Succession planning with reference to TATA Groups

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.
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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
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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

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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

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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.
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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
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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"

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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.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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) http://articles.economictimes.indiatimes.com/2011-0519/news/29560492_1_russi-mody-jack-welch-succession-planning
4) http://www.ehow.com/list_6725168_types-succession-planning.html
5) http://www.ehow.com/list_6584811_succession-planning-methods.html
6) http:// www.citehr.com
7) http://www.tatacentralarchives.com/history/family_tree/family_tree.pdf

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Succession planning with reference to TATA Groups

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