Succession planning for Corporate India! Some Learnings’ from TATA Group’s Succession planning..

I was closely following on the news articles & the discussions around succession planning and approaches adopted by the TATA group, in identifying successor for Ratan Tata.I really appreciate the way Ratan TATA (level 5 leadership qualities) has built 83 B $ Global conglomerate with 13- 14% CAGR in revenues, net profit and market capitalization during his 20 Yrs tenure as Chairman. In 1991, when Ratan took over, most of the group’s revenue came from its Indian operations; in 2011, 58% of its revenue came from global operations, which goes to Ratan’s credit.

This is definitely a tough & a time consuming process for selection committee to find a “successor” of the caliber who can manage business group which comprises over 100 operating companies in seven business sectors with 413000 employees, in this challenging time. Companies like ICICI and Infosys had managed succession planning events however Ratan’s succession needs a much more rigor as the complexity of operations & diversity of his portfolio’s are very high.

The selection committee took 15 months’ time to identify the successor for Ratan TATA. The first committee guided by Satish pradhan (HR Head) with other Senior Leaders had given some light on possible successors but haven’t nail down on the person. Subsequent to this, Ratan Tata has constituted a 5 member selection committee with members from TATA trust and TATA sons.

Looking at diverse data points, it appears to me that selection committee would have had the following guidelines while identifying the successor for Ratan TATA.

1. Long run way –Leadership Continuity for next 25 yrs
2. TATA Group Ethos ( similar to level 5 leadership -personal humility and professional will)
3. Experienced in handling Similar size, scale, scope, complexity (Diversified portfolio mgt)
4. Shareholders / Stake holders acceptance
5. Commitment to philanthropy

Mean while, there are lot of speculations on the possible and potential candidate(s), that the selection committee are considering for this position. Rumors floated around Indra Nooyi’s (PepsiCo’s CEO) , as she being one of the strong candidate for this position as she had the experience - required level of scale, scope ,size as well as India connection. Later news floated about Noel Tata (aged 55), chairman of Trent (one of the TATA group company) & Half-brother of TATA, is the most qualified person for this role. Some web sites conducted surveys, the results lead to Noel Tata as the potential candidate and also his connection with TATA family seen as an advantage for him.

At the end of all such speculations, the final news was out on Nov’11.The Selection committee anonymously selected Cyrus Mistry as the Successor for Ratan Tata, who was initially been part of selection committee. While referring to this piece of information, I got to hear from multiple India leaders /Authors that this news came as surprise to them. However looking at earlier selection made by TATA Group in identifying the successors for their operating companies, I don’t see this as a surprise as there is a clear pattern behind that. Let us understand that more..
Let’s see the chronological events that happened at TATA group in identifying successors for earlier operating Companies for MD & CEO roles.

Year operating company Person holding Successor Age Source of successor
2006 Tata housing N/A Brotin Banerjee 35 Within the TATA Group
2008 Tata chemicals Mr. Khusrokhan R mukundan 42 Within the company
2009 TCS S. Ramdurai N. chandrasekaran 46 Within the company
2010 Tata Tele Anil Sardana Srinath N 45 Within the company
2011 Tata commu Srinath N Vinod kumar 45 within the TATA group
2012 TATA group Ratan TATA Cyrus Mistry 43 Within the TATA Group

Don’t you see some pattern in above selections? Yes there is clear pattern in terms of Age, source of this hire..

Cyrus meets almost all the criteria including TATA Ethos .He is currently aged at 43 (long run way) ,Active in TATA boards from 2006 (Tata Ethos) ,has managed public limited companies , their family has 18.5% share in TATA group (shareholders acceptance) & known for Level 5 leadership qualities .Looking at the above dimensions , do they have any better choice than Cyrus? So finally selection committee leaned towards him.

The process is not over. The success of succession management not only lies with identifying the good successor but how well organization inducts him to that position. In the current plan, Cyrus Mistry (6th chairman for TATA group) will shadow Ratan Tata for the next one year. I am sure Ratan will handle this transition with greatest care looking at his earlier learning’s. . I wish and hope Cyrus will take this group to next level and build world’s largest company.

Is there something that India corporates/ political parties learn from this exercise to build greater India? Let us see

1. Selection Criteria : Greater importance given in Core values (TATA ‘s Etho’s, Commitment to Philanthropy) & Long run way for successor (environment to take bigger risks /time to turnaround bigger bets)
2. Selection Process : Initial search / constitution of selection committee /duration of the process /talent attention on this position/preparing shareholders with regular update
3. Creating eco system for right successor identification - Before installing new generation leader , the operating companies has been installed with new gen leaders..
4. Talent review committee to identify hipots : Talent review committee to review hipots on regular basis. Though it appears to be role based succession planning (chairman role) now, this was preceded by individual & pool based succession planning in earlier operating companies..
5. Way of inducting Successor into new role: Cyrus will be Dy. Chairman for one year shadowing Ratan Tata.

Currently India’s two largest political parties and other corporate companies like HCL, Wipro, Bajaj are also going through succession management process. BJP has announced their party leader Mr.Nithin Gadkari (age is 54 ),which came as surprise, Last year .Looking at his profile, it appears that he is well qualified ,but would be taken more mileage by bringing more public awareness about the process . Sonia’s health condition has brought lot of focus around Succession management in Congress party. Congress party has a identified successor (Rahul Gandhi aged 41 ) and there was a delay in installing his leadership due to lack of successor eco system. For example, i.e only 13 out of 79 cabinet and state ministers are below 50 yrs age.

Looking at TATA’s succession management case study, Indian organizations & political parties may see the greater importance for succession planning & management. I wish that they will institutionalize some of these best practices in identifying & installing the successors to build greater India..

Suresh Anubolu
HR Practitioner and Executive Coach

Read more at:
http://www.ndtv.com/video/player/news/how-cyrus-mistry-was-selected-to-be-ratan-tatas-successor/217328&cp
http://www.dailymotion.com/video/xmln2h_ratan-tata-s-enviable-journey_news?ralg=thefilter#from=playrelon