to 100
applications and will soon announce the successor to Kuldip Singh, CMD of MTNL and
Gopal Das, CMD of BSNL.
Professionally-run companies in India, mostly MNCs and a handful of home-grown
companies like Infosys, are more forthcoming when it comes to chalking out a strategic
succession planning process. Professionally-managed companies have definite processes
and employ latest techniques while identifying potential successors. Take for instance
Larsen & Toubro (L&T). Well before two years of current Chairman A. M. Naik’s retirement,
the organization has systematically and strategically put in place a succession planning
process and will announce the name of the new Chairman six months before Naik retires so
that s / he is able to get proper handholding. In many of the MNCs operating in India, the
decision to find a successor is more in tune with business strategy and growth vision for the
future of the organization. Kellogg India recently roped in Sangeeta Pendurkar, former VP-
Strategy & Commercial Leverages at Coca Cola India to head its Indian operations as MD,
replacing Anupam Dutta. Pendurkar’s experience in revamping Coca Cola India’s tea and
coffee business (Georgia) and introducing innovative regional brands such as Minute Maid
and Nimbu Fresh made her a suitable choice for Kellogg India’s strategic plan to strengthen
the company’s stranglehold on the breakfast segment by introducing more regional flavors.
In certain other professionally-managed organizations, senior leaders have the
responsibility to design their own succession planning process, as in Lucent Technologies,
where senior managers are expected to develop at least two potential successors using job
rotations, challenging work assignments, special projects and executive coaching.
Companies like Hindustan Unilever, P&G and ITC have traditionally groomed most of their
senior management internally using a combination of talent review sessions,
comprehensive training programs, job rotations and a combination of HR and leadership
Role of the Board & the CEO:
For corporate Boards, CEO succession planning should be one of the most important
commitments toward the organization. Even though Boards across the spectrum realize the
need for an effective succession plan, they seldom devise processes and practices and
devote sufficient time to this activity. Dr. Arvind Agrawal, President and Chief Executive
Corporate Development & HR - RPG Enterprises, says, “It is imperative for the
management / executive Board to participate in the whole succession planning process. I
am talking about the involvement of management or executive Board and not the legal
Board. The process of succession planning is simple but the real difference lies in its
execution and that’s where most companies falter. The process demands full dedication of
the top management and not mere compliance as one of the points on a meeting agenda.”
Not having a strategic succession planning process and an effective CEO successor is a
potential risk to companies and it is the obligation of the Board to timely address this risk.
This is also lacking because most companies do not have a Chief Risk Officer (CRO) to
identify the potential threats that may arise due to little or no succession planning. In simple
words, it is the responsibility of the Board to make sure that the framework and guidelines
for succession planning are in place and are practiced to evaluate the developments on a
regular basis. While corporate Boards play a critical role in succession planning in
professionally managed companies, their role is limited in family run businesses where the
family patriarch is generally the one who takes such decisions. In PSUs, the final decision
of choosing the successor is taken by an external authority (generally the Cabinet) in
consultation with the Board.
“Normally only banks have CROs, as this is a mandatory requirement. It is not a very
common role”, says Prakash from Korn/Ferry, “and wherever they are, they tend to restrict
their role to systemic risks like technology risk, financial risk, political / regulatory risk, and
not really people risks. CEO succession is the Board’s responsibility and the responsibility
of the CHRO and from my experience, does not normally come under the risk officer’s
purview.” Adds Poonam Barua, Founder Chairman, Forum for Women in Leadership, “In
the global scenario, best performing companies worldwide are increasingly looking at
voluntary compliance practices and provisions for having a Chief Risk Officer who reports to
the Board (and not to the CFO), and identifies the challenges in the succession planning
process, including the need to increase diversity on company Boards. Ultimately, Board
diversity and succession planning is not just an HR issue, but a corporate governance
issue. The Chief Risk Officer will also need to identify lack of diversity as an important risk
for the company. Companies such as GE, KPMG, Deloitte, IBM, PepsiCo, Nokia, Microsoft,
et all have huge diversity programs to ensure more women move into top management
The Board is responsible for clearly conveying to the CEO that his / her performance will
also be measured by his / her ability to manage succession. Additionally, the Board, in
consultation with the CEO, is responsible for detailing out the criteria of selection of the next
CEO. The CEO’s role, on the other hand, is to identify high potential leaders and spend
disproportionate resources to develop them, besides monitoring the outcome of succession
planning activities at all levels in the organization. Sometimes, the CEO’s failure to identify
a suitable successor acts as an impediment to the growth of the organization. When
Rohinton Aga, MD, Thermax passed away in 1996, Abhay Nalawade was appointed his
successor. However, roughly five years later, the entire Board of Governors had to resign
en-masse as the company struggled to compete in the changing business environment.
