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NAME: RAIMOHAN R.

SHAHA BATCH: 74 SUCCESSION PLANNING


Succession planning is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. Through your succession planning process, you recruit superior employees, develop their knowledge, skills, and abilities, and prepare them for advancement or promotion into ever more challenging roles. Actively pursuing succession planning ensures that employees are constantly developed to fill each needed role. As your organization expands, loses key employees, provides promotional opportunities, and increases sales, your succession planning guarantees that you have employees on hand ready and waiting to fill new roles. Effective, proactive succession planning leaves your organization well prepared for expansion, the loss of a key employee, filling a new, needed job, employee promotions, and organizational redesign for opportunities. Successful succession planning builds bench strength.
Develop Employees for Succession Planning To develop the employees you need for your succession plan, you use such practices aslateral moves, assignment to special projects, team leadership roles, and both internal and external training and development opportunities. Through your succession planning process, you also retain superior employees because they appreciate the time, attention, and development that you are investing in them. Employees are motivated and engaged when they can see a career path for their continued growth and development. To effectively do succession planning in your organization, you must identify the organizations long term goals. You must hire superior staff. You need to identify and understand the developmental needs of your employees. You must ensure that all key employees understand their career paths and the roles they are being developed to fill. You need to focus resources on key employee retention. You need to be aware of employment trends in your area to know the roles you will have a difficult time filling externally.

Leadership Development and Succession Planning at ICICI Bank


On 19 December 2008, ICICI bank named joint managing director Chanda Kochhar as its new CEO from May 2009 to lead India's second-largest lender at a time of declining market share, soaring bad debts and a tough global environment. She would be the successor of the 61-year-old visionary banker K. V. Kamath, MD and CEO of ICICI Bank who was to retire on 30 April 2009 after completing his successful tenure of 11 years. ICICI bank with a network of 1,456 branches and 4,721 ATMs in India and presence in 18 countries, is India's second-largest bank with total assets of Rs. 3,793.01 billion (US$75 billion) and profit after tax of Rs. 37.58 billion for the year ending March 31, 2009. It offers a wide range of banking products and financial services to corporate and retail customers. The need for succession planning arose at ICICI as the term of one top level executive ended, one other retired and two left the company. This case has been developed to provide understanding on how leaders are identified, nurtured and developed at ICICI bank, the strengths and weaknesses of CEO centric model of leadership development being followed by Kamath and the new institutionalized process of leadership development. It also provides the scope for discussion about the strengths and weaknesses of hiring an insider or outsider for the position of a CEO and the role of outgoing CEO in the development and selection of his/her successor.

Succession at L&T: How India Inc's most mysterious succession plan might work out
I always told them that this life is reserved for L&T." An illustrious career that spans over 46 years, Anil Manibhai Naik, chairman and managing director of L&T, was sounded on many career options. It was some five years ago, when in a reflective mood that Naik mentioned this to this writer. The engineering firm founded by two Danish engineers, Henning Holck Larsen and Soren Kristian Toubro, is now led by indigenous talents who have won their spurs on multiple occasions.

L&T, among the few companies with no promoters, thwarted two powerful predators having deep pockets. The moves and countermoves to save L&T from covetous eyes culminated in a crucial minority stake resting in the hands of employees. They now own 12.16% of L&T. Naik was in the thick of it, aided by public sentiment to wrest back the initiative from the predators such as the late Dhirubhai Ambani of Reliance Industries and later Kumar Mangalam Birla's Aditya Birla group which was also keen on parts of L&T's business. L&T Overcoat In the interaction five years ago, he narrated how DR Mehta, Sebi chairman at the time the cement business was hived off, was impressed by Naik's steadfast desire to see L&T employees get a hold on India's largest private sector engineering firm. Quoting Mehta, he said: "If you pinch Naik, you'll find an L&T overcoat." Ditto with Kumar Mangalam Birla, chairman of the Aditya Birla group who bought the cement business from L&T in exchange for shares the company owned in L&T. While introducing Naik to BK Birla, his grandfather, the young scion is said to have remarked: "I've never seen a man so committed and loyal to his company". There's no doubt that L&T scaled heights under Naik, with market capitalisation, when trading ended on Friday, at Rs 82,592 crore, against Rs 4,000 crore in 2000. Naik has delivered. But stakeholders are anxious to hear of a succession plan. Speculation is rife on the recurring topic of succession at L&T. Man Who Knows Naik Anumolu Ramakrishna, Naik's former colleague is in Mumbai holding forth at an exhibition and conference on Concrete Technology, currently underway at MMRDA grounds, in Bandra-Kurla complex. The same venue, where Anna Hazare and his folks failed to attract enough supporters to fill up the vast grounds is now tented and has mammoth concrete mixers and several stalls as businesses try to grab a share of India's infrastructure story by showcasing implements to build India's infrastructure. On the sidelines of the conference, Ramakrishna, the former president and deputy managing director at L&T agreed to give a perspective on L&T and the irascible Naik, with whom he spent more than five years as his immediate colleague on the board. When Ramakrishna retired from L&T, he was the senior most L&T employee, having spent 43 years in the engineering giant. Naik since then has beaten that record. They are friends and stay in touch. "All of us have played an important role at L&T," says Ramakrishna. "But Naik has his own style," he laughs as he talks about Naik. Naik took the reins from SD Kulkarni. Both had different approaches to leadership. Kulkarni was more muted, while Naik is aggressive. "Every leader has brought in good values," says Ramakrishna who saw

