Bangalore: HCL Technologies Ltd has a new chief executive officer (CEO) and Infosys Ltd could, sometime next year.
While Infosys has been projecting company veterans Ashok Vemuri, B.G. Srinivas and even V. Balakrishnan as contenders for the top post, HCL promoted Anant Gupta as the president and chief executive on Thursday to take over from current vice-chairman and chief executive Vineet Nayar.
At both firms, finding the next CEO candidate has been about picking an internal leader who understands the company’s culture, is acceptable to other leaders internally and is also an obvious “next in the line” (So far, at Infosys, it has also been about the co-founders taking turns to occupy the corner room—in over 30 years, no non-founder has become CEO).
HCL’s choice, and Infosys’s (no matter who it is) show that most Indian information technology (IT) services companies are happy to take the easy way out and pick leaders soaked deep in the culture. Unfortunately, most of these people are capable of making incremental changes at best. They are not the kind to challenge the status quo.
Indeed, CEO transitions across India’s top tech firms are predictable—a bit like speculating whether Cherrapunji (the world record holder for the most rainfall in a calendar year) will see rains this monsoon.
Most of these firms take immense pride in being able to groom internal leaders who become CEOs. But they become CEOs because candidates outside are not even considered.
“I can’t think of a single instance when these companies actually interviewed an external candidate. At best, they (may have) looked at some names shared by a board member,” says a board member at one of the top-five Indian tech firms who spoke on the condition of anonymity.
Indeed, for three decades, Infosys’s next leaders watched as founders took charge as CEOs, one by one. “These so-called smooth transitions make you ask if in all these years, Infosys has ever considered an external candidate at all,” added the person cited above.
At Wipro Ltd, the company’s billionaire founder Azim Premji hired an outsider for the first time in 1999 when he got Vivek Paul to run and expand his fledgling ($150 million in revenue then) software business. After Paul quit in May 2005 because of some differences with Premji, Wipro has never attempted to experiment with an outsider again. The company instead had five presidents (Sudip Banerjee, A.L. Rao, Girish Paranjpe, Suresh Vaswani and T.K. Kurien) running different business units until it created a joint CEO leadership model by promoting Paranjpe and Vaswani in April 2008.
Wipro was finally forced to scrap the joint CEO model in February 2011 after several quarters of poor performance. Premji replaced the joint CEOs with Kurien, another company veteran.
Top recruitment firms specializing in CEO searches say they have almost given up on large Indian tech firms as a source for any future business.
“They fear that an external candidate may disrupt existing processes, but maybe that’s something they actually need the most now,” says the head of a multinational head hunting firm who, too, spoke on the condition of anonymity.
The question these firms need to answer while looking for their next CEO is about what they need to do to compete more effectively with Accenture Plc and IBM Corp.
Unfortunately, the CEO search mandate is mostly about picking an obvious next-in-line capable enough to manage thousands of people in an increasingly complex environment.
Though Hewlett Packard Co. (H-P) may not be the best example of anything at this moment, the board of the stricken company can’t be faulted with trying all options. In the past two-and-a-half years, the H-P board has gone through four CEOs.
This is not to suggest that internal candidates do not make good CEOs. IBM is a very successful example of how internal leaders can be groomed to become CEOs. In its 100-year history, the only time IBM brought an outsider to run the company was in 1993 when it appointed Louis V. Gerstner to succeed John Akers who was forced out by the board before the retirement age of 60. Then, every new CEO has been able to take IBM to a different orbit. Once a product company, IBM’s business is now driven by services and consulting.
When the first-generation entrepreneurs such as Shiv Nadar or even N.R. Narayana Murthy looked to pass on the baton, there was nothing wrong with the idea of picking up an internal candidate groomed and mentored for the role. The environment was not as challenging. The Indian offshoring model was considered a unique proposition by clients and these firms needed leaders who could build a massive delivery engine capable of beating IBM and Accenture in quality and cost.
Now, it’s no more about cost effectiveness. IBM, with around 170,000 staff in India, is as big in offshore delivery as any of the top-three Indian tech firms.
Indian IT’s first generation entrepreneurs and boards need to ask what kind of leadership attributes are now required. These boards need to ensure their firms do not end up in the same situation as Europe’s biggest software firms that ignored globalization for many years and are now finally waking up to much grief.