PSUs are looking for new leaders for new times

The SBI headquarters in Mumbai. RFPs from PSUs looking to build a succession planning road map have gone up in the last couple of years.
The SBI headquarters in Mumbai. RFPs from PSUs looking to build a succession planning road map have gone up in the last couple of years.


  • Why do some public sector companies are pressing the accelerator on succession planning road map?

MUMBAI : Over the last year, consultants from an advisory firm ran a battery of psychometric tests on senior executives at a large public sector energy company.

The executives were tested on if they were introverts, extroverts or a combination of both. Do they back their decisions with data or rely on instinct? Case studies were circulated and the executives asked to come up with solutions around expanding the company’s business in a new country.

Vacant at the top
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Vacant at the top

The responses were first assessed by the consultants and then analysed by the human resources team at the public sector unit (PSU). Psychometric assessments, which measure personality traits and behavioural style among others, are quite common in the private sector. Till a few years ago, they were nearly unheard of in PSUs. Not any longer.

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“These behavioural assessments will become part of a scorecard, which can then be used to pick a candidate to lead a PSU," said a senior industry executive who didn’t want to be identified. “There are discussions within the government and in selection committees around this."

Well, times are changing.

The pandemic turbocharged the digital pivot of all companies. Business models, in some cases, changed. So has inventory and the supply-chain management. In sectors such as banking and insurance, fintechs are innovating at a furious pace. At the same time, India’s energy transition—from fossil fuel to everything green—presents both new opportunities and challenges.

An NTPC power generation unit at Kawas in Gujarat
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An NTPC power generation unit at Kawas in Gujarat

India’s grand old PSUs have perhaps realized that all this change management can’t be handled without the right people at the top. They want their senior executives to be in sync with the changing times, learn what consumers want and use digital platforms to expand their business.

“There are gaps in the leadership pipeline. For senior level roles, there are not enough capable or ready leaders coming through the ranks. PSUs need more ready leaders to be able to steer existing business and drive entry into new business areas," said Sankalp Mohanty, a partner at Deloitte, a consulting company.

Deloitte is one company that works with many PSUs.

Mohanty listed out several traits that leaders need to make things work in today’s business climate—strategic thinking, digital orientation, innovation and inclusive leadership.

“These capabilities are lacking in many leaders. Hence, today, much of the succession planning efforts at PSUs are focused on building pipelines for critical roles at the senior-most levels," he added.

No doubt, request for proposals (RFPs) from PSUs looking to build a succession planning road map have gone up in the last couple of years, advisory firms said.

RFPs typically announce a project and solicit bids.

“The RFPs this year for succession planning have shot up for PSUs. We are looking at assessment techniques for leadership profiles," said Surya Shekhar De, head of financial institutions at consulting company Aon. The consulting company uses a battery of tools ranging from psychometric assessments, case studies, role plays and behavioural event interviews to understand a candidate’s leadership potential.

‘We are hiring’

The push for succession planning comes at a time when questions are being raised on the number of PSUs that are working without senior executives. As of 25 July, 21 posts of chairman and managing directors (CMDs) and managing directors (MDs) were vacant at central public sector enterprises (CPSEs).

Last month, Sanjay Jaiswal, a member of Parliament, posed a question in the Lok Sabha: what steps are being taken to fill up the vacant posts expeditiously?

Minister of state for finance, Bhagwat Kishanrao Karad, responded saying that filling up vacant posts is a continuous process. “Though efforts are made to ensure that the board-level posts do not remain vacant for long, at any point in time, there would be some posts that remain vacant due to various reasons. However, for the smooth functioning of the organization, any vacant board-level post is put under additional charge of another serving officer," he said.

Here’s how the process of recruitment for top jobs goes in government institutions. After the vacancies at the central public sector enterprises are reported by the administrative ministry or department, the Public Enterprises Selection Board (PESB), a body that advises the government on appointments, undertakes the selection process for board-level positions. The PESB constitutes a search committee to look out for and identify suitable executives who can be appointed to level-I and level-II posts.

“The government has also recognized the need to develop a cadre of professional managers within the public sector. Hence, unless markedly better candidates are available from outside, internal candidates, employed in the PSE, will be preferred for appointment to board-level posts. However, if internal candidates are not available, preference will be given to candidates working in other PSEs, either in the same area of business or in other areas," PESB’s website says. Of course, under special circumstances, appointments can be made without the involvement of the PESB.

Even a ‘Maharatna’ (PSUs that log more than 5,000 crore of net profit for three consecutive years and an average annual turnover of 25,000 crore for three years) like the Oil and Natural Gas Corporation Ltd (ONGC) has a top-level vacancy, as of date. The position of its full-time CMD is up for grabs since April 2021. ONGC has had temporary heads ever since. Rajesh Kumar Srivastava is its current acting chairman.

