11 MAR, 2012, 10.38AM IST,
Lesson's from AM Naik and L&T's leadership change
Managing leadership succession is very challenging for all organisations, tougher for more complex entities. Unfortunately, in several cases, neither the incumbent nor the board wakes up to address this challenge early on.
Typically, in their hurry to grow the organisation, they either forget or do not devote adequate attention to such a strategically important matter before it becomes a crisis. The leadership change at L&T has attracted a lot of attention precisely for the same reason. There are several lessons from this experience.
Every Lap Counts
Leadership succession is like a relay race. Choice of the runners for each lap depends on the challenges ahead, the first and last runners being the fastest. There has to be adequate preparation and perfect understanding between runners about the timing of passing the baton.
The person handing over the baton should feel confident that the person receiving it has caught hold of it. The two runners have to have perfect understanding between them about each other. In a well-trained context, this happens in split seconds. Played out in slow motion, the same thing happens in leadership succession in corporations.
In this highly professionalised organisation, the board and management have always been aware of the need for finding a successor to Mr Naik, who is already 70. In fact, media reports that appeared about two years ago had described the dilemma that the company was going to face.
It is unfortunate that the board did not do much then or earlier about choosing the runner for the next lap with all the appropriate capabilities, and prepare the ground for a smooth change over. This was in spite of the fact that the entire team of executive directors was over 60 then!
Start Early
The board should have started the process of identifying the successor at least five years back with a definite deadline, and intensified the search especially when it was clear then itself that there was no obvious choice available.
The company would have been better off with a younger top leadership to steer the organisation to achieve the 25 percent compound growth planned in the next several years. Such an approach would have guaranteed smooth transition of leadership at L&T, with an over lapping phase for the baton change to be trouble free.
Doubles Game
The current decision to split the responsibilities between chairman and managing director appears to be a convenient decision. The new duo of chairman and MD/CEO is going to face sharing the responsibilities of shaping the destiny of the organisation. It may not be easy for the new entrant to flourish when Mr Naik's shadow continues to loom large as the executive chairman.
Given that Mr Naik and Mr Venkatraman will play a doubles game for the next five years, it is critical for them both as well as the board to objectively discuss the roles they will actually play independently and jointly. The new MD should not become a figure head
Prepare Next Runner
Mr Naik has built L&T into a giant organisation, fighting several odds. He has a larger than life image. In such a scenario, it is for the incumbent to remind himself of the trusteeship role he is playing and prepare the organisation for the next leader. It appears that Mr Naik did not do it early enough.
By asking Mr Naik to continue as the executive chairman, the board has signalled its lack of preparedness for a change which is inevitable for anyone. Many leaders in business and politics do not believe that their time for retirement would ever come; they tend to think that they alone are capable of running subsequent laps. They do not recognise the need to prepare the next lap runner early on. Mr Naik and the board failed in their trusteeship responsibility.
Insecurity of Retirement
The longer a leader stays and the bigger the success, the greater is likely to be the challenge for his departure. Individual egos play a dominant role in refusing to accept realities. This is where some of the basic teachings of this country such as detachment, contentment and feeling of duty become all the more helpful. This is when leaders show their maturity.
National Institution
L&T is a national institution, respected and regarded for its professionalism by multiple stakeholders. The top team, representing all the stakeholders has a responsibility to ensure that it starts preparing for the next lap runner now itself. As trustees, they have to constantly remind themselves that no individual is indispensable.
(The author is Thomas Schmidheiny Chair Professor of Family Business & Wealth Management,