While Rohinton Aga nurtured and grew Thermax over a long period of time, he did not pay
enough attention to succession planning. Nalawde has, in fact, been quoted to have said,
“Mr. Aga never made it explicit that he would have wanted me to become the Managing
Director.” Stephen A. Miles, Vice Chairman at leadership advisory firm Heidrick & Struggles
and Prof. David Larcker from Stanford Graduate School of Business re-iterate this point -
“The CEO’s role is to develop viable internal successors so there are real internal
candidates for the Board’s evaluation and to be an advisor to the Board on the strengths
and weaknesses of the candidates. The CEO does not own this process. Many want to own
it but the Board must own the process and manage the CEO.” In PSUs, the current CEO or
CMD plays little or no role whatsoever in selecting his / her successor, which again is very
dangerous for business continuity and hence, corporate health.
A STUDY ON MURUGAPPA GROUP SUCCESSION PLANNING
The Murugappa Group, headquartered in Chennai (Madras), India has grown from humble
beginnings to become a very important conglomerate. The company started as the dream
of a driven entrepreneur in Burma in the early 1900s. Today it boasts revenues of US$ 850
million and employs 22,500 people in its 27 business units. The company is presently
undergoing a major change, as it restructures its family governance system. It realizes that
change is necessary if they want to continue to compete in the world marketplace. Though
adaptation is not always easy, the Murugappas find strength through their heritage and
An entrepreneurial spirit
The family traces its business history to 1760 when the great-great great grandfather
of the founder was active in trading and money lending. He had five sons who each,
separately, built successful businesses that, in later generations, led to leadership in
several industries in India. The family came from a long line of members of the Chettiar
sub-clan of the Vaisyas caste-merchants and professionals with business interests
primarily in Burma, Malaysia, Sri Lanka and Vietnam, known for their scrupulous honesty,
trustworthiness, cleverness in trade and proficiency at money matters.
Following Indian tradition, the majority control of his deceased father's entire estate went to
the eldest son, with Dewan Bahadur receiving virtually nothing for all his work. The
unfairness of this policy spurred him to divide his estate equally among his three sons -
Murugappa, Vellayan and AMM. He did this while they were young men and while he
was still alive to give them the freedom and the opportunity to be a family energetically
pursuing business together. He also encouraged free speech among his sons until a
decision was taken; then the courtesies due to an elder had to be honored. This, too, varied
from the norm in society at the time where respect for the elder was paramount.
All three of Dewan Bahadur's sons shared their father's venturesome business spirit and
complemented each other in their managerial styles. Murugappa was marketing and
external relations-oriented; Vellayan was finance-oriented; and AMM was operations-
oriented, with a focus on details.
In the early 1930s, Dewan Bahadur and his sons made several decisions that were critical
to their later success. At a time when 70% of Chettiar wealth was in Burma, they repatriated
much of their monies to India so that the Great Depression, World War II and Burmese
national movements didn't bankrupt the family; they had an insight that India was
on the verge of industrialization; and they decided to take the family's first steps into major
With the repatriated funds, they established a sandpaper plant (the beginning of today's
US$ 65 million abrasives business called CUMI); they purchased a steel safe
manufacturing company; they started an insurance company; and they bought a rubber
plantation. The Murugappa Group was born.
In 1931, Dewan Bahadur's eldest son, Murugappa, visited the US for the International
Chambers of Commerce Convention. This trip broadened the family's view of possibilities
for making money and expanding the company. When Murugappa returned from the US, he
kept an eye out for a business opportunity he could set up and lead in India. When he
heard from an acquaintance that there was market demand in India for a quality
manufacturer of steel security furniture such as safes, cashboxes and filing cabinets, he
moved forward with family support, commencing production in 1940.
