Tata to retire, search for successor on
Tata Sons on Wednesday said it has set up a panel to search for a
successor to Group Chairman Ratan Tata, who is due to retire in
December 2012. The move comes within days of
There is a lot of hoopla these days
with regard to 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.
Several impending Indian leadership transitions are of high public
interest: Infosys, Tata, L&T, not to mention Sathya Sai Baba and
the Dalai Lama. Public reportage and guesswork about individual
candidates ends up hurting the interest of the candidate. For
example when Russi Mody was slated to become chairman of Telco in
the late 1980s, an advance story broke in the media. Russi Mody
never became chairman of Telco. It may well have been Russi Mody's
fault, but the media report did him in.
Thus a public focus on the candidates rather than the process can
become counter-productive. Many international companies use their
own tested process. BP practised the system of identifying and
grooming 'The Turtles' which the CEO monitored personally as
revealed by Lord Browne in his book.
The GE approach is fabled. In the 1980s, Reginald Jones was
chairman. The process that he and the board undertook to prepare a
list of possibilities, how they shortened it and how he finally
zeroed in on Jack Welch is the subject of a Harvard case study.
The process included a plane trip by Reginald Jones individually
with each of the contenders. During the trip Jones asked his
companion candidate a surprise question, "Suppose this plane
crashed and neither you or I were to survive. Also suppose that
just before the crash you are asked to name a successor at GE,
whom would you choose and why?" According to Jones, the
conversation revealed a lot about the candidate himself. Jack
Welch, of course, became an immensely successful CEO. After his 20
years, Welch went on to repeat a modified process when the board
chose Jeff Immelt around mid 2000s.
In India, the Hindustan Unilever (HUL) system of C and D listers
has been much lauded. It is a continuous process of discussing
people and identifying people at different levels for the distance
they are judged to be able to travel in their career. In his
autobiography, the first Indian chairman of HUL, Prakash Tandon,
wrote about how he started to think about his successor within a
year of his assuming chairmanship in 1961. A subsequent chairman,
T. Thomas, also described how he went about the difficult choice
between two outstanding candidates, Susim Datta and Ashok Ganguly.
The process centred on identifying a list of candidates, placing
them in specially chosen and challenging roles, and then observing
The parent Unilever also had a well established system. For
decades, Unilever produced internal CEOs and chairmen. In the
2000s, when the non-executive chairman and CEO were both Unilever
lifers, the Board felt the need for change. First, they brought in
a Swedish outsider, Michael Treschow, as non-executive chairman
and followed with another outsider as CEO, Paul Polman from
P&G/Nestle. The process was driven by the board with a great deal
of sensitivity and confidentiality.
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. Chairman Tobaccowala
initiated a high visibility, open search which resulted in the
recruitment of Ramesh Sarin of ITC as the CEO. Subsequent events
proved that Tobaccowala had no intention of giving up his
executive power and authority. Inevitable clashes followed and
Sarin moved on.
But something positive by way of process must have happened during
the last 20 Ratan Tata years. 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.
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.
Now Tata is in the midst of the mother of all successions, finding
a successor to Ratan Tata. Instead of focussing on the possible
candidates, let us reflect on the process they have announced.
Firstly, a search committee has been appointed with the
composition and membership placed in the public domain. The choice
of candidate is wide open: man or woman, Indian or foreigner,
internal or external. Secondly, the search committee has provided
brief public updates of the status; it is not surprising those
details or candidates are not revealed. Thirdly, the search
committee has set itself approximate time targets so that their
work inadvertently does not become desultory. Lastly, they have
internally adopted relevant criteria and a methodology, taking the
assistance of a specialist firm. There does not seem much else to
do by way of process.
Based on the recent track record of successful transitions and the
transparent process for the chairman succession, the Tata group
has a good chance of getting the succession right. It is better
that we wait for the search committee to do its job rather than
keep speculating on names and individuals.
(The writer is a
senior company executive. He can be reached at email@example.com)