SlideShare a Scribd company logo
1 of 35
Download to read offline
1
CONTENT
Sr. No. PARTICULARS Page No.
CHAPTER I – INTRODUCTION
1.1 Introduction to HRM 3
1.2 Importance of HRM 3
1.3 Introduction to Succession Planning 5
CHAPTER II – SUCCESSION PLANNING
2.1 Definition 5
2.2 Enforcing the Succession Plan 6
2.3 Coverage 6
2.4 The Role of HR 7
2.5 Importance of Succession Planning 8
2.6 Succession Planning Process 10
2.7 Advantages of Succession Planning 14
2.8 Mistakes to be Avoided in Succession
Planning
15
CHAPTER III – CASE STUDY OF TATA GROUP
3.1 Introduction 17
2
3.2 Early Years of Mr. Ratan Tata 19
3.3 Building the TATA Corporate Brand 21
3.4 TATA Group – Today & Tomorrow 22
3.5 The Challenges Before the Successor 24
3.6 The Race for Succession 26
3.7 About Cyrus Pallonji Mistry 28
CHAPTER IV – CONCLUSION
4.1 Aftermath of the Decision 31
4.2 Conclusion on Succession Planning 33
CHAPTER V - APPENDIX
5.1 Bibliography 35
3
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.
Importance of HRM:-
1. Recruitment and Training
This is one of the major responsibilities of the human resource team. The HR managers
come up with plans and strategies for hiring the right kind of people. They design the
criteria which is best suited for a specific job description. Their other tasks related to
recruitment include formulating the obligations of an employee and the scope of tasks
assigned to him or her. Based on these two factors, the contract of an employee with the
company is prepared. When needed, they also provide training to the employees
according to the requirements of the organization. Thus, the staff members get the
opportunity to sharpen their existing skills or develop specialized skills which in turn,
will help them to take up some new roles.
2. Performance Appraisals
HRM encourages the people working in an organization, to work according to their
potential and gives them suggestions that can help them to bring about improvement in it.
The team communicates with the staff individually from time to time and provides all the
necessary information regarding their performances and also defines their respective
4
roles. This is beneficial as it enables them to form an outline of their anticipated goals in
much clearer terms and thereby, helps them execute the goals with best possible efforts.
Performance appraisals, when taken on a regular basis, motivate the employees.
3. Maintaining Work Atmosphere
This is a vital aspect of HRM because the performance of an individual in an
organization is largely driven by the work atmosphere or work culture that prevails at the
workplace. A good working condition is one of the benefits that the employees can
expect from an efficient human resource team. A safe, clean and healthy environment can
bring out the best in an employee. A friendly atmosphere gives the staff members‘ job
satisfaction as well.
4. Managing Disputes
In an organization, there are several issues on which disputes may arise between the
employees and the employers. You can say conflicts are almost inevitable. In such a
scenario, it is the human resource department which acts as a consultant and mediator to
sort out those issues in an effective manner. They first hear the grievances of the
employees. Then they come up with suitable solutions to sort them out. In other words,
they take timely action and prevent things from going out of hands.
5. Developing Public Relations
The responsibility of establishing good public relations lies with the HRM to a great
extent. They organize business meetings, seminars and various official gatherings on
behalf of the company in order to build up relationships with other business sectors.
Sometimes, the HR department plays an active role in preparing the business and
marketing plans for the organization too.
Any organization, without a proper setup for HRM is bound to suffer from serious problems
while managing its regular activities. For this reason, today, companies must put a lot of effort
and energy into setting up a strong and effective HRM.
5
INTRODUCTION TO SUCCESSION PLANNING
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 potential. 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.
Definition
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-term successors).‘
According to Hirsh, succession planning sits inside a very much wider set of resourcing and
development processes called 'succession management', encompassing management resourcing
6
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
organization;
 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;
 Moving to another position and different set of responsibilities within the organization.
Coverage
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.
7
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 expertise. 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 databases.
8
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:-
1. 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.
2. 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 goals.
3. 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.
4. 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
9
dependents, life insurance premiums paid for by the company, your car, professional
memberships, and other business-related expenses.
5. 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.
6. 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 internal candidates.
7. 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.
10
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.
Success factors
There are several factors typically found in successful succession planning initiatives. For
example:-
 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.
11
Steps
Step 1: Link Strategic and Workforce Planning Decisions
This step involves:-
1. Identifying the long-term vision and direction.
2. Analyzing future requirements for products and services.
3. Using data already collected.
4. Connecting succession planning to the values of the organization.
5. Connecting succession planning to the needs and interests of senior leaders.
Step 2: Analyze Gaps
This step involves:-
1. Identifying core competencies and technical competency requirements.
2. Determining current supply and anticipated demand.
3. Determining talents needed for the long term.
4. Identifying ―real‖ continuity issues.
5. Developing a business plan based on long-term talent needs, not on position replacement.
Step 3: Identify Talent Pools
This step involves:-
1. Using pools of candidates V/s development of positions.
2. Identifying talent with critical competencies from multiple levels—early in careers and
often.
3. Assessing competency and skill levels of current workforce, using assessment
instrument(s).
4. Using 360° feedback for development purposes.
5. Analyzing external sources of talent.
12
Step 4: Develop Succession Strategies
This step involves:-
1. Identifying recruitment strategies:-
 Recruitment and relocation bonuses.
 Special programs.
2. Identifying retention strategies:-
 Retention bonuses.
 Quality of work life programs.
3. Identifying development/learning strategies:-
 Planned job assignments.
 Formal development.
 Coaching and mentoring.
 Assessment and feedback.
 Action learning projects.
 Communities of practice.
 Shadowing.
Step 5: Implement Succession Strategies
This step involves:-
1. Implementing recruitment strategies (e.g., recruitment and relocation bonuses).
2. Implementing retention strategies (e.g., retention bonuses, quality of work life programs).
3. Implementing development/learning strategies (e.g., planned job assignments, formal
development, Communities of Practice).
4. Communication planning.
5. Determining and applying measures of success.
6. Linking succession planning to HR processes.
 Performance management.
 Compensation.
 Recognition.
13
 Recruitment and retention.
 Workforce planning.
7. Implementing strategies for maintaining senior level commitment.
Step 6: Monitor and Evaluate
This step involves:-
1. Tracking selections from talent pools.
2. Listening to leader feedback on success of internal talent and internal hires.
3. Analyzing satisfaction surveys from customers, employees, and stakeholders.
4. Assessing response to changing requirements and needs.
14
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 Planning
can:-
1. 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 apply.
2. 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 this
happen.
3. 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.
4. Help you plan for the future direction of the company.
15
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
mistakes:-
1. 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.
2. 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.
3. 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 responsibility.
4. 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
16
phased way - either from the top down or else starting in specific divisions or locations
with greatest need.
5. 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.‖
6. 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.
7. Lack of understanding how it works and how it benefits the organization.
8. Lack of a formal written plan for the person or position(s).
9. Lack of availability of human and financial resources; lack of budgetary commitment.
10. Superficial approach; lack of real understanding of the procedures, processes and
requirements of each area the individual is exposed to during the process.
11. 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.
12. Failure to identify key employees who may have concerns with your succession plan.
13. Failure to plan for disability.
14. A rigid, inflexible plan NOT tailored to the needs and abilities of the personnel involved.
15. Too long a wait for real movement/promotion, disillusionment, may result in some
people leaving due to apparent inertia in the system.
16. 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.
17. Complex program, requiring considerable paper work, follow-up, reporting.
17
Case Study of TATA Group
The Tata case is interesting. From what is publicly known, succession planning was not a strong
point until the late 1980s. In the late 1970s, the unsuccessful succession planning attempt by
Voltas is etched in the public mind.
The Tata‘s have gone down this road before. In 1981, group company Voltas hired a search firm
to find a CEO. ―There was a worldwide search,‖ said P.N. Singh, who was in charge of HR at
Voltas when the exercise took place. ―A global agency was employed. There were ads in global
media and people were asked to apply for the job of CEO. Chairman Tobaccowala initiated a
high visibility, open search which resulted in the recruitment of Ramesh Sarin of ITC as the CEO
and finally, Sarin from tobacco-to-hotels major ITC was chosen as MD.‖ The experiment
worked for only a few years. Subsequent events proved that Tobaccowala had no intention of
giving up his executive power and authority. Inevitable clashes followed and Sarin fell out and
moved on. ―It was a question of culture and control,‖ says Singh, who is now chairman of Grid
Consultants, which conducts Blake & Mouton grid seminars. ―ITC had a different culture and
Tobaccowala had a different idea of control. He was unwilling to let go. Tobaccowala was an
‗entrepreneur‘ and Sarin was a manager. So the two should actually have worked well together.‖
But something positive by way of process must have happened during the last 20 years under
Ratan Tata. It is known that Ratan Tata set up a group HR function as part of his re-organization
plan in the 1990s. The intent was to introduce good practices within the companies with respect
to talent management and succession planning. While there is not much outside information
about how much progress the companies have made, something right must be going on. The
succession transitions are impressive from an outsider's perspective. Further, the board directors
seem to be involved and to drive the leadership changes in the companies.
In Tata Steel, Jamshed Irani became CEO in 1991 amidst tumultuous circumstances of the Russi
Mody departure. In earlier interviews, Irani had mentioned that by the late 1990s, he presented to
Ratan Tata a comprehensive review of possible successors; together, they zeroed in on a few
possibilities. From this list, B. Muthuraman emerged as the CEO in 2001. Muthuraman, it is
learnt, did a similar exercise and discussed it quite early on with Ratan Tata and the board while
choosing his successor in 2009. He too accomplished a successful transition.
18
In Tata Consultancy, S. Ramadorai took over from the legendary F.C. Kohli in 1996. He was
filling big shoes. He grew the business dramatically over the next decade and a half, including
the IPO of the company. By mid 2000s, he is reported to have made a short list of potential
successors for discussion with Ratan Tata and the board. From this list emerged N.
Chandrasekharan. Ramadorai walked out of his TCS office on the date of his retirement so that
his successor would have a free hand.
In Tata Chemicals, change was sought in 2001. Outsider Prasad Menon was recruited to succeed
Manu Seth. Perhaps because of what he had learnt at ICI, his earlier company, Prasad Menon
started to think about succession early on. Apart from pacing potential, solid internal leaders, the
leadership brought in a young TAS officer into the company and tested him through hugely
challenging assignments. All the identified candidates were watched, coached, talked about and
nominated to Advanced Management Programmes. Finally a choice was made by selecting R.
Mukundan, with a short bridging role by veteran Homi Khusrokhan.
The successful transitions completed in the listed Tata companies during the last two decades are
impressive: Titan (where Xerxes Desai gave way to Bhaskar Bhat), Voltas, Rallis, and Indian
Hotels. The conclusion is that whatever the process, the Tata group seems to have got succession
about right - not perfect, but it seems to be effective and deliver positive results.
In 2011, Tata was in the midst of the mother of all successions, finding a successor to Ratan
Tata. Instead of focusing on the possible candidates, it is purposeful to reflect on the streamlined
and effective process of succession they had announced.
Firstly, a search committee was appointed with its composition and membership placed in the
public domain. The choice of candidate was kept wide open: man or woman, Indian or foreigner,
internal or external. Secondly, the search committee provided brief public updates of the status; it
wasn‘t surprising that the details or candidates were not revealed. Thirdly, the search committee
set itself approximate time targets so that their work inadvertently did not become desultory.
Lastly, they internally adopted relevant criteria and a methodology, taking the assistance of a
specialist firm. There seemingly wasn‘t much else to do by way of a process. Based on the recent
track record of successful transitions and the transparent process for the chairman succession, the
Tata group did have a good chance of getting the succession right. People had no choice but to
19
wait for the search committee to complete its job rather than to keep speculating on names and
individuals.
EARLY YEARS OF MR. RATAN TATA & THE EXIT OF THE SATRAPS
Ratan Tata was a surprise choice to head the group after JRD (as J.R.D. Tata was popularly
