Succession planning with reference to TATA Groups


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A detailed document describing the process & procedure of Succession Planning. And also the process adopted in TATA Groups to plan its successor for Ratan Tata.

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Succession planning with reference to TATA Groups

  1. 1. COMPREHENSIVE AREA SEMINAR SUCCESSION PLANNING WITH REFERENCE TO TATA GROUPS Introduction “Good succession planning is not just looking at who is next in line for a slot, but looking at people early in their careers and determining what kind of training they need to become leaders.” There was a time when organizations had many managerial levels, and the abundant leaders spent a substantial amount of time in strategic activities such as process improvement, training and mentoring. It was every supervisor’s responsibility to develop the next generation of leaders. The executives who rose through the ranks during this period are now retiring. It has been said that 1 in every 5 senior executives of the Fortune 500 are eligible to retire, and more than 50% of all senior government executives in the US are also eligible to retire. An ASSOCHAM Business Barometer (ABB) Survey has revealed that India Inc. has a long way to go for putting in place its succession plan at top level. The ABB Survey of 275 leading management consultants, corporate, academicians and professionals on ‘Missing Link in Succession Plan’ found that only a 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, ‘4’ on a scale of 10 in terms of long term planning and grooming of the successor to the head of a firm. Almost half of the Indian top 100 organizations are family run businesses. Though astute in business, when it comes to sorting out matters of succession some of India's oldest business families may still need to do their homework. Be it the Ambanis of Reliance Industries, the Bajajs of Bajaj Auto, the Nandas of Escorts, or the Modis of Modi Rubber - each family has, in the recent past, faced succession and ownership issues and found them tough to resolve. Except for a handful of companies like Infosys; where the passing of baton from N.R. Narayana Murthy to Nandan Nilekani then to Kris Gopalakrishnan later to S. D. Shibulal, happened without a hitch. S.I.T PGDMS & RC 1
  2. 2. Definition: “Succession Planning can be defined as a purposeful and systematic efforts made by an organization to ensure leadership continuity, retain and develop knowledge and intellectual capital for the future, and encourage individual employee growth and development”. - (Schein, 1997; cited in Caruso, Groehler & Perry, 2005). Objectives 1) To identify and proactively plan for critical work force positions, by developing a pool of potential successors and encouraging a culture that supports knowledge transfer and employee development. 2) To build human resource programs that attract and retain qualified individuals. 3) To implement a framework that identifies the competency requirements of critical positions, assesses potential candidates and develops required competencies through planned learning and development initiatives. Models of succession Planning: There are various models of succession planning. They are, 1) Succession planning by position - management driven: Incumbent identifies the individual(s) who are in their view best qualified to move into the position in the short term (say within 1 year); the medium term (within 2 years) or the longer term (3-5 years); The incumbent may also identify their perception of the development needs of the candidates they have named; 2) Creating succession planning "pools": In this model, high potential candidates are identified within the organisation as the senior managers of the future; They are usually selected by a task force of senior managers (often with the assistance of Human Resources) who set aside a day or more to go through a list of all employees above a certain level and assess S.I.T PGDMS & RC 2
