As a rush of CEOs near the end of their tenures, and as talent-shortage grips India Inc., the concept of succession planning raises its head again.

By Seema Shukla

The search is on. And the holy grail that everyone is looking for is a successor. At the top of the recall-charts is Group Tata. Thus, in the early days of July, 2000, Tata Sons created a 'governance' council that would identify a successor to Ratan Tata (he retires from his executive position(s) in December, 2002). Later that month, Tata Steel set out on a similar mission; the company's Managing Director J.J. Irani retires in mid-2000. It isn't just the Tata Group that's desperately seeking successors. Although its CEO, P.M. Sinha, has several years to go before he retires, PepsiCo India has embarked on a who's-next quest of its own.

Their task won't be easy. Succession planning exercises in India may no longer be the sword-in-the-stone routines they used to be some time ago, but companies still exhibit the same behaviour-which ranges from the paranoid to the ultra-paranoid-when queried about what (or who) is to come. And those companies that have managed to identify successors from within-like Cadbury India, where Marketing Head Bharat Puri, BT learns, is being groomed as Rajeev Bakshi's successor, or Titan Industries where Marketing Chief Bhaskar Bhatt is expected to take over from Xerxes Desai-prefer to not speak about the issue at all.

Which could explain why Mahendra Swarup is careful not to let you get a glance as he flips through the pages of his 'white file'. Pepsi's Executive Director (hr) has reason to be cautious: the file (called the Personnel Development Plan) contains the present and future 'human' blueprint for Pepsi's Indian operations. All of the company's 300 managers (including Swarup) are listed along with details of their most likely immediate successor.

Identifying fast-trackers is an old practice in Hindustan Lever Ltd (HLL)-only, in the old days it never used to tell people that they were 'listers'. Today's hyperactive job market has changed that. Now, the company uses the carrot of a 'listing' to entice its high performers to stay. Indeed, it seems common knowledge within the company that CEO Vindi Banga will be succeeded by one of two listers: Arun Adhikari, Executive Director (Personal Products) or Nitin Paranjpayee, former Head of Chennai HLL, and now Executive Advisor to the Unilever Chairman. Says Gurdeep Singh, 56, Director (HR, Corporate Affairs & Technology), HLL: ''There is a war for talent. We need to retain and grow top talent. We can only do that if they know what we think of them and are planning for them.''

Things are even more serious at L&T. In the next four years, 60 per cent of its managerial talent will retire. Thus, the past six months have seen CEO A.M. Naik busy instituting a succession-planning template: the top 10 per cent (in terms of performance) of the L&T executives are labelled stars and put on the fast-track.

Who needs succession planning?

Actually, every one does. For, succession planning isn't just about the search for the next CEO (although that is one aspect that generates public interest); it is about grooming (better) employees for larger roles. The currency in this high-stakes game is corporate India's best and brightest. Some companies call them stars; others fast-trackers or listers; and still others high pots (that's short for 'potentials'-people with the ability to deliver). How does succession planning help? It helps companies retain those people it'd like to by telling them how they fit into the organisation's blueprint for the morrow.

And it's not just a question of filling up gaps in the organisational chart. Explains Ralph Heuwing, 34, Managing Director, The Boston Consulting Group: ''Succession planning isn't just about planning a succession. It is (about) developing a pool of well-rounded business professionals who have acquired a broad exposure to different functions and business units over the course of their junior- and middle-management career.''

No company is better than its people. If a company's performance is not what it should be, it could be because of a mismatch between the ability of its leaders and the requirements of the task at hand. Why else would Thermax Chairperson Anu Aga ask all her directors to resign?

CEOs who ignore the issue of succession planning could find themselves in a predicament similar to L&T's Naik: most of the company's senior managers hired in the 1960s will retire in the next few years, and as he candidly admits, L&T wasn't really known for its succession planning efforts in the past. Explaining his decision to identify fast-trackers (stars, the company calls them) he says: ''Four years from now I do not want to have to depend on external recruitment. If my plans go well, by 2005 L&T will be in strong hands.''

The 'how' of succession planning

Expectedly, there is no one best way. Most organisations opt for a strategy where they identify key performers who are then put on an accelerated growth path. For example, HLL has its listers, L&T its stars, ABN Amro Bank its high potentials, and Motorola its NGLs (new generation leaders) and HIPs (high-intellect performers). The contentious issue is whether or not those identified should be told they have been chosen.

HLL never used to, and the company's grapevine used to be abuzz with rumours on who was in and who was out. Now, the organisation believes that it is necessary for those listed to know they are the chosen. Says Gurdeep Singh: ''Before we first started telling managers they were listed a year ago, we were naturally concerned about the reaction of the others. But we were doing it in response to two needs: first, the organisational climate survey done during Project Millennium indicated that our managers wanted greater differences in rewards and recognition between those given to high performers and those judged to have high potential for growth and the rest, and also wanted greater transparency on issues concerning their careers. Second, as the market for talent hots up outside, it has become increasingly important that we tell the people we value that we value them.''

