Passing the baton... smoothly

Challenges of succeeding a CEO with a long tenure

In an ideal world, a poorly performing business leader (Chairman, CEO) will be replaced by the board. In reality, this seldom happens. It could be due to interpersonal skills, family ties, difficulty in finding a replacement or the board is a “nodder’s club”. Hence, in many companies, performance or governance may not dictate the leader’s tenure and many of the leaders tend to stay at the helm of affairs for too long. As Marshall Goldsmith, renowned leadership coach, puts it, “If you are not forced to hand off the baton before you want to, you may be tempted to hold it and keep running.” 

Even if the incumbent leader’s track record is stellar, too long a tenure as the leader may make it difficult for the successor to find her feet. Ratan Tata had to face board-level storms in Tata group companies after he took over the mantle from JRD Tata, who led the Tata group for half a century. Anu Aga faced serious problems in Thermax when she became the Chairperson of the company after the untimely death of her husband Rohinton Aga. Krish Gopalakrishnan and Sibulal and later Vishal Sikka also faced issues in leading Infosys after N. R. Narayana Murthy stepped down as the Chairman in 2011, after having led it for three decades. 

These three examples are unrelated in industry, location (head office) and size. The long tenure of their leaders and the turbulent ride for the successor is a common thread though. While there are multiple reasons for the troubles faced by these companies after the new leadership took over, one of the main reasons seems to be the long and successful tenure of the predecessors.

Leadership style and culture: Edgar Schein in his celebrated work on leadership and culture observes that organisational culture and leadership are intertwined. When a leader occupies the top position for a long time, she shapes the culture of the organisation to suit her style. The influence of leadership style is very strong with family-owned firms when the leader is also the controlling owner and the distinction between the leader and the company is fuzzy. Over a period of time, the organisation culture becomes too dependent on the leader’s style to the extent that it loses its flexibility to adapt to a different style. 

If the leader quits when the organisation is in trouble, then the new leader gets an opportunity to shake up the organisational culture. However, when the long-serving leader quits when the organisation is doing well, the new leader would find it difficult to make the organisation adapt to her style. The persisting culture in the organization resists the change in leadership style, thereby creating a problem for the new leader. In the case of the Tata group, JRD Tata had laissez-faire style of leadership that allowed the CEOs of the group companies to run the respective firms as their personal fiefdom. When Ratan Tata took over, he tried to adopt a different style and that did not go well with incumbent CEOs and resulted in legendary board room battles.

Similarly, at Thermax, Rohinton Aga had a style of leadership which resulted in an informal culture in the organisation.  However, that proved to be a hurdle for Anu Aga in reviving the fortunes of Thermax.