Outside successors at Indian cos may send 'wrong message'

With a search on globally for successors to Ratan Tata and Narayana Murthy, consultancy firm Deloitte has cautioned India Inc against bringing in outsiders as it may send a wrong message about leadership development within the respective groups.

The $71 billion Tata Group has started the hunt for a successor to its Chairman, Ratan Tata, who would be stepping down in December, 2012. The hunt is also on to find a replacement for Infosys Chairman and Chief Mentor N R Narayana Murthy, who would be retiring in August next year.

A successor from within the company would increase the probability of a positive transition, as well as a successful future for the entity, Deloitte said.

"Hiring an external successor brings great risk from the cultural fitment point of view and may send a wrong message," Deloitte (India) Senior Director Abhay Gupte told PTI.

With the Tatas starting the search process, speculation is rife that his half-brother, Noel Tata, who is being given more responsibilities in the group, could be the next man in charge.

Rumours were also doing the rounds that top India-origin American CEOs, Vikram Pandit and Indra Nooyi, as well as telecom major Vodafone's former chief, Arun Sarin, could be in the race to succeed Ratan Tata.

"The Tata Group is an Indian Group and we should not be looking (at it) as a Parsi group. The successor should be the right person and not anti-Parsi or pro-Parsi," Ratan Tata had recently said at the annual general meeting of Tata Chemicals.

A five-member search panel is looking for a replacement to Ratan Tata and the new chairman for the Tata Group is expected to be finalised by March, 2011.

Meanwhile, Infosys' Murthy has said the IT major is open to a foreigner becoming his successor.

"Well, given that we have a significant percentage of foreign holdings in Infosys, I don't think it should matter whether it is an Indian or a foreigner who chairs the company," he had said.

64-year-old Murthy has also maintained that it would not be difficult for an outsider to succeed him.

Infosys' nominations committee has started the search for Murthy's successor.

Regarding succession plans at Indian corporates, Deloitte's Gupte said that talent managers should develop an internal successor if at all possible, "because the need to look outside also sends the wrong message about an organisation's leadership development capabilities".

Going by reports, succession plans are also taking shape at many other Indian companies, such as Godrej, HCL, GMR, Bharti, Wipro, UB Group, B K Modi Group and Patni Computer Systems.