Friday, June 17, 2011

Succession Planning in Indian IT Companies

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 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.

Source ET


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