A much larger foray, conceived during the same time period, was to enter the business of
making abrasives, a product used by manufacturers to sand, sharpen and smooth
equipment, materials, components and end-products. The family's rationale was that if
world war broke out, the volume and variety of goods imported on British ships would
decrease; thus, local manufacturing would expand with the new opportunity. The family
cleverly negotiated to buy, dismantle, ship and install an abrasives plant from the American
Midwest to its location in India. The plant was operational in 1942. About a decade later,
AMM made contact with the three largest abrasives companies in the world - to seek a joint
venture for access to new technologies. When all three were disinterested or very slow to
respond, he contacted and struck a deal with Carborundum USA and Universal of
UK. Before anything official was signed, the largest company in the field made overtures
and showed interest. Since the family had given its word to the British company, they would
not go back on it to negotiate with one of their larger, first choice firms. This was the first of
many successful joint venture arrangements (since 1952 named Carborundum Universal of
Madras, India or CUMI). After India gained independence in 1947, the Murugappa family
was among the first in India to form a joint venture. With introductions by Sir A Rarnaswami
Mudaliar, some experience in steel manufacturing of safes and with a vision for bicycles in
India, Tube Investments of India (TII) was formed in 1949. TII began as a bicycle assembly
firm representing the English Hercules brand in India. The English partner began with a
43% interest. Over time, TII grew, integrated into most all components, and diversified into
steel tubes for furniture, industry and other applications. Hercules became the number one
bicycle company in India. The British partner eventually departed the industry, turned the
Hercules, BSA and Philips brand over to the Murugappas and divested its ownership
position. One of the patterns in the Group's development is that their foreign partners lose
interest in the Indian venture due to acquisition, management or strategy changes and sell
back their shares to the family at a better than fair price because of the trusting relationship
they had built. This happened, for example, with CUMI in 1982when its UK parent sold back
It’s shares. CUMI, now publicly traded, is 43% controlled by the family.
Adaptation and growth
In India's government-regulated economy, the Murugappa Group found it necessary to
adapt in order to prosper. In the 1980s, Indian law prohibited formation of a business group,
so the family followed the system of crossholding controlling shares among separate public
companies. Recently that law has changed, and the family is restructuring again to become
a holding company. Because of government regulation in the past, it was difficult to obtain
licenses for new businesses. Between 1964 and 1980, the Group applied for 17 licenses.
Out of the 17 license applications, one was granted and the other 16 were not. The Group
decided not to pursue these because of their values. Consequently, to grow, they sought
acquisition of sick units to turn around. In the last 20 years, 17 additional companies have
The most well publicized acquisition occurred in 1981 with the purchase of Madras based
EID Parry - a huge, decrepit, yet symbolic business that the Group had been interested in
since 1958. Parry, the second oldest commercial name in India, included fertilisers,
pesticides, confectionery and also sugar mills. For years EID Parry's creditors were asking
the Group to take over its management, given the Group's management reputation and
acumen. The family repeatedly turned down the overtures, responding that without control
EID Parry wasn't in the family interests. Eventually, the creditors relented and the family
gained control of the publicly traded company. The agreement made headlines because it
showed the Group's commitment to invest in what many in India felt was a risky venture,
but what they saw as an opportunity to grow. EID Parry is now a business with US$ 265
million in sales and is 41% family-owned. With EID Parry came a 7% holding in a joint
venture fertilizer company, Coromandel Fertilizers Ltd Chevron and IMC Global partnered
in the fertilizer growth area then later sold out. EID Parry developed a unique organic
pesticide from indigenous neem seeds that is often acclaimed to be the best in the world.
EID Parry is also in the sanitary ware business. However, not all businesses have been a
success. For example, the Group has divested a cement company, sold its electronics
business and faced difficulties with its long held construction company.
Business and philanthropy
Today the Group includes seven substantial business units comprising 27 companies in a
variety of industries: CUMI, TlI, Coromandel, Parry Agro, EID Parry, CIFCO and the only
private company, Arnbadi Estates, holder of some of the plantations. TlI now has four
significant lines: bicycles, chains, industrial tubes and roll forming. CUMI is a full line,
vertically integrated abrasives company and Coromandel is a very profitable fertilizer
business. With Arnbadi and Parry Agro, the Group remains active in rubber, tea and coffee
plantations. EID Parry includes an assortment of businesses including fertilizers, sugar
mills, pesticides and sanitary ware. The Group is in the food industry with Parrys
Confectionery Ltd. CIFCO is in the financial services of brokerage, vehicle finance,
insurance and mutual funds. The Murugappa Group and family also continue to build on the
example of philanthropy initiated by Dewan Bahadur. His decision to set aside a major
portion of his wealth for charitable causes, starting in 1924 when he built a hospital in his
home village, commenced a tradition of helping, guiding and supporting others in
communities in which the companies do business. The family's trust, the AMM Foundation,
is sustained by a fixed percentage of annual business profits and family contributions. To
date it has built and nurtured four high schools of 8000 students, a polytechnic institute of
1000 students, four no-fee hospitals and a rural research centre. The rural research centre
focuses its activities on developing such things as protein-efficient algae, natural dyes,
organic farming and technologies for the rural and urban poor. Although by custom, the
sisters and wives of the Murugappa men do not work in the businesses, they are the major
sources of leadership and guidance in the family's foundation and the institutions it
While success seems to overflow for the Murugappas, the family and business have also
been shaped by trauma and loss. Tragedy first struck in late 1945 at the end of WWII.