  3. 3. which individuals should be identified as high potential. To facilitate decision making, they will often agree on some criteria by which to select the individuals, and may have the person's most recent performance appraisal as an additional resource. Once the pool has been identified, those who make the list will generally receive some special attention. How much attention will depend on the organisation's willingness to make a financial commitment to the program? Often the Human Resource Department puts together a "fast track" program in which they assist the person to develop an individual development plan. They may provide some group training; they may institute a mentoring program, and identify certain training programs these people should attend. 3) Top-down/bottom-up succession planning: This model is based on the current and expected future needs of the organisation, as well as on ongoing two-way communication with employees. This process involves: Senior management as a group determines what competencies are required to enable a person to take on the key roles. Certain criteria for progression are determined as across-the-board requirements for development, for example, education levels, organisational cross training, participation in management training. All employees at a pre-determined level are provided with the information developed by Senior Management by a session about succession planning and career development. This session outlines clearly the requirements for progression in the organisation. This enables staff to determine whether they are interested or not in progression; and to self-identify if they wish to be involved in a program which will help them to meet the criteria for development and progression; Employees who signal their interest in progression then participate in a workshop in which they are given guidance and led through such processes as: a) Using 360 degree feedback to determine their strengths and weaknesses particularly relating to management skills, b) Developing their own individual development plan and reviewing it with other appropriate people, c) Learning how to take responsibility for their own career growth, and S.I.T PGDMS & RC 3
  4. 4. d) Considering what would be good "next moves" for them to make in their careers. Assessment centres could also be used as part of the workshops. Challenges in Succession Planning a) Lack of funding for leadership development b) Inability to locate or create a pool of active and passive candidate c) Lack of assessment tools d) Lack of succession planning tools and career development tools e) Inability to identify the future talent needs of the organization f) Lack of interest from senior executives Guiding Principles 1) Supports the five fundamental values of the New Brunswick public service: Integrity, Respect, Impartiality, Service and Competence. 2) Conducted in accordance with the Civil Service Act, its regulations and the policies established by the Board of Management. 3) Strikes a balance between the values of fairness, accessibility, transparency, and efficient use of government resources for current and future needs. 4) Aligned with current and future business needs of government and departmental/agency strategic plans; 5) Aligned with the goals of the Corporate HR Plan and the Executive Development Strategy to develop current and aspiring leaders; 6) Candidates are assessed using methods that are competency-based and free from favouritism; 7) Communication is open and transparent. Benefits of Succession Planning 1) Aligning strategic goals and human resources to enable the “right people in the right place at the right time” to achieve desired business results 2) The development of qualified pools of candidates ready to fill critical or key positions S.I.T PGDMS & RC 4
  5. 5. 3) Providing stability in leadership and other critical positions to sustain a high-performing public service and ensure the uninterrupted delivery of services and programs. 4) Identifying workforce renewal needs as a means of targeting necessary employee training and development 5) Helping individuals realize their career plans and aspirations within the organization 6) Improving employees’ ability to respond to changing environmental demands, and 7) The opportunity for timely corporate knowledge transfer Succession Planning Process Step 1: Link Strategic and Workforce Planning Decisions This step involves: a) Identifying the long-term vision and direction b) Analyzing future requirements for products and services c) Using data already collected d) Connecting succession planning to the values of the organization e) Connecting succession planning to the needs and interests of senior leaders. S.I.T PGDMS & RC 5
  6. 6. Step 2: Analyze Gaps This step involves: a) Identifying core competencies and technical competency requirements b) Determining current supply and anticipated demand c) Determining talents needed for the long term d) Identifying “real” continuity issues e) Developing a business plan based on long-term talent needs, not on position replacement. Step 3: Identify Talent Pools This step involves: a) Using pools of candidates vs. development of positions b) Identifying talent with critical competencies from multiple levels — early in careers and often c) Assessing competency and skill levels of current workforce, using assessment instrument(s) d) Using 360° feedback for development purposes e) Analyzing external sources of talent. Step 4: Develop Succession Strategies This step involves: a) Identifying recruitment strategies:  Recruitment and relocation bonuses  Special programs b) Identifying retention strategies:  Retention bonuses  Quality of work life programs c) Identifying development/learning strategies:  Planned job assignments  Formal development  Coaching and mentoring  Assessment and feedback  Action learning projects  Communities of practice S.I.T PGDMS & RC 6
