The story is still unfolding on what went wrong with the leadership succession at the Tatas. It is now clear that there were several missteps in the whole process of managing succession. Given that the group is rated as one of the most professionalised, with no direct control of any family, the successor should have had a smooth ride from the word go. What went wrong for Mistry, an insider in different capacities? Was it the person or the process?
Leadership succession involves three distinct phases: developing clarity on the kind of person to succeed and defining the capabilities to look for; the process of identifying, objectively shortlisting using definite criteria and making final selection is equally important; and, finally induction of the person with the handing over of the baton and allowing the new leader to take full charge. These phases and processes therein are known to every novice with a MBA degree! Then why did the Tatas err terribly? What are some of the common mistakes even reputed companies make?
What do we look for?
Many companies do not spend quality time to define their expectations about the new person or lack consensus in the selection team on prioritisation of the criteria. Beyond the clichéd statements come the desire of the outgoing chairman to install a mirror image to carry on with the existing agenda that is passionate to him.
Sometimes, adequate attention is not paid to the toolkit of skills the person brings, including the political skills to command respect, to take the team along, particularly if he does not come with a set of laurels from the past, as it happened in the case of Mistry. There is also the risk of one reaching the “level of incompetence” when one bites that one is not able to chew however tasty it is!
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Process challenges
The Tatas’ search over a long period of time is reflective of the difficulties in identifying the “right” candidate to fill the big shoes that Ratan Tata created for himself over two decades. It is all the more difficult to persuade already successful global leaders to change track and join the Tatas for various reasons.
There have been several instances of poor selection decisions in well established and reputed organisations, both commercial and developmental. As the effort to locate the “best” candidate leads to nowhere, the selection committee comes under pressure to finalise a name. Out of fatigue, it may make some decision and find post facto justifications for the same. Did the same thing happen in the case of Mistry? Perhaps. Some well-known Indian institutions have paid dearly for such decisions in the past.
Induction
Even the best of relay teams have to practise and perfect the skills of baton change. The longer the shadow of the outgoing chairman lingers, in reality or in perception, the new chairman is suffocated, and the organisation suffers. The irony is that the outgoing chairman, who has nurtured the organisation over a long period of time, would least realise that his acts are only
detrimental. They fail to distinguish between mentoring and interference. The longer the tenure the chairman has, the more challenging it becomes for him to detach.
This perhaps is the toughest part of succession when the outgoing chairman fails to cut the umbilical cord. In businesses controlled directly or indirectly by the promoter family, the long shadow of the outgoing chairman tends to appear often unsolicited. The trustee thus cuts at the root of further institution building.
Other than in organisations with a rigid fixed tenure by regulations, most other large organisations have found their leaders wanting in adhering to their terms of appointment and leave way for their successors to take charge. Some of the corporate stalwarts including Ratan Tata had reasons to move the goal post of retirement multiple times. The only exception seems to be M V Subbiah of the Murugappa family, who stepped down voluntarily on turning 65 according to the family tradition. Such leaders build institutions by passing over the baton to carefully selected successors.
The author is professor and executive director of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
