Succession Planning: Key To Business Success

From Cyrus Mistry to N. Chandrashekaran, Tata Group has seen both sides when implementing succession plans. While the former was riddled with controversies, the latter appears to have hit a home run. 

Succession plans are paramount to driving businesses forward. From ensuring business continuity to bringing the desired level of professionalism, the value of creating a pipeline of leaders cannot be understated.

Challenges go far and beyond business continuity 

From disagreements over policies to non-alignment over strategic decisions between senior leaders, lack of succession planning has wider ramifications than what meets the eye. The Godrej- Mahendran fallout back in 2011 is a prime example of losing out an integral part of a company’s vision in the absence of a succession plan. Mahendran was bullish about taking the company to newer markets. However quick expansion meant more marketing outlay leading to a potential decline in the FMGC company’s bottom line. Things reportedly turned sour between other senior leaders from the Godrej family and Mahendran and led to the latter resigning from the CEO’s post.

Companies may also experience a decline in revenue as was reported after Narayan Murthy stepped down from Infosys in 2002. 

Succession planning an essential governance practice

Be it a well-planned retirement or an abrupt resignation, a well-rounded succession plan is seen as a good governance practice to prevent a leadership vacuum at the top and making it a part of SEBI disclosure norms for listed entities makes it a prerogative to be followed in letter and spirit. So how well are India’s top companies doing in terms of making succession plans a part of boardroom discussions as well as implementing them?

A recent corporate governance survey published by Excellence Enablers gives some perspective in this direction. The research considered the Annual reports and website disclosures of NIFTY 100 companies as a base to gauge how the surveyed companies fared on the count of creating and empowering future leaders. 

In the previous 4 FYs, 66 companies, which have disclosed details on succession planning, are common. In the previous 4 FYs, 35 companies, which have disclosed details on succession planning of the Board, are common. In the previous 4 FYs, 52 companies, which have disclosed details on succession planning of management, are common. 

Succession planning has moved from being a dialogue item in the board meeting agenda to an essential disclosure feature in board reports. And recent hirings, like Tata’s N. Chandrashekaran, show that companies are getting better at identifying and retaining the top talent for top roles with every passing year. 

With a large concentration of family-owned businesses complemented by opportunities to scale in the current economic scenario, the time is ripe for more companies to take succession planning seriously. 

The right leadership makes all the difference.