known).
He studied at Cornell University, specialized in architecture, and had an offer from International
Business Machines Corp., but returned to India because his grandmother was unwell, and joined
Tata Steel Ltd (then known as Tata Iron and Steel Co., or Tisco) as an apprentice on the shop
floor of its Jamshedpur plant. The year was 1962.
In 1971, he was appointed director-in-charge of the ailing National Radio and Electronics Co.
While Tata managed to turn around the firm‘s fortunes, it was to be a temporary success.
In 1977, he was asked to turn around another troubled company, the Mumbai-based Empress
Mills. Tata managed to do so, but was refused an investment he thought was required. The
Mumbai textile workers‘ strike led by Datta Samant also hurt the company, which eventually
closed down in 1986.
Maybe because of these failures, few people understood why he was chosen as the person who
would replace JRD in 1991. At the time, Tata was still perceived as an outsider in Bombay
House, the group‘s headquarters.
Several group companies were also led by individuals who had been given considerable
autonomy by JRD and were, sometimes, more closely associated with their companies than the
group‘s chairman himself.
Among these executives were Russi Mody at Tata Steel; Darbari Seth at Tata Tea and Tata
Chemicals; Ajit Kerkar, who transformed the Taj group (Indian Hotels) into a major hospitality
chain; and Nani Palkhivala, a director on the boards of several Tata companies and chairman of
20
the erstwhile Associated Cement Companies (ACC Ltd), in which the Tata group was one of the
original promoters.
It had been widely expected that one of these individuals would succeed JRD, and Tata‘s
appointment resulted in some bitterness—and not all of it remained unvoiced. Mody sparred
openly with Tata. Kerkar and the new chairman had different views on the management of the
chain.
―J.R.D. Tata had around him a team of senior managers, all of them people of substantial
understanding in their respective spheres,‖ Tata said in an interview posted on the Tata group
website on 6 December for some time before being inexplicably taken down. ―While they may
have acceded to his wish that I take over the chairmanship—and this happened suddenly—I must
confess that I did not feel any sense of joyousness on their part, because some of them had
aspirations to have the job themselves.‖
In 1993, Mody was sacked after a messy scrap involving the appointment of senior executives.
In 1997, Palkhivala quit, citing ill health. And Seth retired in 1995 and Kerkar in 1997, after Tata
brought in a new policy that set the retirement age for directors at 70 and senior executives at 65.
―In my personal view, when JRD saw this scramble among the company chiefs to succeed him
and the unpleasant innuendos that surfaced, he may have appointed someone who understood the
Tata ethos, which was always very important to him; and, perhaps, he thought Ratan Tata was
someone who could uphold this ethos,‖ Piramal said.
She added that the concept of succession planning was nascent in JRD‘s time. It‘s only in the last
five years that large business groups have realized the need for this, she said. Indeed, perhaps
because of the rocky start that he had, Tata appointed a five-member selection committee,
comprising N.A. Soonawala, Shirin Bharucha, R.K. Krishna Kumar, Cyrus Mistry and Lord
Kumar Bhattacharya, to identify his successor.
In hindsight, Tata‘s ascension in 1991 was the best thing that could have happened to the Tata
group, according to a business historian and writer.
21
―Tata, like every Indian company, was suddenly in a new environment. It could not keep
operating under the old market rules, the old certainties,‖ said Morgen Witzel, a UK-based
management writer and author of Tata: The Evolution of a Corporate Brand.
―Ratan Tata‘s strategy was to change Tata to help it keep pace with a changing India,‖ he said.
And, after spending nearly five years quelling the challenge of the satraps, that‘s just what Tata
did.
BUILDING THE TATA CORPORATE BRAND – A GROUP IDENTITY
Once the dust over the succession issue settled, the conglomerate‘s new chief Mr. Ratan Tata
came into his own. His primary focus was the improvement of the operational efficiencies of
several of the group‘s manufacturing companies and reiterating the very conglomerate nature of
the entity.
The main beneficiaries of the focus on operations were Tisco and Telco (Tata Engineering and
Locomotive Co.). The former soon emerged as one of the lowest-cost steel makers in the world.
The two companies were also renamed—Tisco as Tata Steel and Telco as Tata Motors.
Simultaneously, Tata convinced group companies to pay royalty to Tata Sons for the direct or
indirect use of the Tata brand name. He also moved towards increasing the promoters‘
shareholding in key group firms. Until then, the promoting firms held minority stakes in most
group companies, making them vulnerable to takeovers.
The group also exited businesses such as cement, textiles and cosmetics even as it increased its
focus on others such as software, and entered telecommunications, finance and retail.
These divestments and investments helped the Tata group ―shake off the slightly fusty image it
had built up in the 1980s and make it fit for purpose in the modern world‖, according to Witzel.
Indeed, today, the Tata group‘s most profitable company is information technology firm Tata
Consultancy Services Ltd (TCS), which boasts around $10 billion (around Rs.54,700 crore) in
revenue and serves customers around the world.
22
―I think the creation of the corporate brand was quite important. The Tata corporate brand is one
of the world‘s most valuable global brands because it harnesses the power of the whole group
and creates a strong image in the minds of the stakeholders,‖ Witzel added.
Tata himself sees the re-establishment of the group identity as one of his achievements. In the
interview that was posted on the group‘s website, he said one of his most satisfying moments as
chairman was the welding of ―the organization together in a more cohesive way than it had been
in the past that it was able to identify itself more as a group‖.
And, even as some of these efforts to establish himself, improve the operational effectiveness of
some companies, and reiterate a group identity were bearing fruit, Tata went out and made a big-
ticket global acquisition—the Tetley group in 2000.
THE TATA GROUP – TODAY AND TOMORROW
Mr. Jamsetji N. Tata was the founder of the group. In 1904, he handed over the baton to Sir
Dorab Tata, who was at the helm of affairs till 1932, followed by Sir Nowroji Saklatvala who
was there till 1938. The group was then steered by Mr. J. R. D. Tata till 1991, when the charge
passed on to Mr. Ratan Tata. It was on March 23, 1991, that Mr. Ratan Tata was told by his
uncle that he intended to handover the baton of the group to him. Coinciding with the economic
reforms unleashed by Dr. Manmohan Singh, the group has had a remarkable journey since then!
Mr. Ratan Tata took over the reins of the group at a time when it was an empire made up of
several independent fiefdoms, run by stalwarts like Mr. Darbari Seth, Mr. Russi Mody, Mr. Ajit
Kerkar and Mr. Nani Palkhivala. Mr. Ratan Tata was barely 54 when he assumed control of the
Tata Group in 1991. His successor was searched for, keeping in line with a whole lot of other
Tata company managing directors who were then in their 40s. The group had brought people in
their 40s and 50s to run some key companies. Observers said that the next leaders will be from
among them. They included Tata Power MD Anil Sardana, TCS MD Natarajan Chandrasekaran,
Tata Chemicals MD R Mukundan, Tata Teleservices MD N Srinath, Tata Global Beverages head
Peter Unsworth, Tata Motors MD Carl-Peters Forster, India Hotels chief Raymond Bickson and
Tata International MD Noel Tata.
23
The activities of the group were and are overseen by two bodies. The Executive Office reviews
business activities of all group companies. Besides Ratan Tata, it had R Gopalakrishnan, Ishaat
Hussain, Kishor Chaukar and Arunkumar Gandhi. Then there is the Group Corporate Centre,
which reviewed policy issues related to growth and took decisions on entering new areas. It also
promoted the Tata brand and provided advisory services to group companies in human resources,
finance and legal affairs. It comprised Ratan Tata, JJ Irani, R K Krishna Kumar, R
Gopalakrishnan, Ishaat Hussain, Kishor Chaukar and Arunkumar Gandhi. The members of both
these groups were then in their 60s and 70s. Tata Steel's acquisition of Corus, Tata Motors
buying Jaguar Land Rover and TCS going public were some of the significant milestones after
Mr. Ratan Tata took over from JRD as Chairman of the group. The Tata Group comprises over
100 operating companies in seven business sectors: communications and information
technology, engineering, materials, services, energy, consumer products and chemicals. The
group has operations in more than 80 countries across six continents, and its companies export
products and services to 85 countries. The total revenue of Tata companies, taken together, was
$83.3 billion (around 379,675 Cr INR) in 2010-11, with 58 per cent of this coming from business
outside India. Tata companies employ over 425,000 people worldwide. The Tata name has been
respected in India for 140 years for its adherence to strong values and business ethics. Every Tata
company or enterprise operates independently. Each of these companies has its own board of
directors and shareholders, to whom it is answerable. There are 31 publicly listed Tata
enterprises and they have a combined market capitalization of about $77.44 billion (as on
November 17, 2011), and a shareholder base of 4.3 million. The major Tata companies are Tata
Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global
Beverages, Indian Hotels, Tata Communications, Tata Teleservices and Titan. ―Mr. Tata has
taken the group to great heights and we hope the new Chairman will take it to greater heights,‖
said an official closely associated with the selection committee. The five-member committee
held 18 meetings over the last on-and-a-half years and interviewed a large number of candidates,
both Indian and expatriates.
―Mr. Tata had a tougher clean-up exercise where there were many powerful individuals who
were running their own fiefdoms. He managed to do this while carving out a new global agenda
for the Group. The new Chairman will have a relatively easier job on his hands,‖ an industry
veteran said. Much like the few erstwhile Kings who chose a successor based on merit alone, the
24
group had invariably followed the principle of meritocracy when choosing a successor in the
past. What the new Chairman would have had to take over from Mr. Ratan Tata was a much
more well-knit and cohesive group, united by a shared philosophy, vision and identity.
THE CHALLENGES THAT WERE BEFORE THE MAN-TO-BE
There is always a lot of hoopla surrounding the succession planning of leaders. Whenever a
visible leadership change occurs, the image of the incoming leader appears to be much less than
the exiting leader. The fallacy lies in our tendency to make an unfair comparison between the
embellished profile of the outgoing leader and the unclear profile of the incoming leader. That is
why Lal Bahadur Shastri initially looked inadequate as a replacement for Jawaharlal Nehru,
Homi Sethna looked inadequate compared to Homi Bhabha and Vikram Sarabhai, and Ratan
Tata was thought to be less than J.R.D. Tata. But all of these turned out to be successful
transitions. There were many challenges ahead for the young Chairman-to-be.
STEEL
Weak demand and decline in global steel prices were the key challenges faced by Tata Steel's
European operations. This was even as the prices of raw materials such as coking coal and iron
ore ruled high as compared to 2010. Tata Steel had reduced its capacity utilization marginally in
line with weakening demand and may have had to resort to production cuts if demand did not
improve in Europe. Even in India, the company was up against weaker demand from sectors
such as construction and automotive, but expected volumes to grow by eight per cent for the year
2011.
AUTOMOTIVE
The big disappointment was the Nano which was clocking modest numbers. The car business
needs to rev up though commercial vehicles had been doing well. The Tatas were and are the
market leader in trucks and buses but a lot depended then on the state of the economy over the
next few months.
25
TELECOM
In the telecom sector, the Tatas had their hands full with major challenges for both Tata
Teleservices and Tata Communications. Tata Tele was now the fifth largest telecom player in a
crowded market with as many as 14 in the arena. But the overall telecom sector was witnessing
disturbing trends over the past year. All the operators' revenues, including Tata Teleservices,
were stagnating, profitability was declining, and investments were slowing and costs were rising.
Tata Teleservices undertook a major restructuring exercise in bid to cut costs and rationalize
operations. The Successor had to ensure that this paid off in the long term.
Apart from the tough market conditions, there were a whole host of regulatory issues especially
those related to spectrum. Tata Teleservices still did not have GSM spectrum in key markets like
Delhi. The company's 3G roll out was also under a cloud with the Government raising questions
over roaming agreements.
On the Tata Communications front, the worry was to bring the company back into profitability.
The company, which once had a monopoly over the international long distance segment, had to
reposition its strategy with more focus on foreign markets. While this paid off to some extent, the
then ongoing dispute with the Government over funding and land sale put the company's
expansion plans on hold.
Another immediate challenge for the new Chairman was to be able to steer the company away
from all that happened with Ms. Niira Radia and the 2G scam. Although there were no business
implications, the Tatas had taken a major hit on its image, which the new Chairman would have
had to build.
IT SERVICES
The offshore IT/BPO players were grappling with macro uncertainties in key overseas markets
such as the US and Europe, and, at the same time, coping with currency volatility back home.
For TCS, the largest Indian IT Services Company, the challenge was also to sustain its pole
position in a market that had already started seeing a reshuffle in the pecking order of Tier-1
vendors, said Mr. Sanjeev Hota, Associate Vice-President - Institutional Equities at Sharekhan.
26
Also given its over two lakh employee base, TCS had to chase, perhaps even more aggressively,
the non-linear growth strategy (beyond adding employees). ―Deals such as the recent $2.2-billion
contract from Friends Life (a British financial services firm) will be critical in this regard…If
TCS wants to scale up further, it will be important that the revenue growth outstrips the
employee growth,‖ noted Mr. Harit Shah, Senior Research Analyst at Nirmal Bang Institutional
Equities.
Though the company had been growing at a scorching pace in the last few quarters, the euro
zone crisis and the rupee volatility were the key challenges. Mr. Tata's acumen when it came to
the business of technology was well known. Would the new Chairman's lack of expertise in the