Middle son, Vellayan, age 40, was assinated while in Burma as part of a formal delegation
gauging the safety of Indian civilians returning to the newly communist country. From
then on, his two brothers functioned in the business roles as 'Mr Outside' (Murugappa) and
'Mr Inside' (AMM), under the overall leadership of the elder - their father until his death in
1949, Murugappa until his death in 1965 and AMM until his death in 1999. Beginning in the
late 1950s, the third generation sons entered the business. They successfully avoided a
common family business trap of an enterprise slumping after the founder's generation. This
was due to their elders' concerted focus on developing the talents of the younger members
as professionals through academic training, international experience, at least two years of
work outside of the family business and finally employment at a mid-level in the Group's
companies, rising one step at a time. Up through the mid- 1990s, each of the six male
family members in the third generation rose to become managing director of one or more of
the business units: MV, first son of Vellayan and the oldest of his generation, set the pace
with higher education at a college. While working at businesses within the Group, MV was
encouraged by his uncle AMM, the chairman, to play roles in the business world beyond the
family, including positions on boards, associations and delegations. He held Managing
Director or Joint Managing Director positions at Carborundum, later CUMI, III and
Coromandel until his death in 1996. Muthiah, second son of Vellayan, was adopted as a
teen by his uncle Murugappa who had no male heirs. He held several positions with the
family firms, including Ambadi Estates where he became a leading authority on planting in
southern India. He worked at Coromandel Engineering and was the Managing Director of
CUMI when he died suddenly in 1979 at age 49.
Murugappan, the third son of Vellayan trained as a civil engineer in England and used his
expertise to successfully scout unique new lines of industrial products to manufacture and
sell in India. He took over the Managing Director position of CUM I when Muthiah died and
continues as Chairman of CUMI to this day. Since 1999, he has been the family elder, but
decided against the leadership of the business, deferring to his younger brother, Subbiah.
Subbiah, the youngest son of Vellayan, has his college degree from the University ofAston
in England. He is credited with a major role in turning ailing EID Parry into a successful
business in the 1980s, serving as Vice-Chairman and Managing Director. He also had
leadership positions at TI Cycles, as the Chairman of the Murugappa Group and the
Executive Chairman of ElD Parry. In 1996 he was appointed Group CEO. Muru, the oldest
son of AMM, studied mechanical engineering in England, followed by on-the-job training at
Tube Investments Group UK. He worked at, then headed upCoromandel Engineering, the
family's construction business. He died in 1995 at age 55.
Algy is the second son of AMM. After schooling in Lawrence at Ooty and gaining his degree
in commerce in India, he went to Britain as a Management Trainee with TI. He started his
work experience at TI Cycles and subsequently moved up to No. 2 to Muthiah in the
plantation business. He was instrumental in starting up the Cholamandalam financial
services business. Currently he is Vice Chairman of the Murugappa Group and Chairman of
Since the late 1970s, six of seven sons in the fourth generation have also joined the Group,
making contributions in the business units at all levels including managing director. All men
of the same generation and age who work in the family business receive equal
compensation and perks, regardless of title, position, contribution or level of responsibility
within the organization. To enhance individual and Group success, informal mentoring
among the family members takes place with older, more experienced and/or accomp1ished
members guiding, assisting and supporting younger, less experienced members. As for
inheritance, equal thirds of the family's business shares - following the three branches of
the family emanating from the three sons of Dewan Bahadur - are divided and entrusted to
the males in each generation, whether they work in the business or not.
An important transition in organization occurred in 1985 when the Group hired for the first
time a management consultant, AD Little, to look at issues of structure and succession.
This effort resulted in a leadership succession plan in which senior members of the family of
generation filled the positions of Business Unit Managing Directors, COO and CEO
until each retired at 65, with the selection process based on merit as well as seniority.
After India signed the World Trade Organization agreement around 1995, the family saw
opportunities, including new export-oriented activities. Because of this, they realized the
necessity of making speedier business portfolio decisions than was presently possible due
to individual family members being emotionally involved in separate business units. In this
environment, even when everyone wanted to make a positive business decision for the
Group as a whole, it could not be made with the speed and nimbleness necessary in the
faster pace of the new global economy. Despite this realization, nothing changed until 1996
when Muru and MV both died at early ages. These tragic events acted as a wake-up call.
The family elder, AMM, urged a restructuring to improve the future of the business by
relying less on family members for the day-to-day management of the business units as
managing directors. Leadership of this task fell to AMM until his death in 1999, then to his
nephew Murugappan who continues as family elder today, and to Subbiah,
Appointed Group CEO in 1996.
The goal of the restructuring was to introduce change without disrupting performance in
an atmosphere of openness and support. The family leaders sought the help of an
esteemed Indian colleague to help facilitate discussions of change among family members.