L&T too follows the same logic: the company views succession planning as a motivational tool. Explains Deepak Gupta, 41, CEO, Korn Ferry International: ''Companies need to tell people they are special. That is the best way to get people to stay and perform.''

The flipside? This may cause some heart-burn among those not selected, but companies, justifiably, do not mind losing a few not-so-good employees as long as they can get their best ones to stay. Explains Prem J. Kamath, 51, Head, Management Resources, HLL (who claims that the fact that he's not a lister doesn't bother him): ''Prima facie it is demotivating to non-listers. We have to tell them that they are not written off. A person may be on the fast track at one stage, but that does not mean he will stay on it for ever-no complacency is allowed. We don't make a public announcement; only the concerned person is told.''

However, some other companies believe it is best not to tell the employees that they have been singled out. At Pepsi, the PDP process is applied to all managers; the company does not believe in singling out listers. Explains Swarup: ''If you confine your process to listers, and even half of them leave, there could be a problem. We focus on the entire organisation. We 'grow' employees, keeping in mind a certain position. But we don't tell them till they're going to move into that position. I know some companies use lists as a retention tool. But retaining people by promising a future that is not guaranteed, is not on.'' Seconds Romesh Sobti, 50, Managing Director, ABN Amro: ''We feel the need to be very subtle. The person does not know he is a high potential.''

There are some clear disadvantages attached with telling people that they are on the fast track. The news could get around, and create informal power centres within the company. Says R. Suresh, 36, Managing Director, Stanton Chase: ''Everyone wants to get close to a future boss.'' That, says J.N. Amrolia, the head of hr at Ashok Leyland, is the reason the company doesn't tell people they are on the fast track: ''The crown-prince syndrome often backfires and demotivates the others.''

Employees who know they aren't on the expressway to the corner room have little reason to stay on; employees who know they are, can use that knowledge to get a better deal elsewhere; and a listing of the chosen helps proactive poachers know just whom to hire. Chuckles Swarup: ''It helps headhunters and companies like ours in our cherry picking. I only hire listers from HLL.''

The ideal approach differs from company to company and is a function of the organisational culture. If a company handles its succession planning badly, it could end up losing talent. If it handles it well, it still could. Explains Heuwing: ''If you take the likely successor into confidence too late, he might leave out of anxiety. If you tell him too early, it may result in a false sense of career security or in dysfunctional behaviour towards peers. You have to strike a balance.''

Some organisations like HLL, manage to achieve this balance by ensuring that there are at least two contenders for the post till the very end. Apart from Banga, the company's Director (Personal Products), Harish Manwani, was also in the race for the top spot at the company. Now, Manwani is in London, and slated to take over a global responsibility with HLL's parent Unilever.

An eye on the big picture

The best succession planning initiatives are those that are totally in sync with an organisation's long-term strategy. Says Swarup: ''It (Pepsi's PDP) helps us to get a bird's eye view of the organisation's capabilities. And that perspective enables us take pre-emptive action. We can understand the developmental needs of the organisation and act on it quickly.'' Agrees Aquil Busrai, 47, Executive director (HR), India and SAARC, Motorola: ''Each individual in Motorola has got a career template. These templates are developed keeping the organisational blueprint in mind.''

If you think this sounds simple, perish the thought. PepsiCo's organisational-development model is an infotech-enabled one that uses inputs like the company's business plan (for the next three years) and its existing organisational chart to project its requirements in terms of the number of people it needs, and the skills they need to possess.

Before initiating its Star program, L&T hired hr consulting firm William Mercer to draw up a detailed organisational chart (listing the positions and the competencies required for the position). For each position, L&T tries to find an internal candidate. If it can't, it asks an executive placement firm to find an external one. In some cases, it looks for an external candidate even after identifying an internal one, and compares the two.

Indeed, headhunting for an 'external' solution to succession planning isn't that uncommon, especially when it comes to senior levels. Says Sanjiv Sachar, 42, Partner, Egon Zehnder: ''Often, when we are hiring people for senior positions, we are directed to recruit people who have the potential to move into the CEO slot in a few years.''

The king is dead...

Gupta of Korn Ferry puts it best: ''Asking a CEO who his successor is going to be is like asking an old man if he has written his will.'' Most chief executives do not quite like the idea of identifying someone who will take over from them some day. Pepsi may have be having an unwritten rule about people not moving up the corporate hierarchy till they have identified a successor. And management mavens may go on and on about a CEO being as good as the successor he appoints, but the reality is that most CEOs continue to be antsy while discussing succession planning.

In 1991, General Electric's legendary chief executive Jack Welch was quoted as saying: ''From now on, choosing my successor is the most important decision I'll make. It occupies a considerable amount of thought almost every day.'' Welch is due to finally bid adieu in April, 2001, and a successor is still to be named.

If it has taken a super-manager like Welch so long, may be it is not wrong to expect Corporate India to take some more time to get comfortable with the concept of succession planning. Till then, anyone got a glass slipper?

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