technology space be a deterrent going forward? – was a key question to be considered. ―I do not
think so…at the top level people settle into their roles pretty quickly. Sometimes a complete
outsider can bring a completely new perspective to the business of technology,‖ TCS sources had
said.
THE RACE FOR SUCCESSION
The committee set up to find a successor to Tata group Chairman Ratan Tata had shortlisted
around 11 candidates. Out of them, four-five were group employees.
The frontrunner in the Tata race appeared to be Noel Tata, Ratan Tata‘s half-brother who was
then promoted to overseeing the group‘s international operations. Some 65% of the
conglomerate‘s US$70.8 billion revenue (April-
March 2008-2009) came from outside India, so this was a significant responsibility.
Additionally, Noel Tata was the son-in-law of Pallonji Mistry, who owned 18.4% in Tata Sons,
which made him the single largest individual shareholder (most of the equity being held by
charitable trusts).
But others were in the race, too. The Economic Times speculated that the internal candidates
include Tata Sons executive directors Ishaat Hussain and R. Gopalakrishnan; and B.
Muthuraman, Ravi Kant and S. Ramadorai, vice chairmen of Tata Steel, Tata Motors and Tata
Consultancy Services (TCS), respectively. The younger group included the CEOs of TCS (N.
27
Chandrasekaran) and Titan (Bhaskar Bhat). But they were long shots at best, observers had
reported.
There was also a speculation that, given the group‘s increasing global focus, the choice need not
be an Indian. The Times of India said that the candidates could include Indra Nooyi of PepsiCo,
former Vodafone head Arun Sarin and Renault Nissan chief Carlos Ghosn. ―The selection
process would consider suitable persons from within the Tata companies, other professionals in
India as well as persons overseas with global experience,‖ said a Tata Sons press release.
Ratan Tata had also clarified that the new chief need not have to be either a Parsi or a Tata. (The
Parsis are a wealthy business community in India, and the Tata chief has traditionally been a
Parsi.) The Parsis are a shrinking community. Birth rates are very low and women who marry
outside the community are excommunicated. There are now less than 60,000 Parsis left in India,
and it is inevitable that the Tata baton will pass on to a non-Parsi sooner or later.
It was evident that it would have to pass on to a non-Tata, too. The Tatas are a small clan. Apart
from Ratan, there was his 80-year-old French stepmother, Simone, who was obviously not in the
running for his job. His brother, Jimmy, who was close to 70 and had retired from Tata Power.
Aloo Tata (who was by birth a Mistry) wouldn‘t have got precedence over her husband, Noel.
And their three children — Liya, Maya and Neville — were still studying. So, Noel was the only
Tata who was eligible.
The composition of the selection panel had some critics speculating that the choice of Noel was
pre-decided. It consisted of Tata Sons directors R.K. Krishna Kumar and Cyrus Mistry (who was
Noel Tata‘s brother-in-law), Tata veteran N.S. Soonawala, group legal advisor Shirin Barucha
and independent member Lord
Kumar Bhattacharya of the Warwick Manufacturing Group of the U.K. ―There was only one
external member,‖ said Pradeep Mukerjee, founder-director of Confluence Coaching and
Consulting. Mukerjee, who had worked for several years in the HR area with Citigroup in the
U.S., says that in the West, such selection panels have many more external members. ―What
good is a panel stuffed with internal members? I wonder what the true purpose is.‖ Thus, the
panel did have to face some criticism but it was worthwhile to keep a panel that was in keeping
28
with the core values of the Tata Group for such a strategic decision-making which would bear
fruit in the long run.
CYRUS PALLONJI MISTRY
Cyrus Mistry, then 43, is the son of construction tycoon Pallonji Shapoorji Mistry. Valued at
$8.8 billion, Pallonji held an 18.5 per cent stake in Tata Sons, making him the single largest
shareholder.
Mr. Mistry is the younger son of Pallonji and is married to Rohika Chagla, the daughter of
lawyer Iqbal Chagla. He has an elder brother - Shapoor Mistry and one of his sisters is married to
Noel Tata, Ratan Tata's half-brother.
He had been a director of Tata Sons since September 1, 2006. He served as a Director of Tata
Elxsi Limited, from September 24, 1990 to October 26, 2009 and was a Director of Tata Power
Co. Ltd until September 18, 2006.
Mr. Mistry served as Chairman of the Board of Shapoorji Pallonji Group and Afcons
Infrastructure Limited before he became the Chairman of the Tata Group.
Mr. Mistry also served as Director of various companies including - Forvol International
Services Ltd, Shapoorji Pallonji & Co. Ltd, Cyrus Investments Ltd, Shapoorji Pallonji Power Co.
Ltd, Buildbazaar Technologies (India) Pvt Ltd, Sterling Investment Corporation Pvt. Ltd,
Samalpatti Power Co. Pvt. Ltd, Shapoorji Pallonji & Co. (Rajkot) Pvt. Ltd, Shapoorji Pallonji
Finance Ltd, Shapoorji Pallonji Infrastructure Capital Co. Ltd, Oman Shapoorji Construction Co.
Ltd and Muscat Pallonji Shapoorji & Co. Pvt. Ltd.
Mr. Mistry had been a Non-executive Director of Forbes Gokak Limited since June 23, 2003.
Mr. Mistry is Fellow of the Institute of Civil Engineers. He holds a BE in Civil Engineering from
Imperial College, London and a Master of Science in Management from London Business
School. He holds a Bachelor of Commerce from Mumbai University.
29
An avid golfer, Mr. Mistry is also a founder member of the Construction Federation of India. He
is a trustee of the Breach Candy Hospital Trust, Mumbai. He is also on the board of Imperial
College India Foundation.
Cyrus Pallonji Mistry succeeded Ratan Tata at the helm of Tata Sons. He was appointed as
Deputy Chairman and worked with Mr. Tata for one year as per the plan chalked out for him as a
successor, before taking over in December 2012.
43-year-old Mistry was a director of Tata Sons and Tata Elxsi (India). Ratan Tata retired in 2012
when he turned 75. He joined the Tata group in 1962 and was the Chairman since 1991. Mr.
Cyrus Mistry took over from a man who over the last two decades transformed the Tata Group
into a global enterprise.
Endorsing the appointment then, Mr. Tata had said, "The appointment of Mr. Cyrus P. Mistry as
Deputy Chairman of Tata Sons is a good and far-sighted choice." (Courtesy: Press release from
Tata Sons)
"I will be committed to working with him over the next year to give him the exposure, the
involvement and the operating experience to equip him to undertake the full responsibility of the
Group on my retirement," Mr. Tata had added.
Mr. Mistry had said that he was deeply honoured by his appointment. "I am aware that an
enormous responsibility, with a great legacy, has been entrusted to me," he had reported in a
statement.
He announced that he will legally dissociate himself from the management of his family
businesses to avoid any issue of conflict of interest. Shapoorji Pallonji Mistry, the father of the
new deputy chairman, was owner of 18 per cent stake in Tata Sons. The Shapoorji Pallonji
Group is into construction, textile, water treatment and other businesses. Cyrus Mistry was the
managing director of the two billion dollar SP Group.
Apart from the Tata Group, he also serves as a director on the board of several other companies,
including Shapoorji Pallonji & Co, Forbes Gokak, Afcons Infrastructure and United Motors
(India).
30
Mr. Mistry was also a part of a search panel appointed last year to find Mr. Tata's successor. He
withdrew himself when his name was suggested. He then entered the process as a candidate.
The 5-member panel also comprised of N A Soonawala, vice-chairman, Tata Sons; R K Krishna
Kumar, non-executive director, Tata Sons; Lord Bhattacharya, a businessman based in the UK
who runs Warwick Manufacturing; and Shirin Bharucha, a lawyer for the group. The committee
is said to have met 18 times before announcing the succession plan.
31
CONCLUSION
Aftermath of the Decision
If there is any class on succession planning scheduled, Ratan Tata will surely be the one who
rightfully deserves to give tutorials. For the man who took the Tata group worth US$ 5 bn to
US$ 70 bn, the decision to relinquish the control must not have come easy, followed by a tough
job to search the right candidate who could step in his large shoes.
The same retirement rule that saw some of JRD‘s satraps leave the group mandated Tata‘s
retirement as well. ―Some people have suggested that the retirement policy should not apply to
the chairman,‖ Tata said in his interview on the website. ―I have always believed that you don‘t
make exceptions for yourself. So I took the view that the rule should apply to me too. I realize
that I have to live by the rules that I have set and step down when the time comes. And that time
has come.‖
Cyrus Mistry had been working with Tata for a year before he stepped down, and Tata had said
the Tata Sons chairman-designate has the analytical skills to steer the business forward and the
integrity to uphold the Tata ethos. Later, Tata Sons formally announced that Mistry would take
over on 28 December 2012 and Ratan Tata would become Chairman Emeritus.
Some of the challenges that lay ahead of Mistry were akin to those Tata faced when he ascended
to the top job. The succession this time round was not as acrimonious as it was during Tata‘s
time, but with many of Tata‘s chieftains nearing retirement, Mistry has had to scout for young
talent from within the group and outside to fill the void. He had already started doing that.
Madhu Kannan, a former chief executive officer of BSE, was his first hire.
―You can live in a house, drive a car, make a phone call, season your food, insure yourself, wear
a watch, walk in shoes, cool yourself with air-conditioning, and stay in a hotel all courtesy of
Tata firms,‖ said an article dated 1 December 2012 in The Economist. The dilemma is that the
group may not necessarily be making money doing all of this. Tata‘s telecom business, for
instance, was under severe strain following the upheaval in the sector in the wake of the 2G
scam, and its future was uncertain. Elsewhere, though Taj was still one of the most respected
names in the Indian hospitality industry, Indian Hotels wasn‘t too profitable, with acquisitions
32
weighing on the firm. Problems with Tata Steel‘s European operations persisted and the current
dynamics of the steel business at home weren‘t too exciting either.
Tata Sons, a holding company (which is the only unlisted from among the group), needed not
just a professional executive but a smart fund manager as well at the helm of affairs. Mistry had
to manage to do both. While a year of working and learning closely with Mr. Tata before taking
the full responsibility of the group in December 2012 did help, the responsibility was enormous.
But to begin with, he had showed good intentions by announcing a legal dissociation from the
management of his family businesses (Mistry was MD of SP Group which was into construction,
textile and water treatment etc.) to avoid any conflict of interest.
His selection was important in the sense it sent some important signals - Tata Group will choose
the one it considered responsible and worthy enough to run the group, even if it were a non-Tata
(Mistry had been chosen over Noel Tata, Ratan Tata's half-brother who had served as the
managing director of the retailing company- Trent and is now serving as non-executive chairman
- to merge some Tata Group retailing operations). Especially then when Tata Group holdings
were high enough to be insulated from takeover threats. While Cyrus doesn't bear the name Tata,
he was no outsider to the group. He had served as a Director of Tata sons and was expected to
have a strong hold over the group values.
Besides, roping in someone who belongs to a family that has significant holdings in Tata sons
(Cyrus being son of Mr. Pallonjee Mistry, who has largest 18% stake in Tatasons) made good
strategic sense as shareholding is the key to control for the group like Tata which is more global
than ever.
Thus, Mistry didn‘t just have big shoes to fill, he also needed to hit the ground running.
Did Tata have his timing right? Says Cappelli: ―I‘m not a big fan of picking a successor way in
advance. I think the better approach is to develop candidates, several of whom could step in.
Then very near retirement — if that‘s the change event — the successor gets named in time for
people to get comfortable. But the downside of naming a successor is that if it turns out that
things change and that person is not appointed, then their career is really damaged.‖
33
Singh of Bain agrees that succession planning is a process, not an event. ―The ideal succession
planning is evergreen,‖ he said. The formal announcement of a successor depends on factors
such as size and scale of the business. For a group of Tatas‘ scale and diversity, a long transition
is required. For most companies, a six- to 12-month overlap and transition would be appropriate.
Announcing anything earlier than this simply invites trouble for both the incumbent and the
designee and may lead to the unintended and costly departure of one or both, besides resulting in
dysfunctional organizational behavior.‖
In practice, though, there are often disasters. Why? Raghunath of IIMB said, ―Failure of
succession planning has its roots in the mindset that all termination is an unpleasant act — if not
death — and the ritual leading up to it is painful.‖
However, Mr. Ratan Tata, having handed over the reins in the able hands of Mr. Mistry, we
conclude that the future of the Tata Group stands bright and is moving on, on a high pedestal.
Conclusion on Succession Planning
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
34
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.
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.
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.
Succession planning for the future evolution of our key players is a vital step, that will prepare
we for keeping balance as changes happen when our people leave we – however good we are at
managing them. There are several ways for us to make sure performance management successful
to help us with our succession planning.
Succession planning is challenging to start with, but if we have the right performance
management tools to get we through it then we are going to make everything work.
If we are having trouble with performance management during succession then we should
remember that it is our responsibility to drive it – no hiding places here! Gradually, as we
introduce new measures for our people, equitably and consistently, we will find performance
management will lift the overall outputs of the business. The great opportunity then is to ensure
that we use this information to tease extra performance from all our people and notice, just
notice, who starts to show up as capable of more, much more.
Then we really are starting to build real value into the succession planning tactics we are
adopting as part of the bigger strategy to sustainable business success.
35
BIBLIOGRAPHY
1. www.ummid.com
2. www.equitymaster.com
3. www.thehindubusinessline.com
4. www.livemint.com
5. knowledge.wharton.upenn.edu
6. vikaspota.com
7. sureshine.blogspot.in
8. www.thenational.ae
9. www.studymode.com
10.www.firstpost.com
11.ashokbhatia.wordpress.com
12.www.ndtv.com