Several insights about the Murugappa Group's reorganization surfaced which included the
1) To be more of a Group rather than a collection of separate entities;
2) To be more flexible in the make-up of the portfolio of businesses;
3) To have less emotional attachment by individuals to their businesses;
4) To shift away from family-led units to non-family-led units; and
5) To mentor the non-family managing directors for the long-term view.
To facilitate the change process, the family members on the board committed one to two
days a month for almost two years. This resulted in establishing a holding company - like
board with the intention of becoming an actual holding company in the future. In 1999, the
Murugappa Group created the new governance structure. They changed the leadership of
the individual business units from family members to professional managers and the family
members moved to board positions on the newly formed nine-member Murugappa
Corporate Board (MCB). This holding company-like board includes as directors five
family members (two from the third generation and three from the fourth generation), three
independent members and the Group CFO. The independent board members recognized
the importance of their participation in the transition of the company and wanted to work
with the Murugappa family members because of their exceptional experience, humility and
a willingness to listen. They also wanted to demonstrate the success of the holding
company model for family business and to ensure the family business as an important force
in the economy of India.
The new structure was innovative for the business and for India. At once, it allowed family
members on the board to focus on strategic areas across businesses for the benefit of the
entire organization. Each family member on the MCB serves as a fulltime director with three
assigned responsibilities. One is for a function across all business units, another is
to serve as mentor/overseer for one or more businesses he has typically never led before,
and the third is to guide younger family members for future governance roles. One of the
benefits of this arrangement has been the creation of knowledge transfer and technology
synergies among the Group's businesses. The move harnessed the substantial business
experience and resourcefulness of the family members for the good of the overall company,
not just a business unit, and also brought a new perspective from the independent board
members. The family members on the board have noticed great value in the restructuring,
although it is not without personal challenges because they are being stretched to perform
in areas new to them with different people, operations and situations.The changes made in
management and leadership of the business were also noticed by workers, family and
community. The family board members are aware that they are serving as role models of
the structural change, especially in bringing along other constituent groups that need to
make adjustments to the new arrangement. The new governing structures caused a shift in
decision-making to one that is more collaborative - a counter to Indian norms and values of
the traditional leadership role of elders in the family.
As the business moves from family-operated to family-governed, formalizing the family's
business approach is being discussed within the family and among the MCB members. The
family has taken steps towards articulating what they stand for by developing their
Corporate Values and Beliefs. These are listed prominently on their corporate materials,
website, and Bill of Rights and Responsibilities for Family Member Owners, all of which can
be amended by family consensus but not by vote. The development of a Family
Constitution is seen as the next important step, but the form the Family Constitution takes -
whether it should be a formal written document or an understanding by custom and practice
– is under discussion. Independent directors are trying to get the family to formalize
procedures because the businesses' complexity demands it. Family and independent
directors of the board realize that the future role of family members in the business is
evolving. They are aware that family members in future generations will have more choices
in terms of profession than in the past and may opt out of the business. Those who enter
the business need education, development and training to be future leaders in the family
business at the governing level, although they will not be managing directors of units. Up
until April 2001, the MCB was headed by a family member, Subbiah. At that time, he
stepped aside and independent board member NS Raghavan took over as the MCB's first
independent non-family executive chairman on an interim basis. The reasons for this
change were to create an environment that encourages creativity and fuels growth and to
make decision-making even more rational and less personal. The board is proceeding
slowly to find a permanent non-family MCB chairman, preferring to wait for a person who is
just right for the position. In the last decade, the Group has looked at its portfolio of
businesses with an eye towards future growth. Although many of the Group's long-term
companies are in low margin, old economy manufacturing, there has been a continued
focus on investing in and maximizing research for the good of the business. Several of the
business units have launched products developed as a direct result of its proprietary
research investments that could have global markets. The value of supporting research for
product innovation is a priority.
The company also seeks to balance and reduce its portfolio of companies to the six
business areas it knows well and in which it holds leadership positions. The Group plans to
shift reliance away from low but steady growth manufacturing to opportunities in the high
growth financial services sector through its business unit, CIFCO, where it has manageria
and financial capability. The Group is increasing exports and is exploring entirely new
opportunities in industries that are global employing the highly talented, yet cost-effective
Indian workforce. One such endeavor under development is information technology
enabled products. For the Murugappa Group family business leaders, the last three years
have been times of great structural changes, shifts in thinking and adaptation, all the while
managing a major spectrum of successful businesses and opportunities in a marketplace
that is increasingly fast paced and global. Sustaining them through these substantial efforts
in meeting success in the future have been the valuable lessons of their family's heritage.
