SUCCESSION PLANNING – ALMOST ALWAYS A REACTIVE GAP FILLING

about 7 months ago
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Yes Bank has hired Korn Ferry to find founder and CEO Rana Kapoor's successor and a decision is expected to come by 15th of Dec.

There is major speculation about who will head the Bank – an insider or outsider? The only ‘insider’ name doing the rounds is Rajat Monga, senior group President of the Bank currently. And the murmur is that the probability of an ‘outsider’ heading is higher.

If we look around the private sector banks, we see a common thread – none of them have a succession plan in place. Axis, ICICI as well as Yes have not chalked out this one important aspect. Succession planning is simply not done.

But a small bank can teach these big daddies a lesson or two. Ujjivan Small Finance Bank recently announced that it has begun its succession planning because its founder-cum-chief executive Samit Ghosh is scheduled to retire in November next year.  It has already shortlisted half a dozen candidates for the CEO’s position and is planning to submit a list of three candidates to the Reserve Bank of India by December for its approval. How many Indian companies manage to plan so well in advance?

This is typical of not just the banks but also seen across India private sector companies. Even the PSUs, they hunt and hunt and for months they too do not have a CEO. Many banks and major Govt institutions have remained headless for so long.

The saga of Infosys, Tata and even Britannia is the past shows that succession planning is a thorny issue. 

One might tend to think that in family run organisations, such issues do not come up. But a recent detailed and very insightful report published by PwC shows that only 28% of the next generation in family run businesses strongly feel that they have clarity on their future role. Tellingly, only 15% of family businesses have a robust and documented succession plan in place. 

In family run businesses the areas of conflict arise when there is a conflict between the heart and the mind – whether you should do what is right for the family or what is right for the business. Decision making with the ‘heart’ over the ‘head’ increases likelihood for conflict, shaking strong foundations upon which the business was built.

Even in non-family run companies, succession planning is very dicey. In the recent times, L&T is one company which managed this very well. A year before AM Naik stepped down, he introduced SN Subrahmanyan, the then deputy MD and President as his successor. Thus it was very well planned and executed.

Organisations and banks should have to make succession planning as strategic exercise rather than treat it like a reactive action to fill in a gap. The transition pain should be smooth or else it causes so much disruption.

In India, be it family run or professional, the fact is that even when the founder of a company brings over an “outsider” CEO, he never really gives up control. His may not come into work every day, but he knows every day-to-day happening and remains very much in the loop despite having resigned as CEO.

We simply cannot let go. Just as we can never let go of our children, continue to meddle in their lives even when they themselves have become parents; it is simply in our DNA to monitor our own baby – be it the child or the company which was founded from scratch. It is all very professional and “so mature” to get in a professional CEO but clearly, it does not work here.

The truth is that promoters and their families in India, never ever hand over charge; it remains largely a feudal society and dynasties are a way of life and perpetuity. 

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