More Related Content

What's hot

HR Internship Presentation
HR Internship PresentationHR Internship Presentation
HR Internship Presentation
Willdeeta Hayden
 
Human Resource Management (in TATA Motors)
Human Resource Management (in TATA Motors)Human Resource Management (in TATA Motors)
Human Resource Management (in TATA Motors)
Urmilesh Tiwari
 
HR Policies of Aditya Birla Group ppt
HR Policies of Aditya Birla Group pptHR Policies of Aditya Birla Group ppt
HR Policies of Aditya Birla Group ppt
Manish Pandey
 

What's hot (20)

A STUDY ON EFFECTIVENESS OF EMPLOYEE’S TRAINING AND DEVELOPMENT IN RANE BRAK...
 A STUDY ON EFFECTIVENESS OF EMPLOYEE’S TRAINING AND DEVELOPMENT IN RANE BRAK... A STUDY ON EFFECTIVENESS OF EMPLOYEE’S TRAINING AND DEVELOPMENT IN RANE BRAK...
A STUDY ON EFFECTIVENESS OF EMPLOYEE’S TRAINING AND DEVELOPMENT IN RANE BRAK...
 
Strategic Human Resource Management (SHRM)
Strategic Human Resource Management (SHRM)Strategic Human Resource Management (SHRM)
Strategic Human Resource Management (SHRM)
 
HR Internship Presentation
HR Internship PresentationHR Internship Presentation
HR Internship Presentation
 
Talent Management practices of TCS
Talent Management practices of TCS  Talent Management practices of TCS
Talent Management practices of TCS
 
SUMMER TRAINING PROJECT ON HUMAN RESOURCE
SUMMER TRAINING PROJECT ON  HUMAN RESOURCESUMMER TRAINING PROJECT ON  HUMAN RESOURCE
SUMMER TRAINING PROJECT ON HUMAN RESOURCE
 
Human Resource Management (in TATA Motors)
Human Resource Management (in TATA Motors)Human Resource Management (in TATA Motors)
Human Resource Management (in TATA Motors)
 
Staffing recruitment and selection of INTERNATIONAL HUMAN RESOURCES MANAGEMENT
Staffing recruitment and selection of INTERNATIONAL HUMAN RESOURCES MANAGEMENTStaffing recruitment and selection of INTERNATIONAL HUMAN RESOURCES MANAGEMENT
Staffing recruitment and selection of INTERNATIONAL HUMAN RESOURCES MANAGEMENT
 
HUMAN RESOURCE MANAGEMENT POLICIES OF TCS AND PANTALOONS
HUMAN RESOURCE MANAGEMENT POLICIES OF TCS AND PANTALOONS HUMAN RESOURCE MANAGEMENT POLICIES OF TCS AND PANTALOONS
HUMAN RESOURCE MANAGEMENT POLICIES OF TCS AND PANTALOONS
 
Training and Development in Infosys
Training and Development in InfosysTraining and Development in Infosys
Training and Development in Infosys
 
EMPLOYEE ENGAGEMENT PROJECT
EMPLOYEE ENGAGEMENT PROJECTEMPLOYEE ENGAGEMENT PROJECT
EMPLOYEE ENGAGEMENT PROJECT
 
Hindustan Unilever Limited Performance Management System
Hindustan Unilever Limited Performance Management SystemHindustan Unilever Limited Performance Management System
Hindustan Unilever Limited Performance Management System
 
HRD strategies of ITC Ltd
HRD strategies of ITC LtdHRD strategies of ITC Ltd
HRD strategies of ITC Ltd
 
reward system of tata co
reward system of tata coreward system of tata co
reward system of tata co
 
infosys hr policies
infosys hr policiesinfosys hr policies
infosys hr policies
 
Influence Of Technology On Human Resource Management
Influence Of Technology On Human Resource ManagementInfluence Of Technology On Human Resource Management
Influence Of Technology On Human Resource Management
 
Supply forecasting technique
Supply  forecasting techniqueSupply  forecasting technique
Supply forecasting technique
 
Recruitment and Selection Summer Internship Project Report
Recruitment and Selection Summer Internship Project ReportRecruitment and Selection Summer Internship Project Report
Recruitment and Selection Summer Internship Project Report
 
emerging trends and issues in HRM
emerging trends and issues in HRMemerging trends and issues in HRM
emerging trends and issues in HRM
 
HR Policies of Aditya Birla Group ppt
HR Policies of Aditya Birla Group pptHR Policies of Aditya Birla Group ppt
HR Policies of Aditya Birla Group ppt
 
Hr policies of top 5 compnaies
Hr policies of top 5 compnaiesHr policies of top 5 compnaies
Hr policies of top 5 compnaies
 

Similar to SUCCESSION PLANNING OF TATA

IMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNING
IMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNINGIMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNING
IMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNING
indexPub
 

Similar to SUCCESSION PLANNING OF TATA (20)

Succession planning
Succession planningSuccession planning
Succession planning
 
IMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNING
IMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNINGIMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNING
IMPACT OF PERFORMANCE MANAGEMENT ON SUCCESSION PLANNING
 
R&s
R&sR&s
R&s
 
Succession planning and management by ehab elbaz
Succession planning and management by ehab elbazSuccession planning and management by ehab elbaz
Succession planning and management by ehab elbaz
 
Mba106 human resource management
Mba106  human resource managementMba106  human resource management
Mba106 human resource management
 
BBA Human Resource Management
BBA Human Resource ManagementBBA Human Resource Management
BBA Human Resource Management
 
INTRODUCTION OF HUMAN RESOURCE MANAGEMENT
INTRODUCTION OF HUMAN RESOURCE MANAGEMENTINTRODUCTION OF HUMAN RESOURCE MANAGEMENT
INTRODUCTION OF HUMAN RESOURCE MANAGEMENT
 
Human resource management and its alignment to the strategy of a future grou...
Human resource management and its alignment to the strategy of  a future grou...Human resource management and its alignment to the strategy of  a future grou...
Human resource management and its alignment to the strategy of a future grou...
 
What is management by muzammil
What is management by muzammilWhat is management by muzammil
What is management by muzammil
 
Human resource management (hrm)
Human resource management (hrm)Human resource management (hrm)
Human resource management (hrm)
 
Succession planning
Succession planningSuccession planning
Succession planning
 
Hrm- EVP Twins
Hrm- EVP TwinsHrm- EVP Twins
Hrm- EVP Twins
 
Succession Planning.
Succession Planning.Succession Planning.
Succession Planning.
 
Managing of HRM in 21st century
Managing of HRM in 21st centuryManaging of HRM in 21st century
Managing of HRM in 21st century
 
203 human resource management notes dimr (1)
203 human resource management notes dimr (1)203 human resource management notes dimr (1)
203 human resource management notes dimr (1)
 
HRD MATRIX Notes in HRD for BBA and MBA.
HRD MATRIX Notes in HRD for BBA and MBA.HRD MATRIX Notes in HRD for BBA and MBA.
HRD MATRIX Notes in HRD for BBA and MBA.
 
Tc11 a1
Tc11 a1Tc11 a1
Tc11 a1
 
Hrm 01
Hrm 01Hrm 01
Hrm 01
 
Functions of HRM Needs, Process, What, Wherer, How !
Functions of HRM Needs, Process, What, Wherer, How !Functions of HRM Needs, Process, What, Wherer, How !
Functions of HRM Needs, Process, What, Wherer, How !
 