Throughout the generations, family members in the business have used situations
presented to them as springboards from which to creatively adjust, flex and move forward
for the good of family and community. They have anticipated change, shown a willingness
to adapt and to take risks. As fourth generation Murugu reflected when he accepted, on
behalf of his family, the IMD Distinguished Family Business Award in October 2001 in
Rome, "We consider ourselves custodians to a heritage and trustees to a tradition, both
built on togetherness, trust, mutual respect, ethical values and above all dignity,
independence and discipline. As the scope and magnitude of the family and business
leadership changes, we are preparing ourselves for the great challenges ahead.
Best Practices of the Murugappa Group
• Family Development: The older generations focus on developing the
talents of the younger members, as professionals, through academic
training, international experience, at least two years of work outside of the
family business, family mentors, and a career path that provides broad
• Transitions and Re-organization: They strive to introduce change
without disrupting performance through an atmosphere of openness and
support. They draw strength during change from their heritage and values.
• Succession: Leadership roles change in a clear and unselfish way
A STUDY ON INFOSYS SUCCESSION PLANNING
The Leadership Factory
In the next five years, the four remaining founders of this iconic company will walk
away. So, Infosys is putting in place a succession pyramid for the ages that runs
deep and is 750 people wide.
MATTHEW FRANK BARNEY HAD A PERSONAL connection with India that goes back to
1997. The 41-yearold American met his Bengali wife, Shreya, in a “romantic semi-
conductor factory” in Orlando. Last year, Barney also sealed a professional connection with
India. He, Shreya and their two young kids moved to Mysore, where Barney joined Infosys
Technologies for an assignment that will have a great bearing on how this iconic Indian
software company is run and perceived for generations to come.
Barney is the head of leadership development at Infosys Leadership Institute. Never in the
storied 29-year history of Infosys has so much hinged on this responsibility. The seven
founders, each of them pillars in their own right, have built and run a company that is solid
in its business construct and has values that are unimpeachable.
But they are leaving, one by one. Ashok Arora left in 1989 and NS Raghavan in 2000. Last
year, Nandan Nilekani went to work for the
government. In the next five years, the remaining four — NR Narayana Murthy, S ‘Kris’
Gopalakrishnan, SD Shibulal and K Dinesh — will also walk away from Infosys, in
deference to Murthy’s decree that all founders retire from operational roles by the age of 60
and from the board by 65. Says Barney: “It’s an inflexion point for Infosys, and we need to
prepare for it.”
In his earlier assignments, Barney helped some of the world’s top companies, including
Motorola, AT&T and Lucent Technologies, to identify their next set of leaders. But, with
Infosys, he’s working for the first time with founders seeking to pass on the baton.
In July, Barney kicked off a hunt to identify 750 leaders, across levels, in Infosys — the
largest such exercise the company has ever undertaken. It’s not a random, one-time
exercise to meet a pressing need. It’s a formal, structured response that is intended to
become an integral part of the company. It will, continuously, identify the sparks in the
company and groom them to become leaders.
Infosys has plenty of leaders, says Tv Mohandas Pai, who heads HR in Infosys and who
brought in Barney. “We believe we have around 100 leaders who can be CEOs of
companies of different sizes,” says Pai. “That doesn’t mean, though, all of them can
become the CEO of Infosys.” What Infosys lacked all these years was a system that could
efficiently identify, organise and hone that leadership, especially in the lower ranks. Which
is what Barney and his seven-member team are putting in place.
TO EXPLAIN THAT SYSTEM, ONE NEEDS to start at the top. At the top, there is a 13-
member board. Five of its members are ‘executive members’, which means they also hold
operational roles in Infosys. CEO Kris Gopalakrishnan and COO SD Shibulal are both
members of the board.
Below the board is a four-member executive council: Subhash B Dhar, Chandra Shekar
Kakal, BG Srinivas, and Ashok Vemuri. The highest decision-making body below the board,
the executive council is the grooming place for the next CEO, CFO and COO. But the
beehive of activity is below the executive council. Out here, Barney has created a three-
tiered pyramid that is intended to identify leaders at all levels from the 115,000 employees
in Infosys. At the first level, or tier-I, Infosys is looking to identify 50 Infoscians who can join
the board in three to five years. “We want each leader to be outrageously successful before
they even come to my process,” says Barney of this set. At this leadership level, people
typically have about 15 years of experience, and are geographical heads or business unit
heads. “We need to make sure that the person is passionate about business,” says CEO
Kris, of this elite pool. “Also, the person should know Infosys well. That’s why we have
always been saying that the leaders should come from inside and they should have a
At the second level, the hunt is for leaders capable of graduating to tier-I or running a
business unit in three to five years. The target number is 150. The candidates here are
vice-presidents and those reporting to unit heads, and have about 10 years of experience.
