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The Art Of Leadership
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Take one look at the history of CEO appointments in Indian industry and elsewhere globally, and you will find there are lessons to be picked up all over the place. There are CEOs born out of adversity, there are CEOs who are handpicked to pursue a strategic objective, there are CEOs for fire-fighting, and so on.
In Quick Succession
In some cases, organisations do not even have enough time to announce the successor. Take the example of those owner-promoters who are involved in the day-to-day management of businesses. In such situations, it is only a question of when their next generation will make its way to the corner office.
Everybody knew that Vijay Mallya or Kumar Mangalam Birla would succeed their parents as heads of businesses. What nobody anticipated was the untimely demise of their respective fathers — Vittal Mallya and Aditya V. Birla — at a time when the younger scions were, arguably, not fully prepared to take over. Of course, they are not the only ones.
The legendary J.R.D. Tata was inducted as a director of Tata Sons when he was only 22, following the death of his father, R.D. Tata, and in 1938 became its chairman when Sir Nowroji Saklatwala passed away. JRD was only 34 then. Wipro's Azim Premji was even younger. At 21, he took over the reins of his hydrogenated cooking fats company and turned it into the IT major that Wipro is today.
|Vikram Akula and Mark Zuckerberg Entreprenur CEOs whose role changed when their firms acquired scale (BW pic by Bloomberg and Subhabrata Das)|
Vijay Mallya, J.R.D. Tata and others took over in a scenario that Ray Carvey, executive vice-president for corporate learning and international, at Harvard Business Publishing, describes as a "battlefield promotion". "These are a lot more risky," says Carvey as the odds are heavily stacked against the successor to make a seamless transition.
In most cases, the new CEOs take on the mantle while they are still learning to perfect their leadership role. But other leadership experts argue that you can never claim that someone is fully ready to take over as CEO due to uncertainties in business. "Aspiring CEOs must be open to throw themselves into the sea, even if they are only 70 per cent ready," says a leadership expert.
Many senior executives feel leadership development is a continuous process rather than a one-off event. It is no surprise that more organisations in India adopt the well-known 70/20/10 principle for leadership development — 70 per cent of learning happens on the job, 20 per cent through informal mentoring and the rest through a formal training exercise. According to Carvey, some of the most effective leadership development programmes have a healthy mix of instructor-led training, technology-enabled learning and action (on the job) learning. "Assessments help the person understand where he or she is. Development programmes help the person learn new skills, but real application comes from action learning," says a recent Harvard study (see ‘Key Trends In Leadership Development and What It Takes to Be The Top Exec).
So did these CEOs who took up the responsibility on the back of a personal crisis eventually succeed in their business roles? In business, pretty much like everywhere else, success is a relative term, caution experts. They point out that K.M. Birla's success as a leader lies in his hands-off approach, where he handpicked top talent to run various businesses of his conglomerate and allowed them to flourish, while still keeping close tabs on the group's operations. Meanwhile, Vijay Mallya, who was until very recently lauded for his aggressive style of running his business empire, now finds that he has to prove himself all over again as his airline business reels under an uneasy pile of debts.
|Nitin Paranjpe and Chanda Kochhar Have been picked from a select group of senior executives who had been groomed by their respective boards — HUL for Paranjpe and ICICI Bank for Kochhar to take the reins of the organisation(BW pic by Subhabrata Das and BW Archive)|
The Big Growth Factor
The other scenario where individuals become de facto CEOs is when the business they founded as entrepreneurs acquires a large scale, and starts to run on its own mighty legs. Mark Zuckerberg, the founder of social networking website Facebook, is one such example. Closer home, there is Vikram Akula, the founder of SKS Microfinance.
Carvey says that in such cases, the company board should evaluate whether the leadership of a startup can manage the transition to a large enterprise. "Running the startup requires different set of skills than raising money in global markets," he says, but warns that even if an external CEO is roped in for the mandate, the entrepreneur must not detach himself completely from the business. The company could need the founder's presence for cultural or intellectual property-related reasons.
In such situations, entrepreneur CEOs should move on to become quasi-spiritual leaders for the business they created. Again, Wipro is a case in point. The company has been picking different leaders to suit the business agenda. For instance, Premji appointed Soota to build the original IT business. Then, the company picked up Vivek Paul, then an executive with Wipro's major client General Electric, to manage the company's growth ambitions to become a global player. Under his tenure, Wipro became a billion-dollar IT services giant from the $150-million enterprise it was when he took over.
But after Paul moved out, Wipro's experience with CEOs has been mixed. Early this year, the company sacked its co-CEOs Suresh Vaswani and Girish Paranjpe. They had been in the position for about three years. Now T.K. Kurien has replaced the co-CEO structure.