BASIC SUMMARY OF HUMAN RESOURCE MANAGEMENT
BASIC SUMMARY OF HUMAN RESOURCE MANAGEMENTBASIC SUMMARY OF HUMAN RESOURCE MANAGEMENT
BASIC SUMMARY OF HUMAN RESOURCE MANAGEMENT
 

More from Soumeet Sarkar (14)

Fm project
Fm projectFm project
Fm project
 
Audit project
Audit projectAudit project
Audit project
 
FOREIGN CAPITAL
FOREIGN CAPITALFOREIGN CAPITAL
FOREIGN CAPITAL
 
PROJECT ON AIRTEL
PROJECT ON AIRTELPROJECT ON AIRTEL
PROJECT ON AIRTEL
 
PROJECT ON BATA
PROJECT ON BATAPROJECT ON BATA
PROJECT ON BATA
 
ORGANISATIONAL BEHAVIOUR PROJECT ON BPO
ORGANISATIONAL BEHAVIOUR PROJECT ON BPO ORGANISATIONAL BEHAVIOUR PROJECT ON BPO
ORGANISATIONAL BEHAVIOUR PROJECT ON BPO
 
PROJECT ON BIG BAZAAR
PROJECT ON BIG BAZAARPROJECT ON BIG BAZAAR
PROJECT ON BIG BAZAAR
 
CORPORATE LEVEL STRATEGY - TAKEOVER STRATEGY
CORPORATE LEVEL STRATEGY - TAKEOVER STRATEGYCORPORATE LEVEL STRATEGY - TAKEOVER STRATEGY
CORPORATE LEVEL STRATEGY - TAKEOVER STRATEGY
 
THE ORIENTAL INSURANCE COMPANY
THE ORIENTAL INSURANCE COMPANYTHE ORIENTAL INSURANCE COMPANY
THE ORIENTAL INSURANCE COMPANY
 
DEPRECIATION OF RUPEE
DEPRECIATION OF RUPEEDEPRECIATION OF RUPEE
DEPRECIATION OF RUPEE
 
JUST IN TIME
JUST IN TIMEJUST IN TIME
JUST IN TIME
 
MARKETING STRATEGY & CUSTOMER SATISFACTION OF BIG BAZAAR
MARKETING STRATEGY & CUSTOMER SATISFACTION OF BIG BAZAARMARKETING STRATEGY & CUSTOMER SATISFACTION OF BIG BAZAAR
MARKETING STRATEGY & CUSTOMER SATISFACTION OF BIG BAZAAR
 
A CRITICAL APPRAISAL ON PERFORMANCE OF WTO
A CRITICAL APPRAISAL ON PERFORMANCE OF WTOA CRITICAL APPRAISAL ON PERFORMANCE OF WTO
A CRITICAL APPRAISAL ON PERFORMANCE OF WTO
 
Internal Audit Project
Internal Audit ProjectInternal Audit Project
Internal Audit Project
 

Recently uploaded

The basics of sentences session 4pptx.pptx
The basics of sentences session 4pptx.pptxThe basics of sentences session 4pptx.pptx
The basics of sentences session 4pptx.pptx
heathfieldcps1
 
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
中 央社
 

Recently uploaded (20)

Benefits and Challenges of OER by Shweta Babel.pptx
Benefits and Challenges of OER by Shweta Babel.pptxBenefits and Challenges of OER by Shweta Babel.pptx
Benefits and Challenges of OER by Shweta Babel.pptx
 
Book Review of Run For Your Life Powerpoint
Book Review of Run For Your Life PowerpointBook Review of Run For Your Life Powerpoint
Book Review of Run For Your Life Powerpoint
 
ANTI PARKISON DRUGS.pptx
ANTI         PARKISON          DRUGS.pptxANTI         PARKISON          DRUGS.pptx
ANTI PARKISON DRUGS.pptx
 
Implanted Devices - VP Shunts: EMGuidewire's Radiology Reading Room
Implanted Devices - VP Shunts: EMGuidewire's Radiology Reading RoomImplanted Devices - VP Shunts: EMGuidewire's Radiology Reading Room
Implanted Devices - VP Shunts: EMGuidewire's Radiology Reading Room
 
Đề tieng anh thpt 2024 danh cho cac ban hoc sinh
Đề tieng anh thpt 2024 danh cho cac ban hoc sinhĐề tieng anh thpt 2024 danh cho cac ban hoc sinh
Đề tieng anh thpt 2024 danh cho cac ban hoc sinh
 
UChicago CMSC 23320 - The Best Commit Messages of 2024
UChicago CMSC 23320 - The Best Commit Messages of 2024UChicago CMSC 23320 - The Best Commit Messages of 2024
UChicago CMSC 23320 - The Best Commit Messages of 2024
 
Capitol Tech Univ Doctoral Presentation -May 2024
Capitol Tech Univ Doctoral Presentation -May 2024Capitol Tech Univ Doctoral Presentation -May 2024
Capitol Tech Univ Doctoral Presentation -May 2024
 
PSYPACT- Practicing Over State Lines May 2024.pptx
PSYPACT- Practicing Over State Lines May 2024.pptxPSYPACT- Practicing Over State Lines May 2024.pptx
PSYPACT- Practicing Over State Lines May 2024.pptx
 
Mattingly "AI and Prompt Design: LLMs with Text Classification and Open Source"
Mattingly "AI and Prompt Design: LLMs with Text Classification and Open Source"Mattingly "AI and Prompt Design: LLMs with Text Classification and Open Source"
Mattingly "AI and Prompt Design: LLMs with Text Classification and Open Source"
 
ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...
ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...
ĐỀ THAM KHẢO KÌ THI TUYỂN SINH VÀO LỚP 10 MÔN TIẾNG ANH FORM 50 CÂU TRẮC NGHI...
 
The basics of sentences session 4pptx.pptx
The basics of sentences session 4pptx.pptxThe basics of sentences session 4pptx.pptx
The basics of sentences session 4pptx.pptx
 
Including Mental Health Support in Project Delivery, 14 May.pdf
Including Mental Health Support in Project Delivery, 14 May.pdfIncluding Mental Health Support in Project Delivery, 14 May.pdf
Including Mental Health Support in Project Delivery, 14 May.pdf
 
Stl Algorithms in C++ jjjjjjjjjjjjjjjjjj
Stl Algorithms in C++ jjjjjjjjjjjjjjjjjjStl Algorithms in C++ jjjjjjjjjjjjjjjjjj
Stl Algorithms in C++ jjjjjjjjjjjjjjjjjj
 
Sternal Fractures & Dislocations - EMGuidewire Radiology Reading Room
Sternal Fractures & Dislocations - EMGuidewire Radiology Reading RoomSternal Fractures & Dislocations - EMGuidewire Radiology Reading Room
Sternal Fractures & Dislocations - EMGuidewire Radiology Reading Room
 
Word Stress rules esl .pptx
Word Stress rules esl               .pptxWord Stress rules esl               .pptx
Word Stress rules esl .pptx
 
How to Manage Closest Location in Odoo 17 Inventory
How to Manage Closest Location in Odoo 17 InventoryHow to Manage Closest Location in Odoo 17 Inventory
How to Manage Closest Location in Odoo 17 Inventory
 
Basic Civil Engineering notes on Transportation Engineering, Modes of Transpo...
Basic Civil Engineering notes on Transportation Engineering, Modes of Transpo...Basic Civil Engineering notes on Transportation Engineering, Modes of Transpo...
Basic Civil Engineering notes on Transportation Engineering, Modes of Transpo...
 
How to Analyse Profit of a Sales Order in Odoo 17
How to Analyse Profit of a Sales Order in Odoo 17How to Analyse Profit of a Sales Order in Odoo 17
How to Analyse Profit of a Sales Order in Odoo 17
 
Chapter 7 Pharmacosy Traditional System of Medicine & Ayurvedic Preparations ...
Chapter 7 Pharmacosy Traditional System of Medicine & Ayurvedic Preparations ...Chapter 7 Pharmacosy Traditional System of Medicine & Ayurvedic Preparations ...
Chapter 7 Pharmacosy Traditional System of Medicine & Ayurvedic Preparations ...
 
