By Shyamanuja Das  

Jun 16: The abrupt change in leadership in Wipro in January and the public rumblings by one of the ex-directors of Infosys about the way the company was going forward with the selection of its new CEO in April have suddenly brought into limelight the issue of succession planning in Indian IT companies. The not-so-exemplary leadership changes within a span of few months in two of the top three IT firms in India have not exactly created a great impression about the management depth and maturity in these companies.

A few other examples of the past, such as that of WNS Global Services, one of the top BPO companies, which took more than a year to name a successor when its founder director announced his resignation, have strengthened this perception. Coming at a time when most of the first generation leaders - many of them founders and entrepreneurs - are stepping down, such a perception may create doubts about the ability of this sector to create value in the long term.

Research by Dataquest shows that this perception is not exactly based on fact. Among the larger Indian IT companies, more firms have had a well-planned succession strategy than those who did not have such a plan. They include India's largest IT company, TCS, which saw a leadership change in 2009; Cognizant, which had had that transition in 2007; and HCL Technologies, where the leadership baton passed to a new CEO in 2007. All these three are among the top five offshoring companies from India. In the BPO segment too, Genpact and EXL, two of the largest BPO firms, had had a good succession planning in place while HCL Infosystems, the largest Indian company focussed on the home market, too has had a well-executed transition.

Based on the examples of these companies, here are a few trends that we have noticed in the good succession plans:

The planning happens at least three years before transition. In all these cases, except HCL Infosystems, the faces of successors were projected internally and externally well before the actual transition. In HCL Infosystems, while the name was not known, it was pretty clear internally that someone from outside and much younger was taking over. So, there was no surprise for employees, customers and investors.

Usually, there is a generational shift. In all these succession plans, there is a minimum age difference of 10 years. In one case, it is 21 years. That is clearly the next generation in an industry which is not more than 30 years old. This is an acknowledgment of two things: one, the business rules change over a period of time and a fresher approach is always better and two, any new CEO should have enough time to carry out his plans and ideas.

Usually, the new leader has to have deep understanding of the core business, whether insider or outsider. While the shifts may be generational, and it is a good idea to get a fresh approach, a lack of understanding of what is the most important thing in the business may create problems. So, for most offshore companies, it is both an understanding of the front-end as well as the delivery. Understanding of customers may come from an outsider but understanding of delivery would come from someone who has spent time internally. In all our examples concerning offshore companies, it is internal people who have been promoted to the top job. HCL Infosystems, which has most of its people in the front-end, decided to go for an outsider who has good understanding of the customer.

Here are a few examples from the recent past:

TCS

S. Ramadorai 65/N. Chandrasekaran 45
Year of Change: 2009

The age difference between them is 20 years. While TCS' Ramadorai was known for his organization building and driving the depth of execution - TCS listed under him, remained a best employer and made major acquisitions in selected markets - Chandrasekaran is a hands-on man, always with customers and very active in industry causes. Has recently taken over as NASSCOM vice chairman.

Cognizant

Lakshmi Narayanan 54/Francisco D'Souza 38
Year of Change: 2007

If Lakshmi Narayanan was the bridge between the old era and the new, who grew from becoming a programmer to a large project man to a CEO, D'Souza, at 38, is the youngest CEO of a professionally managed large company. While continuing with the growth machine image of the company, he started pursuing completely newer opportunities, instead of trying to play catch up with the bigger companies in the latter's turf.

HCL Technologies

Shiv Nadar 60/Vineet Nayar 43
Year of Change: 2007

Shiv Nadar is a legend and attained that status much before even Narayana Murthy and Azim Premji. Nadar was a rebel who questioned all the trends so far in the industry. He was successful in challenging some of them and was not so successful in others but never gave up. His latest - employees first, customers second - is now not just the latest idea to be discussed in US B-schools, it is also a bestseller book.

HCL Infosystems

Ajai Chowdhry 60/Harsh Chitale 39
Year of Change: 2010

The only outsider to take up the top job in such a generational shift in this list, Chitale has proved his credentials, albeit outside the company. But for a company that has the majority of its staff in the front-end, understanding the opportunities outside was more important than understanding the organization, unlike in case of offshoring companies. Founder CEO Ajai Chowdhry, a man with all the old world virtues and sophistication - he is a good singer actually - chose someone who shared his trust and values but little else.

Genpact

Pramod Bhasin 59/Tiger Tyagarajan 50
Year of Change: 2011

As founder CEO, Bhasin built the DNA of the company, commercialized it and built the depth and quality. Some of the best managers in the Indian BPO industry were trained by him. Tyagarajan is a man of execution; who was instrumental in driving non-GE revenue in the initial years. Bhasin has the larger than life image but Tyagarajan is more comfortable with technology, is more in touch with people and even writes a regular blog at http://tigertyagarajan.blogspot.com.

EXL Service

Vikram Talwar 58/Rohit Kapoor 43
Year of Change: 2008

Though there is an age difference of 15 years between them, they together founded the company. That is something that any company would envy: to have a next generation leader who understands the company so much. If Talwar is a maverick, is often irritated by the ignorance of the media and analysts, Kapoor is cool, measured and hands-on.