All this reinforces the need for better succession planning and explains the current rush for metric-driven evaluation of the leadership in PSUs. Which PSUs have taken a lead? Those from the banking sector is one cohort.


One of the latest RFPs is from the State Bank of India (SBI), India’s largest bank with more than 22,000 branches across the country and a network of over 65,000 ATMs.

In the RFP dated 12 August, the bank sought a talent assessment firm for assessing employees “in the behavioral competencies identified by the bank".

SBI already has a history of producing good leaders—they go on to serve other public sector banks and a few of them even head the turnaround projects at private banks. Recently, Mint reported on Prashant Kumar and Rakesh Sharma, two ex-SBI executives, who turned around Yes Bank and IDBI Bank respectively. Unhinged corporate lending, particularly to over-leveraged businesses, had the two banks in a quagmire. The two executives have now put in place stricter risk practices.

SBI now appears keen to groom its next level of executives.

“The top executive grade of the bank plays a pivotal role in driving all the key initiatives of the bank, also serving as change agents as well as grooming their subordinates by acting as mentors. In order to manage and utilize the human asset effectively, it is imperative that competencies are developed to enhance the individual as well as organizational performance," SBI stated in the RFP.

“For ensuring sustainable competitive advantage, it is important that while entrusting higher responsibilities to the senior officials, executives being considered are assessed for the key competencies desirable for handling the position in reckoning, so as to take an informed decision and also understand the development requirements of the pool assessed. This will help in effective succession planning, career development and smooth inter-vertical transition," the RFP further reasoned.

SBI wants to devise individual development plans for executives being considered for promotions.

A senior industry executive aware of the developments at SBI said that the top brass of the bank is getting trained in upping customer focus. “The senior leaders are made to understand what a bank of the future will look like. There is a focus on training people who have worked in different departments and are well versed with digitization across businesses," he said.

SBI, along with other public sector banks, are training their L1 and L2 (second and third rung from the top) executives on how to come up with various customer solutions on the digital platforms, two other industry watchers who didn’t want to be identified said. Bank of Baroda and Punjab National Bank, they added, are two banks interested in succession planning as well.

SBI, Bank of Baroda and Punjab National Bank did not respond to Mint’s queries.

A new power play

NTPC Ltd, India’s largest energy conglomerate, has its executives bracketed into four bands—E0 to E5; E6 & E7; E8 and E9. The company’s key talent and high potential performers are identified at E6 levels and groomed for the leadership pipeline. Like other PSUs, it prefers executives from within NTPC to fill senior-level vacancies.

Nevertheless, the company seems keen to improve its human resource processes. It has engaged Deloitte to finalize a ‘Strategy 2025’ and McKinsey & Company for a corporate restructuring exercise—the objective, NTPC told Mint, will be to strengthen its performance culture.

Not just NTPC, there are a bunch of other energy companies that are keen on streamlining its succession planning processes and performance. Like we mentioned earlier, the sector is under transition. If the future of energy is in renewables, the senior management of all the energy PSUs needs significant re-skilling as well as up-skilling.

“Companies will need to enable specific training with new-age businesses and segments such as green hydrogen coming up. Going forward, with forays into new technologies and segments, PTC India will also have special training and human resources processes for its employees in order to enhance their skills," said Rajib K Mishra, CMD of PTC India Ltd (formerly known as Power Trading Company).

Many experts think oil companies are in for a major disruption because of the shift to electric vehicles. Indian Oil Corporation Ltd (IOCL), for instance, may be saddled with thousands of petrol pumps they wouldn’t need in the future. “Questions like what to do with the existing petrol pumps, how to bring about electric vehicle charging pods are topics that need a different style of thinking," said a senior executive.

IOCL did not respond to Mint’s queries.

ONGC, meanwhile, is training its senior executives on shareholder accountability and risk management. The oil firm told Mint that these programmes help in bringing “an immediate impact in their boardrooms".

The company’s succession planning involves many processes. The first is a recommendation programme ‘HIPO’, short for high potential, wherein employees matching senior role profiles are nominated based on their levels, discipline, experience, and performance score, among others. A second process is the recommendation of a senior executive who is exiting a position and nominates a candidate based on the interactions between the two. The third is self-applications by executives who consider themselves eligible for the post. A talent review panel then selects the candidate and submits its recommendation.

While these processes appear sound, PSUs do face several challenges.

“Existing internal talent processes are more geared towards enabling promotion and not necessarily for identifying successors for particular roles. Succession planning requires a very role-specific focus. It will also require organizations to take a more data-driven approach to identifying successors," Mohanty of Deloitte said.

Succession planning and leadership development in both PSUs and private firms are complicated affairs. However, for PSUs, the road ahead is clearly trickier given how old some of these organizations are. At least, they have made a start.

(Rituraj Baruah contributed to this story.)

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