both at close quarters. According to him, Kulkarni's tenure saw several leaders emerging from engineering background. "He [Kulkarni] gave freedom to these people to grow." Hyperactive CMD Naik's style is 'more hands on'. This results in a lot of time spent on even bidding strategies for projects, say people who have worked with him, perhaps more time than a CMD should devote. Ramakrishna agrees. "It's true. He takes a lot of interest [on bidding and tenders]." "While all of us [at L&T] were hardworking, Naik used to give a little bit extra. He never took a holiday. Though, I don't say that is a good quality" says Ramakrishna. "That's his style. I had my own style," he says. But grooming leaders has been a challenge at L&T. Ramakrishna admits this is problem Naik has to sort out. "To some extent it's been a traditional business. The leaders retired suddenly and the next level was not ready. Some shifted due to outside influences [read rivals poaching]," he said. Time to Let Go? But will Naik let go and will L&T allow him to fade away? L&T has "inherent strengths". Each leader has skills to manage the business, says Ramakrishna. "It is very difficult to let go of Tendulkar. But there are a lot of youngsters. Give them the opportunity as Tendulkar got," says the L&T veteran, using the cricket analogy. Naik's style of operating is that he wants total control. "But at the same time under his leadership there has been growth, market value of L&T has increased substantially," says Ramakrishna who still retains shares of L&T. "I am not selling, L&T's future is very bright," he says.

L & T FAILURE IN SUCCESSION PLANNING

A M Naiks commitment to Larsen & Toubro, or L&T, is beyond doubt. He even wants to move to an apartment near the companys Powai factory once he retires so that when I die, I will be facing L&T. That statement, made to this newspaper a couple of years ago, can be interpreted in two ways. One, it shows his devotion to an organisation he has served for almost half a century for 14 hours a day, seven days a week, turning it into Indias biggest engineering and construction conglomerate. But the statement can also be seen as reflecting the obsession of a leader who has forgotten how to let go. There is no denying that Mr Naik has been L&Ts biggest value driver ever since he took over as chairman in 2003, net sales have grown five times and market value 17 times. He has survived several boardroom battles, thwarted takeover attempts from powerful business families, and cut down on inner-firm bureaucracy, making it one of the few widely held companies that are managed professionally without a single owner. It is certainly not easy to run L&T, with its complex web of 64 businesses ranging from nuclear power to switchgear, 60 per cent built by Mr Naik himself from scratch. But the L&T boards decision to split the companys top post is, at best, a short-term measure and exposes its failure to wake up to address the succession challenge early on. As one of the most widely watched companies in India, it has missed an opportunity to set an example in terms of transparent, forward-looking succession planning. Its board had done this earlier too: in 2006, it raised the chairmans retirement age to 70, giving Mr Naik another five years at the helm. It has had ample time to look for a successor. Mr Naik has himself sought to explain the succession dilemma by saying he would have groomed a younger successor had he got the top job five years earlier (he became CEO at 57) and needs five more years to mentor younger talent in the organisation. But this argument lacks conviction. The fact that the markets have reacted positively to continuity at L&T is, in a way, a matter of concern: market players are responding to short-term feel-good sentiment, rather than investing in the idea that wellgoverned companies are appropriate long-term bets. The board should have played a more proactive role, by helping choose a younger successor and preparing the ground earlier for a smooth handover. More importantly, the dual power structure itself defies all logic. No organisation can or should have two bosses, and in this case the executive tag attached to Mr Naiks designation clearly shows his shadow will continue to loom large over the new managing director (MD). L&T has justified dual authority by saying that while the MD will look after day-to-day operations, the chairman will look at the bigger picture such as making L&T younger, etc. This argument, too, lacks conviction. If the L&T board needed Mr Naik so badly for mentoring, nothing prevented it from, at least, choosing a younger MD who would have stayed on after the chairman finally retires. By opting for somebody who would retire well before Mr Naik, the L&T board has clearly wasted an opportunity.