At the last level, the search is for leaders capable of graduating to tier-II position. This pool,
which is intended to be 550-strong, is chosen from business and technology managers who
are associate vice-presidents or below.
They have about 5-7 years of experience. They are like the Suresh Rainas of the Indian
cricket team. BEFORE BARNEY AND THIS THREE tiered structure, Infosys was identifying
and grooming leaders, but it was more unstructured and the leadership pool was smaller.
But as the company grew and its operations became more complex, as it went beyond its
founders, the imperative for a leadership system increased.
“They are the first among major Indian companies to go through this transition,” says John
McCarthy, senior vice-president and principal analyst, Forrester Research. “It’s always a
challenge when you move the original management out. So far, they have done it in a
transparent and orderly manner.” But a CEO of a leading rival says
the founders will be missed. “Infy is surely ahead in terms of planning its transition, but it will
miss Murthy’s vision and Nandan’s ability to win and retain large accounts like BT,” he says.
Professor David V Day, who is helping Infosys as an external consultant to identify
sustainable leadership models, advises against benchmarking to the past. “First of all, you
can never replace such visionary founders like Mr Murthy and others — they are really one
of a kind. You first have to let go of the assumption that they are going to be fully replaced,”
he says. “The challenge then is how are we going to develop leaders we are going to need
not just now, but also in the future.”
Barney has some answers. “Beginning this year, we will have the ‘tier top-off’ process every
year,” he says. The ‘tier top-off’ is essentially a routine measurement of the numerical
deficiency in the company’s leadership pools.
The last time, Infosys did such an exercise, it was 2007 and its leadership pool was about
Barney and his seven-member team are now looking to do this annually, with a target size
of 750. At every level, currently, Infosys is short. Against its earmarked number of 50
leaders in tier-I, Infosys has identified 37. Down the ranks, the vacuum increases. In tier-II,
the number sought is 150 and it has identified 120. In tier-III,
against 550, it has identified only 200. At each level, the method of identifying talent is
different. Tier-I is self-nominated. Infoscians who think they are up to it can apply. Their
candidature is decided after an interview with the board. For tier-II, it’s the tier-I leaders who
work with the members of the Infosys Leadership Institute and the heads of business units
to identify potential leaders. Tier-III is through a computer-adapted assessment tool. “The
tier-I leaders are fewer and relatively easier to
find,” says Barney, who speaks fluent Bangla. “But when I get to tier-III, there are nearly
10,000 people who can apply. With the tool, I can do it in less than half the time we did the
NEXT COMES THE GROOMING. INFOSYS draws on several resources to groom leaders.
mentoring, leadership workshops and simulation exercises. Mentoring is a big part of the
initiation, and it runs
through Infosys. Murthy mentors the board. The board members, including other founders,
mentor 6-8 leaders at
any point of time from the tier-I pool, which includes the four members of the executive
“We normally mentor different people every year,” says Shibulal. “That’s because what I
can mentor, say, Kris cannot, and vice versa.” So, Shibulal mentors on operations and
execution, Kris on innovation and technology,
Murthy on leadership, Dinesh on quality. Nilekani, when he mentored, was doing strategy.
When Pai mentors, he will focus on entrepreneurship. Adds Shibulal: “It’s more about
experience sharing and passing on the belief, and also how you would have dealt with a
For future leaders like Jamuna Ravi, who is currently vice-president and head of Infosys’
European business for banking and capital markets, mentoring by board members is a
huge bonus. Ravi was selected as a tier-I leader about three years ago and is currently
being mentored by Shibulal. “When I was the delivery head for banking and capital markets,
I used to share my ambitions with him (Shibulal) and also ask about the new competencies
I wanted to acquire,” she recalls. “He told me to make my competencies visible to other
people, in terms of positioning for the next role.”
Barney and his seven-member team also put the 750 potential leaders through exercises
that simulate business challenges such as coping with an unprecedented economic crisis or
renegotiating contracts withcustomers. Day, the Woodside Professor of Leadership and
Management at the University of Western Australia Business School, compliments Infosys
on how it is going about it. “I don’t think anyone, with the exception of perhaps the US
Army, is doing a little bit around simulation, or is doing this in any way with regards to
leadership development,” he says.
