Mr. Narayan Murthy: You Were Actually Right All These Years

Infosys @ 40 – struggling with succession

Of all the things Infosys did right – and, in fact, they were the undisputed trailblazers for the Indian corporate sector in many respects  – succession planning was not one of them.  This is somewhat puzzling for organisations which aspire to create institutions built to last a 100 years,  as succession planning is by far one of the most critical leadership aspects necessary for  the execution of this  vision.

Had it not been for the brilliance of Nandan Nilekani, as well as his availability, willingness and humility,  the permanent destruction of value  in Infosys’ third, arguably fourth, tryst with passing on the baton would have been devastating. It is in that context that Nandan’s recent statement that there is no plan B assumes significance – the proverbial  thorn in the crown which adorns the head !

However, Mr. Murthy’s explicit statement that he was wrong in keeping out the family from the management of Infosys seems deeply flawed, or at least more an expression of anguish rather than the clarity of thought he has been known for in the years he led Infosys. In the eastern hemisphere existence of a feudal culture is a given, and our struggles across nations and societies continue to be the challenge of changing the status quo from nepotism to genuine meritocracy. Infosys has been a torchbearer in this regard, and has spawned an entire new generation  of professionals with the desire to create organizations without the stigma of nepotism attached to it. The damage nepotism can do to organizations is evident all around, including celebrated examples from public life.

When organizations are being built it is critical to enunciate its core values, and the culture the promoters wish to inculcate, as the company engages with professionals while scaling up. It is a ‘social contract’ which it commits to  when, inter alia, attracting talent, providing potential career options, and laying the tenets  of  general decision making it wishes to foster within the company. This is a non trivial matter and, in many respects, lays the foundational ethos of the company itself – its very soul. The difference in this critical aspect  with what  are termed as  “lala” companies  should be obvious. This is not to say that the latter companies are not well run or do not create value – but the social contract is as different as chalk and cheese as is the belief system  of the organization.

Hence, it is a trifle surprising that Mr. Murthy ,at this late stage in Infosys’ life, has decided to go public on this about turn of such a fundamental precept on which Infosys has been built. Nepotism is as much a matter of perception  as it is of substance. Whilst individual progeny could  surely have strengths to manage large corporations,  in most cases the fine line between perceived competence and  assessed  competency  is often very difficult to establish. More tricky are situations where repeated failures of the scion are treated very differently from the exacting standards  applied to  professional managers. These give avenues for discontent, creation of cheerleaders or encourage pure submission to the powers that be ; hence creating  a virtual downward spiral leading to a relatively lower performance organization - when viewed against a meritocratic organization with no next generation family at the helm. One does not have to try very hard to contextualize this in corporates  around us, including those in the IT sector.

Perhaps the only facet which favors the family from taking over the reigns of management is the thesis that their high stake in the company drives more measured decision making in the interest of sustainability in shareholder value. This though is open to debate. From JP industries to Reliance ADAG to GVK group the corporate sector is littered with examples where this has  not been the case and, in fact, the flexibility of boards to drive change in the management simply did not materialise given our governance environment. This would not have been so in case of poorly performing professional managements where change would  have been easily possible.

Infosys has never  had a dearth of talent to take on the leadership mantle. That many left post Nandan’s stint in mid 2000s bears testimony to the rather short sighted policy of the  “founders round table” at running the organization. That Nandan had many years in front of him when he quit (to make way for other founders in running the company)  and gave up the chance of building a more robust organization is a case of lost opportunity for its long term shareholders. That he went on to build something much more substantive was ultimately the nation’s gain, and testimony to the leadership loss at Infosys.

None of us can fathom the reasons why Mr. Murthy made the statement as he did in a recent conversation on national TV. Was it a trial balloon ? Or was it a genuine feeling of regret ? Should we juxtapose that with Nandan’s comment on not having a plan B ?  We will be only wiser in hindsight if plans are afoot for the families’ role in the succession planning  exercise though it seems improbable. But, at least in my view, Mr. Murthy was right over all these years in keeping the founders’ families out of management….. and he should not regret this decision in view of the outstanding company they have built and will bequeath to  future generations of stakeholders.