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文會考英文
 

SUCCESSION PLANNING OF TATA

  • 1. 1 CONTENT Sr. No. PARTICULARS Page No. CHAPTER I – INTRODUCTION 1.1 Introduction to HRM 3 1.2 Importance of HRM 3 1.3 Introduction to Succession Planning 5 CHAPTER II – SUCCESSION PLANNING 2.1 Definition 5 2.2 Enforcing the Succession Plan 6 2.3 Coverage 6 2.4 The Role of HR 7 2.5 Importance of Succession Planning 8 2.6 Succession Planning Process 10 2.7 Advantages of Succession Planning 14 2.8 Mistakes to be Avoided in Succession Planning 15 CHAPTER III – CASE STUDY OF TATA GROUP 3.1 Introduction 17
  • 2. 2 3.2 Early Years of Mr. Ratan Tata 19 3.3 Building the TATA Corporate Brand 21 3.4 TATA Group – Today & Tomorrow 22 3.5 The Challenges Before the Successor 24 3.6 The Race for Succession 26 3.7 About Cyrus Pallonji Mistry 28 CHAPTER IV – CONCLUSION 4.1 Aftermath of the Decision 31 4.2 Conclusion on Succession Planning 33 CHAPTER V - APPENDIX 5.1 Bibliography 35
  • 3. 3 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. Importance of HRM:- 1. Recruitment and Training This is one of the major responsibilities of the human resource team. The HR managers come up with plans and strategies for hiring the right kind of people. They design the criteria which is best suited for a specific job description. Their other tasks related to recruitment include formulating the obligations of an employee and the scope of tasks assigned to him or her. Based on these two factors, the contract of an employee with the company is prepared. When needed, they also provide training to the employees according to the requirements of the organization. Thus, the staff members get the opportunity to sharpen their existing skills or develop specialized skills which in turn, will help them to take up some new roles. 2. Performance Appraisals HRM encourages the people working in an organization, to work according to their potential and gives them suggestions that can help them to bring about improvement in it. The team communicates with the staff individually from time to time and provides all the necessary information regarding their performances and also defines their respective
  • 4. 4 roles. This is beneficial as it enables them to form an outline of their anticipated goals in much clearer terms and thereby, helps them execute the goals with best possible efforts. Performance appraisals, when taken on a regular basis, motivate the employees. 3. Maintaining Work Atmosphere This is a vital aspect of HRM because the performance of an individual in an organization is largely driven by the work atmosphere or work culture that prevails at the workplace. A good working condition is one of the benefits that the employees can expect from an efficient human resource team. A safe, clean and healthy environment can bring out the best in an employee. A friendly atmosphere gives the staff members‘ job satisfaction as well. 4. Managing Disputes In an organization, there are several issues on which disputes may arise between the employees and the employers. You can say conflicts are almost inevitable. In such a scenario, it is the human resource department which acts as a consultant and mediator to sort out those issues in an effective manner. They first hear the grievances of the employees. Then they come up with suitable solutions to sort them out. In other words, they take timely action and prevent things from going out of hands. 5. Developing Public Relations The responsibility of establishing good public relations lies with the HRM to a great extent. They organize business meetings, seminars and various official gatherings on behalf of the company in order to build up relationships with other business sectors. Sometimes, the HR department plays an active role in preparing the business and marketing plans for the organization too. Any organization, without a proper setup for HRM is bound to suffer from serious problems while managing its regular activities. For this reason, today, companies must put a lot of effort and energy into setting up a strong and effective HRM.
  • 5. 5 INTRODUCTION TO SUCCESSION PLANNING 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 potential. 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. Definition 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-term successors).‘ According to Hirsh, succession planning sits inside a very much wider set of resourcing and development processes called 'succession management', encompassing management resourcing
  • 6. 6 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 organization;  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;  Moving to another position and different set of responsibilities within the organization. Coverage 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.
  • 7. 7 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 expertise. 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 databases.
  • 8. 8 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:- 1. 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. 2. 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 goals. 3. 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. 4. 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
  • 9. 9 dependents, life insurance premiums paid for by the company, your car, professional memberships, and other business-related expenses. 5. 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. 6. 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 internal candidates. 7. 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.
  • 10. 10 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. Success factors There are several factors typically found in successful succession planning initiatives. For example:-  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.
  • 11. 11 Steps Step 1: Link Strategic and Workforce Planning Decisions This step involves:- 1. Identifying the long-term vision and direction. 2. Analyzing future requirements for products and services. 3. Using data already collected. 4. Connecting succession planning to the values of the organization. 5. Connecting succession planning to the needs and interests of senior leaders. Step 2: Analyze Gaps This step involves:- 1. Identifying core competencies and technical competency requirements. 2. Determining current supply and anticipated demand. 3. Determining talents needed for the long term. 4. Identifying ―real‖ continuity issues. 5. Developing a business plan based on long-term talent needs, not on position replacement. Step 3: Identify Talent Pools This step involves:- 1. Using pools of candidates V/s development of positions. 2. Identifying talent with critical competencies from multiple levels—early in careers and often. 3. Assessing competency and skill levels of current workforce, using assessment instrument(s). 4. Using 360° feedback for development purposes. 5. Analyzing external sources of talent.
  • 12. 12 Step 4: Develop Succession Strategies This step involves:- 1. Identifying recruitment strategies:-  Recruitment and relocation bonuses.  Special programs. 2. Identifying retention strategies:-  Retention bonuses.  Quality of work life programs. 3. Identifying development/learning strategies:-  Planned job assignments.  Formal development.  Coaching and mentoring.  Assessment and feedback.  Action learning projects.  Communities of practice.  Shadowing. Step 5: Implement Succession Strategies This step involves:- 1. Implementing recruitment strategies (e.g., recruitment and relocation bonuses). 2. Implementing retention strategies (e.g., retention bonuses, quality of work life programs). 3. Implementing development/learning strategies (e.g., planned job assignments, formal development, Communities of Practice). 4. Communication planning. 5. Determining and applying measures of success. 6. Linking succession planning to HR processes.  Performance management.  Compensation.  Recognition.
  • 13. 13  Recruitment and retention.  Workforce planning. 7. Implementing strategies for maintaining senior level commitment. Step 6: Monitor and Evaluate This step involves:- 1. Tracking selections from talent pools. 2. Listening to leader feedback on success of internal talent and internal hires. 3. Analyzing satisfaction surveys from customers, employees, and stakeholders. 4. Assessing response to changing requirements and needs.
  • 14. 14 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 Planning can:- 1. 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 apply. 2. 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 this happen. 3. 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. 4. Help you plan for the future direction of the company.
  • 15. 15 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 mistakes:- 1. 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. 2. 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. 3. 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 responsibility. 4. 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
  • 16. 16 phased way - either from the top down or else starting in specific divisions or locations with greatest need. 5. 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.‖ 6. 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. 7. Lack of understanding how it works and how it benefits the organization. 8. Lack of a formal written plan for the person or position(s). 9. Lack of availability of human and financial resources; lack of budgetary commitment. 10. Superficial approach; lack of real understanding of the procedures, processes and requirements of each area the individual is exposed to during the process. 11. 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. 12. Failure to identify key employees who may have concerns with your succession plan. 13. Failure to plan for disability. 14. A rigid, inflexible plan NOT tailored to the needs and abilities of the personnel involved. 15. Too long a wait for real movement/promotion, disillusionment, may result in some people leaving due to apparent inertia in the system. 16. 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. 17. Complex program, requiring considerable paper work, follow-up, reporting.
  • 17. 17 Case Study of TATA Group The Tata case is interesting. From what is publicly known, succession planning was not a strong point until the late 1980s. In the late 1970s, the unsuccessful succession planning attempt by Voltas is etched in the public mind. The Tata‘s have gone down this road before. In 1981, group company Voltas hired a search firm to find a CEO. ―There was a worldwide search,‖ said P.N. Singh, who was in charge of HR at Voltas when the exercise took place. ―A global agency was employed. There were ads in global media and people were asked to apply for the job of CEO. Chairman Tobaccowala initiated a high visibility, open search which resulted in the recruitment of Ramesh Sarin of ITC as the CEO and finally, Sarin from tobacco-to-hotels major ITC was chosen as MD.‖ The experiment worked for only a few years. Subsequent events proved that Tobaccowala had no intention of giving up his executive power and authority. Inevitable clashes followed and Sarin fell out and moved on. ―It was a question of culture and control,‖ says Singh, who is now chairman of Grid Consultants, which conducts Blake & Mouton grid seminars. ―ITC had a different culture and Tobaccowala had a different idea of control. He was unwilling to let go. Tobaccowala was an ‗entrepreneur‘ and Sarin was a manager. So the two should actually have worked well together.‖ But something positive by way of process must have happened during the last 20 years under Ratan Tata. It is known that Ratan Tata set up a group HR function as part of his re-organization plan in the 1990s. The intent was to introduce good practices within the companies with respect to talent management and succession planning. While there is not much outside information about how much progress the companies have made, something right must be going on. The succession transitions are impressive from an outsider's perspective. Further, the board directors seem to be involved and to drive the leadership changes in the companies. In Tata Steel, Jamshed Irani became CEO in 1991 amidst tumultuous circumstances of the Russi Mody departure. In earlier interviews, Irani had mentioned that by the late 1990s, he presented to Ratan Tata a comprehensive review of possible successors; together, they zeroed in on a few possibilities. From this list, B. Muthuraman emerged as the CEO in 2001. Muthuraman, it is learnt, did a similar exercise and discussed it quite early on with Ratan Tata and the board while choosing his successor in 2009. He too accomplished a successful transition.
  • 18. 18 In Tata Consultancy, S. Ramadorai took over from the legendary F.C. Kohli in 1996. He was filling big shoes. He grew the business dramatically over the next decade and a half, including the IPO of the company. By mid 2000s, he is reported to have made a short list of potential successors for discussion with Ratan Tata and the board. From this list emerged N. Chandrasekharan. Ramadorai walked out of his TCS office on the date of his retirement so that his successor would have a free hand. In Tata Chemicals, change was sought in 2001. Outsider Prasad Menon was recruited to succeed Manu Seth. Perhaps because of what he had learnt at ICI, his earlier company, Prasad Menon started to think about succession early on. Apart from pacing potential, solid internal leaders, the leadership brought in a young TAS officer into the company and tested him through hugely challenging assignments. All the identified candidates were watched, coached, talked about and nominated to Advanced Management Programmes. Finally a choice was made by selecting R. Mukundan, with a short bridging role by veteran Homi Khusrokhan. The successful transitions completed in the listed Tata companies during the last two decades are impressive: Titan (where Xerxes Desai gave way to Bhaskar Bhat), Voltas, Rallis, and Indian Hotels. The conclusion is that whatever the process, the Tata group seems to have got succession about right - not perfect, but it seems to be effective and deliver positive results. In 2011, Tata was in the midst of the mother of all successions, finding a successor to Ratan Tata. Instead of focusing on the possible candidates, it is purposeful to reflect on the streamlined and effective process of succession they had announced. Firstly, a search committee was appointed with its composition and membership placed in the public domain. The choice of candidate was kept wide open: man or woman, Indian or foreigner, internal or external. Secondly, the search committee provided brief public updates of the status; it wasn‘t surprising that the details or candidates were not revealed. Thirdly, the search committee set itself approximate time targets so that their work inadvertently did not become desultory. Lastly, they internally adopted relevant criteria and a methodology, taking the assistance of a specialist firm. There seemingly wasn‘t much else to do by way of a process. Based on the recent track record of successful transitions and the transparent process for the chairman succession, the Tata group did have a good chance of getting the succession right. People had no choice but to