KRIS SAYS THE FOUNDERS WANT TO BE around to see the big transition through. Part
of that handover is passing on the values that Infosys was built on. “We have created a
platform with certain values, and we would like it to command respect, says Kris. “That’s
very, very important for the founders.” Yet, some things will change as Infosys ceases to be
a founder-run company. Manish Tandon, head of the independent validation and testing
business, says some tier-I leaders like him are bringing a new perspective on operating in a
rapidly changing environment. “It’s a win-win because I’m seeing more fresh ideas in
discussions,” he says. “People like us are also asking the right questions, challenging the
status quo and forcing a rethink.” Ritesh Idnani, COO of Infosys’ back-office business, says
there is room to challenge old practices. “When people have credibility in the system, they
can challenge,” he says. “Also, it helps that I’m willing to go and stick my neck out.” For
Infosys, because of their risk-taking abilities, such leaders are important to lead
transformational initiatives. Idnani, for example, scaled up the company’s BPO business
from $43 million in 2005 to $316 million by 2009. He also set up its Brazil unit. Subhash
Dhar, one of the four executive council members, says a company like Infosys that is
aspiring to get out of the founders’ paradigm has to look outside for examples. But the next
leadership, he adds, has to come from within. “Since we are a knowledge services
company, there are over 100,000 aspirants for the top roles. That’s a very high aspiration
quotient,” says Dhar. “It’s a good problem to have.”
What’s encouraging for the next set of leaders is that the founders have ruled out their
children taking over. “As one of the aspirants, I feel empowered that one day a professional
will take over,” says Dhar, who started his career at Tata Unisys and joined Infosys around
13 years ago. “That it’s not going to be run like a family business is a huge, huge thing,” he
says. But to match, leave alone emulate, the work of the founders, Barney’s 750 leaders,
and all those who follow them, will have to step up.
The Infosys Leadership Tree
BOARD OF DIRECTORS
Srinath Batni K Dinesh S Gopalakrishnan TV Mohandas Pai SD Shibulal
Subhash B Dhar Chandra Shekar Kakal BG Srinivas Ashok Vemuri
The idea formed around 3 years ago, it's the decision-making body below the board. Its
members are leaders who can become the next CEO, COO and CFO, take on other top
executive roles, even join the board.
50 Target Number
37 Current Number
The idea Leaders who can join the board in 3-5 years
Running a profit and loss account, geographical heads, business unit heads
About 15 years
150 Target Number
120 Current Number
The idea Leaders who can graduate to tier-1, run a business unit in 3-5 years
Vice-presidents and those reporting to unit heads
About 10 years
550 Target Number
200 Current Number
The idea Potential leaders reporting to tier-II and capable of taking their position
Business & technology managers reporting to tier-II, associate vicepresidents and below
We want each leader to be outrageously successful before they even come to my process.
MATTHEW FRANK BARNEY Head Of Leadership Development, Infosys Leadership Institute
We (the board) normally mentor different people every year. What I can mentor, say, Kris cannot,
and vice versa.
SD SHIBULAL Chief Operating Officer, Infosys
You first have to let go the assumption that they (visionary founders like Mr Murthy) are going to be
PROFESSOR DAVID V DAY External Consultant To Infosys
At the end of the day, the crux of the issue lies in the fact that it is the shareholders‘
representatives who should own the succession planning process. Corporate India is
placed at a critical juncture where the massive inflow of funds will reflect in the gradual
change from concentrated ownership (Government, Promoter families) to a more diffused
and diverse ownership pattern. Regardless of the ownership structure of a company, the
shareholders‘ representatives (company Board or the (cabinet of ministers or patriarchs of
Promoter families) will need to create mechanisms and processes to constantly groom a
leadership pipeline and to identify the best candidate – internal or external – for leading the
company into the future and creating shareholder value. So Indian companies have finally
taken their first step of understanding the importance of succession planning and taking
necessary steps to put it into action for the welfare of the company and its shareholders
against the age old practice followed in India of handing the heir the reigns of the company.
There are a number of areas to keep our eye on as part of our succession
planning activities. Top of the list has to be that as we formulate our ideas to get those
people organized to be top class performers, we need to know how they are doing, right
now. The most important priority, above all, is that we keep our eye on overall performance
of the business. Then, it‘s all about those who work for we, because from them, and them
alone, will our business success come now, and into the future. Managing Performance Of
All Is Vital: We need to carefully use our performance management skills for all of our
people, to make sure that we are clear about their current performance, as well as – for our
succession planning needs – that we know what their potential is too. So it is certainly
something that we have to keep a close eye on as a manager. And if we do not have any
kind of performance management measures then we will struggle to manage our business
adequately now, let alone later on. Performance Management Matters in Succession
The performance management part of succession planning is important because it gives we
insights into individuals and their actual performance as well. If we are closely observing
them and prepared to challenge in uncharted waters, their potential for the mid-to-long
term, will start to fill the spaces that we will need as our team gradually moves along and
we need great replacements.