  7. 7. Step 5: Implement Succession Strategies This step involves: a) Implementing recruitment strategies (e.g., recruitment and relocation bonuses) b) Implementing retention strategies (e.g., retention bonuses, quality of work life programs) c) Implementing development/learning strategies (e.g., planned job assignments, formal development, Communities of Practice) d) Communication planning e) Determining and applying measures of success f) Linking succession planning to HR processes  Performance management  Compensation  Recognition  Recruitment and retention  Workforce planning g) Implementing strategies for maintaining senior level commitment. Step 6: Monitor and Evaluate This step involves: a) Tracking selections from talent pools b) Listening to leader feedback on success of internal talent and internal hires c) Analyzing satisfaction surveys from customers, employees, and stakeholders d) Assessing response to changing requirements and needs. Pitfalls for Succession Planning: 1) Focusing only on the "technical competencies" and failing to consider the team-building and leadership development requirements 2) Underestimating people within the organization or overlooking employees that don't appear to fit your standard "company template" S.I.T PGDMS & RC 7
  8. 8. 3) Implementing a program that is designed for upward mobility only - lateral succession moves should also be included in the plan 4) Failing to offer the appropriate training and developmental opportunities. 5) Creating a development program that only offers generic "leadership" training programs 6) Not holding managers & leaders accountable for succession planning Not sharing the data with employees - you run the risk of losing promising employees if they don't feel the company has a plan for their development 7) This is why succession planning must be a coordinated effort between HR and line and senior executives must ensure the line managers get involved with their own division succession planning efforts. 8) Finally, don't make the mistake of thinking succession planning is only concerned with "upward" succession. Lateral assignments may also be used because there are fewer opportunities as you progress upward in the organization. 9) It's the role of every manager to help their promising subordinates develop their fullest potential by continually challenging them and increasing their leadership competencies. S.I.T PGDMS & RC 8
  9. 9. Introduction to TATA Group: The group takes the name of its founder, Jamsetji Tata a member of whose family has almost invariably been the chairman of the group. The Previous chairman of the Tata group is Ratan Tata who took over from J.R.D Tata 1991 and is currently one of the major international business figures in the age of globality. The Company is currently in its fifth generation of family stewardship. Tata group – promoter holding companies: Tata Sons Tata Sons is the promoter of the major operating Tata companies and holds significant shareholdings in these companies. Tata companies are commonly referred to as the Tata group and the Chairman of Tata Sons as Chairman of the Tata group. The company’s principal activities are: i. To invest in operating companies to support their growth ii. To promote and invest in new businesses iii. To maintain its shareholding in major operating companies Tata Quality Management Services, a division of Tata Sons, assists Tata companies in their business excellence initiatives through the Tata Business Excellence Model, Management of Business Ethics and Tata Code of Conduct. Board of directors, Tata Sons 1) Cyrus P Mistry, Chairman (Formerly, Ratan Tata) 2) Farrokh K Kavarana 3) R Gopalakrishnan 4) Ishaat Hussain 5) RK Krishna Kumar S.I.T PGDMS & RC 9