  • 19. 19 wait for the search committee to complete its job rather than to keep speculating on names and individuals. EARLY YEARS OF MR. RATAN TATA & THE EXIT OF THE SATRAPS Ratan Tata was a surprise choice to head the group after JRD (as J.R.D. Tata was popularly known). He studied at Cornell University, specialized in architecture, and had an offer from International Business Machines Corp., but returned to India because his grandmother was unwell, and joined Tata Steel Ltd (then known as Tata Iron and Steel Co., or Tisco) as an apprentice on the shop floor of its Jamshedpur plant. The year was 1962. In 1971, he was appointed director-in-charge of the ailing National Radio and Electronics Co. While Tata managed to turn around the firm‘s fortunes, it was to be a temporary success. In 1977, he was asked to turn around another troubled company, the Mumbai-based Empress Mills. Tata managed to do so, but was refused an investment he thought was required. The Mumbai textile workers‘ strike led by Datta Samant also hurt the company, which eventually closed down in 1986. Maybe because of these failures, few people understood why he was chosen as the person who would replace JRD in 1991. At the time, Tata was still perceived as an outsider in Bombay House, the group‘s headquarters. Several group companies were also led by individuals who had been given considerable autonomy by JRD and were, sometimes, more closely associated with their companies than the group‘s chairman himself. Among these executives were Russi Mody at Tata Steel; Darbari Seth at Tata Tea and Tata Chemicals; Ajit Kerkar, who transformed the Taj group (Indian Hotels) into a major hospitality chain; and Nani Palkhivala, a director on the boards of several Tata companies and chairman of
  • 20. 20 the erstwhile Associated Cement Companies (ACC Ltd), in which the Tata group was one of the original promoters. It had been widely expected that one of these individuals would succeed JRD, and Tata‘s appointment resulted in some bitterness—and not all of it remained unvoiced. Mody sparred openly with Tata. Kerkar and the new chairman had different views on the management of the chain. ―J.R.D. Tata had around him a team of senior managers, all of them people of substantial understanding in their respective spheres,‖ Tata said in an interview posted on the Tata group website on 6 December for some time before being inexplicably taken down. ―While they may have acceded to his wish that I take over the chairmanship—and this happened suddenly—I must confess that I did not feel any sense of joyousness on their part, because some of them had aspirations to have the job themselves.‖ In 1993, Mody was sacked after a messy scrap involving the appointment of senior executives. In 1997, Palkhivala quit, citing ill health. And Seth retired in 1995 and Kerkar in 1997, after Tata brought in a new policy that set the retirement age for directors at 70 and senior executives at 65. ―In my personal view, when JRD saw this scramble among the company chiefs to succeed him and the unpleasant innuendos that surfaced, he may have appointed someone who understood the Tata ethos, which was always very important to him; and, perhaps, he thought Ratan Tata was someone who could uphold this ethos,‖ Piramal said. She added that the concept of succession planning was nascent in JRD‘s time. It‘s only in the last five years that large business groups have realized the need for this, she said. Indeed, perhaps because of the rocky start that he had, Tata appointed a five-member selection committee, comprising N.A. Soonawala, Shirin Bharucha, R.K. Krishna Kumar, Cyrus Mistry and Lord Kumar Bhattacharya, to identify his successor. In hindsight, Tata‘s ascension in 1991 was the best thing that could have happened to the Tata group, according to a business historian and writer.
  • 21. 21 ―Tata, like every Indian company, was suddenly in a new environment. It could not keep operating under the old market rules, the old certainties,‖ said Morgen Witzel, a UK-based management writer and author of Tata: The Evolution of a Corporate Brand. ―Ratan Tata‘s strategy was to change Tata to help it keep pace with a changing India,‖ he said. And, after spending nearly five years quelling the challenge of the satraps, that‘s just what Tata did. BUILDING THE TATA CORPORATE BRAND – A GROUP IDENTITY Once the dust over the succession issue settled, the conglomerate‘s new chief Mr. Ratan Tata came into his own. His primary focus was the improvement of the operational efficiencies of several of the group‘s manufacturing companies and reiterating the very conglomerate nature of the entity. The main beneficiaries of the focus on operations were Tisco and Telco (Tata Engineering and Locomotive Co.). The former soon emerged as one of the lowest-cost steel makers in the world. The two companies were also renamed—Tisco as Tata Steel and Telco as Tata Motors. Simultaneously, Tata convinced group companies to pay royalty to Tata Sons for the direct or indirect use of the Tata brand name. He also moved towards increasing the promoters‘ shareholding in key group firms. Until then, the promoting firms held minority stakes in most group companies, making them vulnerable to takeovers. The group also exited businesses such as cement, textiles and cosmetics even as it increased its focus on others such as software, and entered telecommunications, finance and retail. These divestments and investments helped the Tata group ―shake off the slightly fusty image it had built up in the 1980s and make it fit for purpose in the modern world‖, according to Witzel. Indeed, today, the Tata group‘s most profitable company is information technology firm Tata Consultancy Services Ltd (TCS), which boasts around $10 billion (around Rs.54,700 crore) in revenue and serves customers around the world.
  • 22. 22 ―I think the creation of the corporate brand was quite important. The Tata corporate brand is one of the world‘s most valuable global brands because it harnesses the power of the whole group and creates a strong image in the minds of the stakeholders,‖ Witzel added. Tata himself sees the re-establishment of the group identity as one of his achievements. In the interview that was posted on the group‘s website, he said one of his most satisfying moments as chairman was the welding of ―the organization together in a more cohesive way than it had been in the past that it was able to identify itself more as a group‖. And, even as some of these efforts to establish himself, improve the operational effectiveness of some companies, and reiterate a group identity were bearing fruit, Tata went out and made a big- ticket global acquisition—the Tetley group in 2000. THE TATA GROUP – TODAY AND TOMORROW Mr. Jamsetji N. Tata was the founder of the group. In 1904, he handed over the baton to Sir Dorab Tata, who was at the helm of affairs till 1932, followed by Sir Nowroji Saklatvala who was there till 1938. The group was then steered by Mr. J. R. D. Tata till 1991, when the charge passed on to Mr. Ratan Tata. It was on March 23, 1991, that Mr. Ratan Tata was told by his uncle that he intended to handover the baton of the group to him. Coinciding with the economic reforms unleashed by Dr. Manmohan Singh, the group has had a remarkable journey since then! Mr. Ratan Tata took over the reins of the group at a time when it was an empire made up of several independent fiefdoms, run by stalwarts like Mr. Darbari Seth, Mr. Russi Mody, Mr. Ajit Kerkar and Mr. Nani Palkhivala. Mr. Ratan Tata was barely 54 when he assumed control of the Tata Group in 1991. His successor was searched for, keeping in line with a whole lot of other Tata company managing directors who were then in their 40s. The group had brought people in their 40s and 50s to run some key companies. Observers said that the next leaders will be from among them. They included Tata Power MD Anil Sardana, TCS MD Natarajan Chandrasekaran, Tata Chemicals MD R Mukundan, Tata Teleservices MD N Srinath, Tata Global Beverages head Peter Unsworth, Tata Motors MD Carl-Peters Forster, India Hotels chief Raymond Bickson and Tata International MD Noel Tata.
  • 23. 23 The activities of the group were and are overseen by two bodies. The Executive Office reviews business activities of all group companies. Besides Ratan Tata, it had R Gopalakrishnan, Ishaat Hussain, Kishor Chaukar and Arunkumar Gandhi. Then there is the Group Corporate Centre, which reviewed policy issues related to growth and took decisions on entering new areas. It also promoted the Tata brand and provided advisory services to group companies in human resources, finance and legal affairs. It comprised Ratan Tata, JJ Irani, R K Krishna Kumar, R Gopalakrishnan, Ishaat Hussain, Kishor Chaukar and Arunkumar Gandhi. The members of both these groups were then in their 60s and 70s. Tata Steel's acquisition of Corus, Tata Motors buying Jaguar Land Rover and TCS going public were some of the significant milestones after Mr. Ratan Tata took over from JRD as Chairman of the group. The Tata Group comprises over 100 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries. The total revenue of Tata companies, taken together, was $83.3 billion (around 379,675 Cr INR) in 2010-11, with 58 per cent of this coming from business outside India. Tata companies employ over 425,000 people worldwide. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. Every Tata company or enterprise operates independently. Each of these companies has its own board of directors and shareholders, to whom it is answerable. There are 31 publicly listed Tata enterprises and they have a combined market capitalization of about $77.44 billion (as on November 17, 2011), and a shareholder base of 4.3 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Indian Hotels, Tata Communications, Tata Teleservices and Titan. ―Mr. Tata has taken the group to great heights and we hope the new Chairman will take it to greater heights,‖ said an official closely associated with the selection committee. The five-member committee held 18 meetings over the last on-and-a-half years and interviewed a large number of candidates, both Indian and expatriates. ―Mr. Tata had a tougher clean-up exercise where there were many powerful individuals who were running their own fiefdoms. He managed to do this while carving out a new global agenda for the Group. The new Chairman will have a relatively easier job on his hands,‖ an industry veteran said. Much like the few erstwhile Kings who chose a successor based on merit alone, the
  • 24. 24 group had invariably followed the principle of meritocracy when choosing a successor in the past. What the new Chairman would have had to take over from Mr. Ratan Tata was a much more well-knit and cohesive group, united by a shared philosophy, vision and identity. THE CHALLENGES THAT WERE BEFORE THE MAN-TO-BE There is always a lot of hoopla surrounding the succession planning of leaders. Whenever a visible leadership change occurs, the image of the incoming leader appears to be much less than the exiting leader. The fallacy lies in our tendency to make an unfair comparison between the embellished profile of the outgoing leader and the unclear profile of the incoming leader. That is why Lal Bahadur Shastri initially looked inadequate as a replacement for Jawaharlal Nehru, Homi Sethna looked inadequate compared to Homi Bhabha and Vikram Sarabhai, and Ratan Tata was thought to be less than J.R.D. Tata. But all of these turned out to be successful transitions. There were many challenges ahead for the young Chairman-to-be. STEEL Weak demand and decline in global steel prices were the key challenges faced by Tata Steel's European operations. This was even as the prices of raw materials such as coking coal and iron ore ruled high as compared to 2010. Tata Steel had reduced its capacity utilization marginally in line with weakening demand and may have had to resort to production cuts if demand did not improve in Europe. Even in India, the company was up against weaker demand from sectors such as construction and automotive, but expected volumes to grow by eight per cent for the year 2011. AUTOMOTIVE The big disappointment was the Nano which was clocking modest numbers. The car business needs to rev up though commercial vehicles had been doing well. The Tatas were and are the market leader in trucks and buses but a lot depended then on the state of the economy over the next few months.
  • 25. 25 TELECOM In the telecom sector, the Tatas had their hands full with major challenges for both Tata Teleservices and Tata Communications. Tata Tele was now the fifth largest telecom player in a crowded market with as many as 14 in the arena. But the overall telecom sector was witnessing disturbing trends over the past year. All the operators' revenues, including Tata Teleservices, were stagnating, profitability was declining, and investments were slowing and costs were rising. Tata Teleservices undertook a major restructuring exercise in bid to cut costs and rationalize operations. The Successor had to ensure that this paid off in the long term. Apart from the tough market conditions, there were a whole host of regulatory issues especially those related to spectrum. Tata Teleservices still did not have GSM spectrum in key markets like Delhi. The company's 3G roll out was also under a cloud with the Government raising questions over roaming agreements. On the Tata Communications front, the worry was to bring the company back into profitability. The company, which once had a monopoly over the international long distance segment, had to reposition its strategy with more focus on foreign markets. While this paid off to some extent, the then ongoing dispute with the Government over funding and land sale put the company's expansion plans on hold. Another immediate challenge for the new Chairman was to be able to steer the company away from all that happened with Ms. Niira Radia and the 2G scam. Although there were no business implications, the Tatas had taken a major hit on its image, which the new Chairman would have had to build. IT SERVICES The offshore IT/BPO players were grappling with macro uncertainties in key overseas markets such as the US and Europe, and, at the same time, coping with currency volatility back home. For TCS, the largest Indian IT Services Company, the challenge was also to sustain its pole position in a market that had already started seeing a reshuffle in the pecking order of Tier-1 vendors, said Mr. Sanjeev Hota, Associate Vice-President - Institutional Equities at Sharekhan.
