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Wipro’s Premji may be preparing for a generational shift

Premji has started preparing to hand over responsibilities to professional managers, elevate son to board seats
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First Published: Sun, Feb 10 2013. 11 34 PM IST
Earlier this year, Azim Premji became the non-executive chairman of a company unit when Wipro hived off its non-IT business into Wipro Enterprises, a sign that he’s started putting together a plan to formally step down. Photo: Aravind Teki/Bloomberg
Earlier this year, Azim Premji became the non-executive chairman of a company unit when Wipro hived off its non-IT business into Wipro Enterprises, a sign that he’s started putting together a plan to formally step down. Photo: Aravind Teki/Bloomberg
Updated: Mon, Feb 11 2013. 09 53 AM IST
Bangalore: It’s difficult to imagine Azim Hashim Premji , 67, not actively involved in the company he transformed from a vegetable oil maker into a nearly $7.3 billion conglomerate. He still reviews all Wipro Ltd businesses every quarter and travels across the globe meeting hundreds of customers and partners every year. Last month, at the World Economic Forum in Davos, he attended more than 40 meetings in three days.
But Premji, the billionaire chairman of Wipro, may have begun setting the stage for his retirement, according to people working directly with him and several others tracking him from outside.
Premji has in the past few months started preparing to hand over executive responsibilities to professional managers and elevate elder son Rishad to board seats across different company units before 2015, people working directly with him said.
“He’s started switching off from many things,” said a person who works closely with the Wipro chairman, but requested anonymity because Premji has not publicly spoken about his retirement plans. “From the way he’s going about everything, I wouldn’t be surprised if the big succession at Wipro happens within two years.”
Earlier this year, Premji became the non-executive chairman of a company unit when Wipro hived off its non-information technology (IT) business into Wipro Enterprises, a sign that he’s started putting together a plan to formally step down. An overhaul of Wipro’s board, adequate grooming of Rishad to manage ownership across the businesses, and an established family office to manage the endowment for his philanthropic activities are his top priorities ahead of stepping down, three people tracking him closely said.
“At the 32,000ft level, it’s quite clear that all of this—hiving off non-IT business, stronger push for family office and endowment—are pieces of a bigger succession plan,” said a second person, requesting anonymity. “In the current context, I would imagine another two years at best for this transition to happen.”
Premji was not available for an interview, a Wipro spokesperson said when Mint approached his office last month.
People who have worked with Premji and are still associated with Wipro say his legacy will be a tough act to follow for anybody who takes over.
“There are three things that stand out about him—his value system, the autonomy he gives to people, and his systematic approach to work,” said Shankar Jaganathan, who worked directly with Premji during his early years and spent nearly two decades with Wipro as corporate treasurer. “These are personal traits tough to replicate for anyone.”
Already, Premji is considering naming Rishad as a director on the Wipro Enterprises board to represent family ownership. If this happens, it will be the second time the Premji scion gets on the board of a Wipro business unit; he joined the company as a manager in 2007 and is now the chief strategy officer of Wipro’s IT business. Rishad already sits on the board of Wipro GE Medical Systems Ltd. If he joins the Wipro Enterprises board, it will be the first business completely owned by Wipro where he gets a board seat.
Before joining Wipro, Rishad, 35, who has an MBA from Harvard Business School, worked at GE Capital in the US for four years and with Bain and Co., London, for two years.
A non-executive role for Premji that will allow him to ensure sufficient grooming for the next generation looks a possibility now, said Kavil Ramachandran, a professor at the Indian School of Business who specializes in family businesses and wealth management.
“I am sure he would move on and continue to be on the board as chairman emeritus or non-executive chairman for some time till he is sure that this young man (Rishad) is able to carry on,” Ramachandran said by phone. “I think this process is very much on; sometimes the 60s kind of time is good because you can start preparing well and even compress the grooming period required for the next generation. Now he has to accelerate the process of transition.”
Another person who also worked directly with Premji until a few years ago and is still in touch with him said the Wipro founder may have already delayed the transition.
“If I were him, I would have stepped down by 2003. This notion of the next gen not being prepared does not always make sense—when Premji took over Wipro, he was just 19 years old,” this person said, requesting anonymity because he did not want to upset Premji by making a public comment on this issue.
Other experts said Premji must retire from executive roles now if he wants to take his philanthropic initiatives to a higher level.
The Azim Premji Foundation works in the area of primary education and has been receiving financial support from the Premji Trust. In December 2010, Premji transferred 213 million shares, an 8.7% stake in Wipro out of the 79.5% he held at the time, to the trust. The transferred shares were then worth Rs.8,846 crore.
“I completely agree that over the past few years, he’s been increasingly getting involved in education and other philanthropic activities. And he put the best talent he had to back these projects,” said Rishikesha T. Krishnan, who teaches corporate strategy at the Indian Institute of Management, Bangalore. “It’s very clear he is working towards that transition. And if he wants to build the university and the foundation in his lifetime, he would need enough time to do. Logically, in two-three years would be the right time.”
The bigger issue, though, is whether Wipro will miss Premji and even face any business issues when he steps down, especially at a time when the company is attempting to regain double-digit growth rates in its IT business.
Some experts said Wipro may actually benefit if Premji’s over-arching presence takes a back seat.
“Azim Premji has always been firmly embedded into everything Wipro does—it is his DNA. I find it hard to see him pulling back much while he is still on Planet Earth,” said Phil Fersht, founder of outsourcing advisory firm HfS Research in the US. “However, if I am to be proved wrong and he is genuinely taking a back seat, this may prove to be a blessing for the firm.”
“We are entering a new age in the services industry where firms like Wipro need to invest more in its consultative and business alignment capabilities—not solely the old-world outsourcing model of low-cost labour and efficient performance,” Fersht added. “Wipro needs to assert itself in the market and having some fresh blood up top could well provide the answer. Moreover, TK (T.K. Kurien, chief executive of Wipro’s IT business) needs to be given the freedom to drive Wipro forward without Azim looking over his shoulder every minute of every day.”
Kurien is trying to help Wipro regain the momentum lost after several years of lagging rivals in revenue growth by collapsing old management structures and hiring senior executives from other firms. The December quarter net profit for Wipro’s IT business beat estimates, but the volume of business declined, a sign that the turnaround is still a work in progress. The company is hoping to catch up with its rivals in the pace of growth by the April-June quarter this year.
For now though, the question is whether Premji may delay this transition further and wait for 2016 when he will complete 50 years at Wipro, apart from spending more time in the business while Rishad is still being grooming. “He will need a much stronger board with a mix of leaders who understand Wipro and its values, apart from some folks from the industry who can bring fresh and bold perspectives to take the company to next level,” said another person familiar with Premji’s thinking, also requesting anonymity.
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First Published: Sun, Feb 10 2013. 11 34 PM IST
More Topics: Azim Premji | Wipro | Rishad Premji | IT | succession |