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BW Businessworld

Heir Not Apparent

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Over the next few years, some of India's most respected business leaders will be retiring. While a few of them have anointed their successors, in the case of most of the others, the new leader who will take over has not yet been chosen. A few organisations have set up committees to evaluate the next chief. The Tata Group is one such — and it is hunting for a successor to Ratan Tata when he steps down as chairman of the group in 2012. The committee has been given the mandate to evaluate both internal as well as external candidates, Indians as well as expatriates.
Meanwhile, in Bangalore, Infosys Technologies is preparing for the time when no founder will be leading the company. If reports are to be believed, Infosys will look within its own pool of professional senior managers to find a leader when the last founder steps aside.

And in Larsen & Toubro, the legendary A.M. Naik is supposedly restructuring the company because he doesn't think that any one person will be able to handle the job as he did. The company has grown so much that it probably needs focused leaders for different businesses that it is engaged in.

Most family-run businesses do not have this particular problem — they expect the leadership baton to be passed on to the next generation. But in many families, the question is whether to divide the business equally — or to give over the reins to the most capable member of the next generation.

The problem with succession planning is that there is really no one way to identify, groom and train a successor. There are no set formulas that work. Even in companies renowned for their succession planning — GE, for example — it is never certain that every succeeding chairman will do well.

The big issue is that the business environment changes too rapidly. In many cases, successors are chosen because they understand the business intimately. The problem is that by the time he or she takes over, the whole business would have changed and many things he or she learnt have to be unlearnt. In many cases, the business itself has to be restructured or reengineered to continue succeeding in the new environment. Deputy editor Srikanth Srinivas explores these issues and others in our cover story this week.

(This story was published in Businessworld Issue Dated 09-05-2011)