  • 26. 26 Also given its over two lakh employee base, TCS had to chase, perhaps even more aggressively, the non-linear growth strategy (beyond adding employees). ―Deals such as the recent $2.2-billion contract from Friends Life (a British financial services firm) will be critical in this regard…If TCS wants to scale up further, it will be important that the revenue growth outstrips the employee growth,‖ noted Mr. Harit Shah, Senior Research Analyst at Nirmal Bang Institutional Equities. Though the company had been growing at a scorching pace in the last few quarters, the euro zone crisis and the rupee volatility were the key challenges. Mr. Tata's acumen when it came to the business of technology was well known. Would the new Chairman's lack of expertise in the technology space be a deterrent going forward? – was a key question to be considered. ―I do not think so…at the top level people settle into their roles pretty quickly. Sometimes a complete outsider can bring a completely new perspective to the business of technology,‖ TCS sources had said. THE RACE FOR SUCCESSION The committee set up to find a successor to Tata group Chairman Ratan Tata had shortlisted around 11 candidates. Out of them, four-five were group employees. The frontrunner in the Tata race appeared to be Noel Tata, Ratan Tata‘s half-brother who was then promoted to overseeing the group‘s international operations. Some 65% of the conglomerate‘s US$70.8 billion revenue (April- March 2008-2009) came from outside India, so this was a significant responsibility. Additionally, Noel Tata was the son-in-law of Pallonji Mistry, who owned 18.4% in Tata Sons, which made him the single largest individual shareholder (most of the equity being held by charitable trusts). But others were in the race, too. The Economic Times speculated that the internal candidates include Tata Sons executive directors Ishaat Hussain and R. Gopalakrishnan; and B. Muthuraman, Ravi Kant and S. Ramadorai, vice chairmen of Tata Steel, Tata Motors and Tata Consultancy Services (TCS), respectively. The younger group included the CEOs of TCS (N.
  • 27. 27 Chandrasekaran) and Titan (Bhaskar Bhat). But they were long shots at best, observers had reported. There was also a speculation that, given the group‘s increasing global focus, the choice need not be an Indian. The Times of India said that the candidates could include Indra Nooyi of PepsiCo, former Vodafone head Arun Sarin and Renault Nissan chief Carlos Ghosn. ―The selection process would consider suitable persons from within the Tata companies, other professionals in India as well as persons overseas with global experience,‖ said a Tata Sons press release. Ratan Tata had also clarified that the new chief need not have to be either a Parsi or a Tata. (The Parsis are a wealthy business community in India, and the Tata chief has traditionally been a Parsi.) The Parsis are a shrinking community. Birth rates are very low and women who marry outside the community are excommunicated. There are now less than 60,000 Parsis left in India, and it is inevitable that the Tata baton will pass on to a non-Parsi sooner or later. It was evident that it would have to pass on to a non-Tata, too. The Tatas are a small clan. Apart from Ratan, there was his 80-year-old French stepmother, Simone, who was obviously not in the running for his job. His brother, Jimmy, who was close to 70 and had retired from Tata Power. Aloo Tata (who was by birth a Mistry) wouldn‘t have got precedence over her husband, Noel. And their three children — Liya, Maya and Neville — were still studying. So, Noel was the only Tata who was eligible. The composition of the selection panel had some critics speculating that the choice of Noel was pre-decided. It consisted of Tata Sons directors R.K. Krishna Kumar and Cyrus Mistry (who was Noel Tata‘s brother-in-law), Tata veteran N.S. Soonawala, group legal advisor Shirin Barucha and independent member Lord Kumar Bhattacharya of the Warwick Manufacturing Group of the U.K. ―There was only one external member,‖ said Pradeep Mukerjee, founder-director of Confluence Coaching and Consulting. Mukerjee, who had worked for several years in the HR area with Citigroup in the U.S., says that in the West, such selection panels have many more external members. ―What good is a panel stuffed with internal members? I wonder what the true purpose is.‖ Thus, the panel did have to face some criticism but it was worthwhile to keep a panel that was in keeping
  • 28. 28 with the core values of the Tata Group for such a strategic decision-making which would bear fruit in the long run. CYRUS PALLONJI MISTRY Cyrus Mistry, then 43, is the son of construction tycoon Pallonji Shapoorji Mistry. Valued at $8.8 billion, Pallonji held an 18.5 per cent stake in Tata Sons, making him the single largest shareholder. Mr. Mistry is the younger son of Pallonji and is married to Rohika Chagla, the daughter of lawyer Iqbal Chagla. He has an elder brother - Shapoor Mistry and one of his sisters is married to Noel Tata, Ratan Tata's half-brother. He had been a director of Tata Sons since September 1, 2006. He served as a Director of Tata Elxsi Limited, from September 24, 1990 to October 26, 2009 and was a Director of Tata Power Co. Ltd until September 18, 2006. Mr. Mistry served as Chairman of the Board of Shapoorji Pallonji Group and Afcons Infrastructure Limited before he became the Chairman of the Tata Group. Mr. Mistry also served as Director of various companies including - Forvol International Services Ltd, Shapoorji Pallonji & Co. Ltd, Cyrus Investments Ltd, Shapoorji Pallonji Power Co. Ltd, Buildbazaar Technologies (India) Pvt Ltd, Sterling Investment Corporation Pvt. Ltd, Samalpatti Power Co. Pvt. Ltd, Shapoorji Pallonji & Co. (Rajkot) Pvt. Ltd, Shapoorji Pallonji Finance Ltd, Shapoorji Pallonji Infrastructure Capital Co. Ltd, Oman Shapoorji Construction Co. Ltd and Muscat Pallonji Shapoorji & Co. Pvt. Ltd. Mr. Mistry had been a Non-executive Director of Forbes Gokak Limited since June 23, 2003. Mr. Mistry is Fellow of the Institute of Civil Engineers. He holds a BE in Civil Engineering from Imperial College, London and a Master of Science in Management from London Business School. He holds a Bachelor of Commerce from Mumbai University.
  • 29. 29 An avid golfer, Mr. Mistry is also a founder member of the Construction Federation of India. He is a trustee of the Breach Candy Hospital Trust, Mumbai. He is also on the board of Imperial College India Foundation. Cyrus Pallonji Mistry succeeded Ratan Tata at the helm of Tata Sons. He was appointed as Deputy Chairman and worked with Mr. Tata for one year as per the plan chalked out for him as a successor, before taking over in December 2012. 43-year-old Mistry was a director of Tata Sons and Tata Elxsi (India). Ratan Tata retired in 2012 when he turned 75. He joined the Tata group in 1962 and was the Chairman since 1991. Mr. Cyrus Mistry took over from a man who over the last two decades transformed the Tata Group into a global enterprise. Endorsing the appointment then, Mr. Tata had said, "The appointment of Mr. Cyrus P. Mistry as Deputy Chairman of Tata Sons is a good and far-sighted choice." (Courtesy: Press release from Tata Sons) "I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the Group on my retirement," Mr. Tata had added. Mr. Mistry had said that he was deeply honoured by his appointment. "I am aware that an enormous responsibility, with a great legacy, has been entrusted to me," he had reported in a statement. He announced that he will legally dissociate himself from the management of his family businesses to avoid any issue of conflict of interest. Shapoorji Pallonji Mistry, the father of the new deputy chairman, was owner of 18 per cent stake in Tata Sons. The Shapoorji Pallonji Group is into construction, textile, water treatment and other businesses. Cyrus Mistry was the managing director of the two billion dollar SP Group. Apart from the Tata Group, he also serves as a director on the board of several other companies, including Shapoorji Pallonji & Co, Forbes Gokak, Afcons Infrastructure and United Motors (India).
  • 30. 30 Mr. Mistry was also a part of a search panel appointed last year to find Mr. Tata's successor. He withdrew himself when his name was suggested. He then entered the process as a candidate. The 5-member panel also comprised of N A Soonawala, vice-chairman, Tata Sons; R K Krishna Kumar, non-executive director, Tata Sons; Lord Bhattacharya, a businessman based in the UK who runs Warwick Manufacturing; and Shirin Bharucha, a lawyer for the group. The committee is said to have met 18 times before announcing the succession plan.
  • 31. 31 CONCLUSION Aftermath of the Decision If there is any class on succession planning scheduled, Ratan Tata will surely be the one who rightfully deserves to give tutorials. For the man who took the Tata group worth US$ 5 bn to US$ 70 bn, the decision to relinquish the control must not have come easy, followed by a tough job to search the right candidate who could step in his large shoes. The same retirement rule that saw some of JRD‘s satraps leave the group mandated Tata‘s retirement as well. ―Some people have suggested that the retirement policy should not apply to the chairman,‖ Tata said in his interview on the website. ―I have always believed that you don‘t make exceptions for yourself. So I took the view that the rule should apply to me too. I realize that I have to live by the rules that I have set and step down when the time comes. And that time has come.‖ Cyrus Mistry had been working with Tata for a year before he stepped down, and Tata had said the Tata Sons chairman-designate has the analytical skills to steer the business forward and the integrity to uphold the Tata ethos. Later, Tata Sons formally announced that Mistry would take over on 28 December 2012 and Ratan Tata would become Chairman Emeritus. Some of the challenges that lay ahead of Mistry were akin to those Tata faced when he ascended to the top job. The succession this time round was not as acrimonious as it was during Tata‘s time, but with many of Tata‘s chieftains nearing retirement, Mistry has had to scout for young talent from within the group and outside to fill the void. He had already started doing that. Madhu Kannan, a former chief executive officer of BSE, was his first hire. ―You can live in a house, drive a car, make a phone call, season your food, insure yourself, wear a watch, walk in shoes, cool yourself with air-conditioning, and stay in a hotel all courtesy of Tata firms,‖ said an article dated 1 December 2012 in The Economist. The dilemma is that the group may not necessarily be making money doing all of this. Tata‘s telecom business, for instance, was under severe strain following the upheaval in the sector in the wake of the 2G scam, and its future was uncertain. Elsewhere, though Taj was still one of the most respected names in the Indian hospitality industry, Indian Hotels wasn‘t too profitable, with acquisitions
  • 32. 32 weighing on the firm. Problems with Tata Steel‘s European operations persisted and the current dynamics of the steel business at home weren‘t too exciting either. Tata Sons, a holding company (which is the only unlisted from among the group), needed not just a professional executive but a smart fund manager as well at the helm of affairs. Mistry had to manage to do both. While a year of working and learning closely with Mr. Tata before taking the full responsibility of the group in December 2012 did help, the responsibility was enormous. But to begin with, he had showed good intentions by announcing a legal dissociation from the management of his family businesses (Mistry was MD of SP Group which was into construction, textile and water treatment etc.) to avoid any conflict of interest. His selection was important in the sense it sent some important signals - Tata Group will choose the one it considered responsible and worthy enough to run the group, even if it were a non-Tata (Mistry had been chosen over Noel Tata, Ratan Tata's half-brother who had served as the managing director of the retailing company- Trent and is now serving as non-executive chairman - to merge some Tata Group retailing operations). Especially then when Tata Group holdings were high enough to be insulated from takeover threats. While Cyrus doesn't bear the name Tata, he was no outsider to the group. He had served as a Director of Tata sons and was expected to have a strong hold over the group values. Besides, roping in someone who belongs to a family that has significant holdings in Tata sons (Cyrus being son of Mr. Pallonjee Mistry, who has largest 18% stake in Tatasons) made good strategic sense as shareholding is the key to control for the group like Tata which is more global than ever. Thus, Mistry didn‘t just have big shoes to fill, he also needed to hit the ground running. Did Tata have his timing right? Says Cappelli: ―I‘m not a big fan of picking a successor way in advance. I think the better approach is to develop candidates, several of whom could step in. Then very near retirement — if that‘s the change event — the successor gets named in time for people to get comfortable. But the downside of naming a successor is that if it turns out that things change and that person is not appointed, then their career is really damaged.‖
  • 33. 33 Singh of Bain agrees that succession planning is a process, not an event. ―The ideal succession planning is evergreen,‖ he said. The formal announcement of a successor depends on factors such as size and scale of the business. For a group of Tatas‘ scale and diversity, a long transition is required. For most companies, a six- to 12-month overlap and transition would be appropriate. Announcing anything earlier than this simply invites trouble for both the incumbent and the designee and may lead to the unintended and costly departure of one or both, besides resulting in dysfunctional organizational behavior.‖ In practice, though, there are often disasters. Why? Raghunath of IIMB said, ―Failure of succession planning has its roots in the mindset that all termination is an unpleasant act — if not death — and the ritual leading up to it is painful.‖ However, Mr. Ratan Tata, having handed over the reins in the able hands of Mr. Mistry, we conclude that the future of the Tata Group stands bright and is moving on, on a high pedestal. Conclusion on Succession Planning 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
  • 34. 34 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. 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. 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. Succession planning for the future evolution of our key players is a vital step, that will prepare we for keeping balance as changes happen when our people leave we – however good we are at managing them. There are several ways for us to make sure performance management successful to help us with our succession planning. Succession planning is challenging to start with, but if we have the right performance management tools to get we through it then we are going to make everything work. If we are having trouble with performance management during succession then we should remember that it is our responsibility to drive it – no hiding places here! Gradually, as we introduce new measures for our people, equitably and consistently, we will find performance management will lift the overall outputs of the business. The great opportunity then is to ensure that we use this information to tease extra performance from all our people and notice, just notice, who starts to show up as capable of more, much more. Then we really are starting to build real value into the succession planning tactics we are adopting as part of the bigger strategy to sustainable business success.
  • 35. 35 BIBLIOGRAPHY 1. www.ummid.com 2. www.equitymaster.com 3. www.thehindubusinessline.com 4. www.livemint.com 5. knowledge.wharton.upenn.edu 6. vikaspota.com 7. sureshine.blogspot.in 8. www.thenational.ae 9. www.studymode.com 10.www.firstpost.com 11.ashokbhatia.wordpress.com 12.www.ndtv.com