  10. 10. Tata Industries Tata Industries was set up by Tata Sons in 1945 as a managing agency for the businesses it promoted. Following the abolition of the managing agency system, Tata Industries' mandate was recast, in the early 1980s, to promote Tata's entry into new and high-tech businesses. Tata Industries has initiated and promoted Tata ventures in several sectors, including control systems, information technology, financial services, auto components, advanced materials, telecom hardware and telecommunication services. Tata Industries’ main activities are: i. To promote Tatas’ entry into new businesses. ii. To maintain shareholding in promoted companies. iii. To invest in operating companies to facilitate growth. Board of directors, Tata Industries 1) Cyrus P Mistry, Chairman (Formerly, Ratan Tata) 2) Farrokh K Kavarana 3) RK Krishna Kumar 4) Ishaat Hussain 5) S Ramadorai 6) B Muthuraman 7) Prasad R Menon 8) Ravi Kant 9) KRS Jamwal, executive director 10) RR Bhinge, executive director. S.I.T PGDMS & RC 10
  11. 11. SUCCESSION PLANNING IN TATA Ratan Tata has taken the group he inherited from his uncle JRD from $5 billion to $70 billion. However, it has been a difficult search to find a successor to carry forward his vision. The group, for the first time, is looking for someone outside the Tata family to head the group even though it has not stopped looking within. S.I.T PGDMS & RC 11
  12. 12. S.I.T PGDMS & RC 12
  13. 13. Tata Sons, the holding company of the Tata Group, announced the members of the five members Committee announced to find a successor to the Group Chairman Ratan Tata who is due for retirement by December 2012. The members include: 1) N A Soonawala Vice Chairman of Tata Sons, 2) Shirin Bharucha, a lawyer who has worked with Tata Group for several years, 3) R K Krishnakumar, Director, Tata Sons, 4) Cyrus Mistry, Board Member, Tata Sons and an outsider, 5) Lord Bhattacharya, Director WMG-Innovative Solutions. The search committee has now gone beyond the brief of merely searching for a leader and recommended a restructuring of the Tata Sons board by bringing in independent directors and younger executives from group companies. The search for a successor was done for almost one year after the committee being formed. Executives Nominated for becoming Successor (by Committee): Name Position in their Respective Company’s Name of the Company 1) Anshu Jain Head of Corporate & Investment Deutsche Bank. 2) Arun Sarin Former CEO Vodafone. Sl. No. S.I.T PGDMS & RC 13
  14. 14. 3) Indira Nooyi CEO PepsiCo. 4) Ishaat Hussain Finance Director TATA Sons. 5) S Ramadorai Vice Chairman TCS 6) R GopalKrishnan Director TATA Sons 7) Noel Tata Managing Director Trent. S.I.T PGDMS & RC 14
  15. 15. Challenges for Committee for the Selection of Successor: 1) Looking for someone to run Tata Sons (which is a holding company) or someone to head the whole group, which is what Ratan Tata is doing now? 2) Why a professional CEO with the experience of running multinational companies should join a group’s privately-owned holding company? As In Ratan Tata’s case, the jobs of Tata Sons’ chairman and group executive head were combined. And he was a Tata. The same symbolised the unity of the two objectives — being head of the holding company and boss of the group. 3) Can a non-Tata manage to do both? To answer this, we need to understand the business of Tata Sons. It is a holding company, and its main business is to get its shareholdings to deliver returns. In short, its business is portfolio management. The purpose of hiring a professional CEO is to maximise shareholder value. A holding company needs a fund manager and not just a professional CEO. Is it any surprise Indira Nooyi, Arun Sarin & others have not expressed any great enthusiasm for a fund management job. Hence resulting in selecting Cyrus Mistry Reasons for choosing Cyrus Mistry: 1) A major shareholder in TATA Sons. 2) Experience of being a Managing Director in Shapoorji Pallonji Mistry’s Construction Group. 3) Age and belonging to Pharsi religion. 4) His career achievements and his financial knowledge were considered at the time of his vote. 5) The family is very familiar with the Tatas and that could be one of the influencing factors & only person who knows totally about TATA than compared to other people shortlisted for the post. S.I.T PGDMS & RC 15
  16. 16. Conclusion: Thus, the study on Succession Planning with reference to TATA GROUPS is hereby concluded. The study was of a great help to provide an insight on Succession Planning and on its models. The study also helped in order to know the path followed by the Committee of TATA to find a successor to Ratan Tata. The study partially enlightened the approach of TATA’s towards the selection of a successor. Last but not the least; Succession Planning is the best tool to ensure the continuum of effective leadership if it is focused towards the impartial selection of the Successor. S.I.T PGDMS & RC 16
  17. 17. Bibliography: 1) Personnel Management – C B Mamoria & V.S.P Rao – Himalaya Publishing House – Thirtieth Edition. 2) Human Resource Planning – Dipak Kumar Bhattacharya – Excel Books – Second Edition 3) 4) 5) 6) http:// 7) S.I.T PGDMS & RC 17