Grooming The Leader
Another scenario is when a CEO succession plan is made after grooming an entire group of senior executives and the board finally picks the chosen one. Hindustan Unilever (HUL) prefers this approach. So did ICICI Bank. When the bank announced the appointment of Chanda Kochhar as successor to K.V. Kamath, it was no surprise to the world at large that the other candidates for the plum post might move on. Kalpana Morparia was the first one to call it quits, followed by Shikha Sharma and Renuka Ramnath. A little later, other senior executives such as V. Vaidyanathan and Madhabi Puri Buch also moved on.
For the rank outsider, it would look like Kochhar would be heading a team without its stars. However, leadership experts explain that organisations following such an approach are adequately prepared to lose the other top performers from their elite leadership group. "Organisations factor this into their future scenario planning. The others move on to become chief executives in other firms. Some of them such as Sharma are quite successful," says a leadership consultant. In fact, companies such as HUL have also helped enrich the CEO talent pool for the Indian industry. "Many CEOs of corporate India have been groomed at HUL," says another consultant.
That said, not always is the search restricted to internal candidates. Take the all-too-familiar case of India's biggest leadership search — the hunt for a successor for Ratan Tata. The search lasted for several months and various names — from Tata's half brother Noel Tata to PepsiCo CEO Indra Nooyi — cropped up. Eventually, the issue was settled last month when the group selected Cyrus Mistry, the son of the Tata Sons largest individual shareholder Pallonji Mistry. The choice of Cyrus Mistry — who has been on the board of Tata Sons since 2006, and also a part of the five member committee to find a new leader for the group — was a surprise to many.
Then there is the case of replacing the iconic chief executive. Milind Sarwate, the head of finance and human resources at Marico, stirs up a debate. "Is an iconic chief executive whose departure leaves a void behind better, or should companies hunt for a low-key leader who ensures his successor can easily follow his act much after s/he quits?" he ponders. Think no further than the iconic Steve Jobs of Apple. It is no secret that his successor Tim Cook has a tough act to follow.
"Sometimes a chief executive is brought in to manage the next big leap of transformation when growth plateaus," says Radhika Gopalkrishnan of human resources and consulting services company Hewitt Associates. Paul Polman, the global CEO of Unilever who was hired from Nestle, is an example of that.
Another case in point is that of Vikram Pandit who was made CEO in a difficult situation to turn around the fortunes of Citigroup. Has Pandit succeeded? The debate is still on.
Horses For Courses
Hiring a chief executive is pretty much a "horses for courses" strategy. And the course that Indian companies are charting as of now is growth-related. A study by Harvard Business Publishing (see ‘Key Trends In Leadership Development') shows expectations from Indian business leaders are for someone who can deliver high growth, manage large-scale acquisition of talent and also scale up the ladder fast.
Essentially, the need is for CEOs who can hit the ground running. That means companies are not going to be spending too much time coaching potential candidates inside a classroom. Respondents in the Harvard study pointed out that this traditional route has obvious disadvantages, including the long time it takes to develop an employee, the high cost of training, decreased employee productivity, difficult scalability, and failure to create sustainable change.
Then as Marico's Sarwate says, top CEOs are measured by how much value they created for the organisation. The value created could be on several parameters. Of course, most successful CEOs are lauded for their ability to lead, motivate and inspire people as well as developing the succession pipeline. We have heard that several times before, but even the seasoned CEOs know that there is many a slip between the powerpoint presentation and the ground reality.
|KEY TRENDS IN LEADERSHIP DEVELOPMENT|
|In a recent study of 43 firms, with more than 1,000 employees each, Harvard Business Publishing identified four key trends in leadership development in India.|
Leaders have to mature faster: Companies want their heads to have a high level of self-awareness, know their strengths and weaknesses and personal leadership style. They have to excel at managing emotions — theirs and of the team and be strong on ethics.
Leaders have to learn strategic skills to manage growth: Delivering and demanding high growth, companies expect leaders to constantly balance strategy and operations. They have to run verticals efficiently and have to do so while investing in long-term growth.
Organisations need to accelerate leadership: About half the respondents said they would use job assignments as a way to develop leaders.
Organisations need scalable and effective leadership development solutions: India has over 2,000 large firms with leaders all over the world. For instance, a large IT firm here will have to train thousands of managers every year and a large public-sector organisation in India will have hundreds of leaders geographically dispersed. With such size, it becomes difficult to get leaders to participate in instructor-led programmes. Organisations in India need scalable solutions that will allow them to develop leaders in key competencies.
(This story was published in Businessworld Issue Dated 26-12-2011)