Infosys is set to finally get a professional CEO after 30 years of having founders at the helm. The process for this has been kicked off with the leadership swap in two of its largest industry verticals to test the mettle of the CEO candidates.
Today, Infosys is perhaps the only top Indian technology firm which is being managed by promoters. All other leading information technology (IT) firms like Tata Consultancy Services (TCS), Wipro, HCL and Cognizant are headed by professional CEOs.
And as this happens, the possible fallout would be a leadership attrition, which could see one of the two aspirants for the top post drop out. Here, that would be either Ashok Vemuri, current head of financial services and insurance (FSI), who has been handed over charge of manufacturing and engineering vertical, orBG Srinivas, who holds manufacturing and engineering and will look after the FSI vertical from April.
Viju K George and Amit Sharma, analysts with J P Morgan, see this as an inevitable outcome of such a succession planning in their report brought out last Friday. “CEO succession planning has inevitable mortality i.e., leadership attrition is involved. After selecting one of the candidates for the role, the remaining equal footed managers or candidates tend to leave the firm,” they wrote in their note to investors.
The duo gave the example of succession planning at GE, where three candidates who were to take over from Jack Welch were given responsibilities across the broader spectrum of businesses to evaluate their calibre beyond their spheres of expertise. GE’s selection process involved Jeffery Immelt being transitioned to GE Medical Systems from GE Plastics, while W James McNerney worked with GE Lighting and then later with GE Aircraft Engines.
Robert L Nardelli headed Transportation Systems and later the GE Power Systems.
“Once Jeffery Immelt was chosen as the CEO of GE, the other two candidates (W James McNerney and Robert L Nardelli) left the company. There is an inevitable mortality in a democratic and open CEO selection process,” said Sharma and George in their report.
Infy, the second-largest information technology (IT) firm, which recently underwent some management restructuring, has already seen some top executives and management hotshots leave. The J P Morgan analysts do not read too much into the timing of Infy’s move as “three years was a reasonable time frame to test the mettle of the CEO candidates in large companies such as Infosys”.
But Nomura’s Pinku Pappan and Ashwin Mehta believe the leadership switch has been timed. They said even though Infy had considered the swap earlier, the software exporter decided to go ahead with it only after the corporate reorganisation in April last year. “The company did not want to make the leadership change at that point in time because executing the change would have been more complex as multiple layers of leadership were shifting,” the duo said in their report last week.
Post the reorganisation, Infosys had a new CEO, two board members quit, three new board members were inducted and the company organised itself along four verticals.
Vaibhav Dhasmana, assistant vice-president, Barclays Securities (India), said Infosys had chosen the candidates who already have a proven track record in their areas. FSI and manufacturing and engineering account for 56% of Infosys’ revenues. “Two to three people were clearly in the running for the CEO post. Since both verticals are doing well, these executives were perhaps swapped in order for them to get better exposure to the industry. However, I don’t think there is much to be read into this move,” he said.
Balaji E is the MD & CEO of Ma Foi Randstad, said job rotation was a common practice in leadership development process and is being used by many Indian corporate houses to select right candidates to head their firm.
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