Succession planning in Indian companies – the TCS way

In an interview I conducted for my forthcoming book on Indian entrepreneurs going global. I asked Mr Ramadorai, when he was the CEO of India’s largest IT firm – TCS, as to who he thought would succeed him, what became quite clear from his and those I asked this question to, was that a pattern was emerging within the boardrooms of Indian companies.

Two issues emerge – (a) whether in their succession planning, they’d consider external candidates and (b) whether they’d consider non-Indian candidates.

On the first issue, it seems clear to me that Indian firms prefer recruiting for top jobs from within their organisation. In the TCS example, Ramadorai’s successor – Chandra has long been seen as the heir apparant. In other similar situations, take Infosys as another example where the baton has been passed from Murthy, Nilekani and now to Krish Gopalakrishnan.

With respects to having a non-Indian at the helm, there aren’t many examples but the two obvious ones that come to mind concern Brian Tempest’s appointment at Ranbaxy, where after a brief stint, he was shifted by Malvinder Singh to a more supportive role, and the other being Alan Rosling, who Ratan Tata appointed to coordinate strategy at Bombay House, the TATA HQ in India. I recollect the look of horror on other industry veterans, when Rosling was appointed and had to represent TATA in global industry platforms.

The other notable example is that of Suzlon, which made the conscious decision to move their HQ to Europe and in tandem appointed a non-Indian as CEO, who has recently moved on, one suspects due to the move back to India for their global HQ.

India has a long way to go in its journey to become a economic super-power, and I believe that a healthy debate has begun in the boardrooms of these companies on issues such as this. In my view, I don’t think we’re too far off from seeing an external, non-Indian heading up a major Indian conglomerate.

Gazing into my crystal ball – I reckon the mother of all succession headaches surrounds Ratan Tata. I wouldn’t be surprised if Tata Sons opted for a (a) external person (b) of non-Indian origin (despite the prominence provided to Naval Tata as heir apparant as a result of his surname),  after Ratan Tata.

Watch this space…

The future of family owned businesses in India

The dominance of family owned businesses in India is well known. However, has what Malvinder Singh done with Ranbaxy shown us what’s to come in years ahead?

For those not watching, Malvinder Singh was the Chairman & CEO of Ranbaxy, India’s largest pharmaceuticals company, who decided that he’s had enough and stepped down.

Ranbaxy was bought by Malvinder’s grandfather, who saw the opportunity in the generics market of India for low cost drugs. Malvinder’s father took charge and grew the business to spectacular levels and took it to a global platform. Malvinder was initiated into the business when his father was diagnosed with cancer. He took on various minor roles in a short span and then emerged as the CEO.

During his apprenticeship, the role of leading Ranbaxy was instituted in a professional CEO – one who wasn’t a member of the family – and at that time, the general public saw this as a positive move and various commentators suggested that the future had arrived. Little did they realise that Malvinder would take charge and sweep aside the same professional management that they had put in place. In fact, Malvinder went that step further and argued that just because his family owned a majority stake didn’t mean he wasn’t “professional” or “qualified” to lead the firm.

Yes, he also brought success to the firm and vindicated his convinction of leading the firm to new heights – most notably, with the sale of his family stake to a Japanese firm for approx $5bn. He may have retained his position as CEO of the firm, but I suspect that after various issues related to the US drugs regulator and also their huge losses, he would’ve had no choice but to walk.

In one way, this seems to complete the story. With the sale of their stake, Malvinder hung in there and still talked of Ranbaxy as an Indian firm. With his exit, Ranbaxy can move on.

So, has Malvinder shown us the future of family owned businesses? Please post your comments.