In an interview with ET Now, Paul Laudicina, Chairman, AT Kearney, and author, talks about the factors that drive change in the world, the role of CEOs in this changing world, and the Indian succession system. Excerpts:
Last time we spoke, we were talking about a World out of Balance. It seems that the cycle has come back once again. It is still out of balance?
Yes, indeed, it is. I think the forces that were driving the world out of balance have shifted somewhat, but those forces are still at play. Globalisation, demographics, environment and natural resources, changing consumer preference and increasing activism and regulation, all of those turbocharged by changes in technology are still driving lots of changes in the world.
So if these are the factors that drive change in the world, we are seeing many of them accentuate in directions that have not been in favour of globalisation, including globalisation itself. It certainly had patches of protectionism, which are lurking around the corner still today. Do you think that’s likely to change or this decade is going to be one of caution?
It should be one of caution. We were unrealistic to think, as many did, in the halcyon days of the 1990s that globalisation and integration was an inexorable ever increasing proposition and this is what Alan Greenspan called ‘irrational exuberance’. We know now that globalisation will not continue unimpeded, it will be affected by lots of factors, protectionism, cost of shipping goods, questions about ultimate consumer demand. So the whole global supply chain is in a process of flux and re-examination and globalisation. Whether or not it continues uninterrupted will be the big driver.
The concept of opportunity is also evolving on a daily basis because globalisation was really the chase for opportunity at the right place and the right time?
That’s correct, but globalisation and the integration on which it rests not only bring opportunity, but they also bring vulnerability. In the 1990s, everyone was struck with the opportunities associated from integration and since the turn of the century, it has been more about nominating the risks and the balance that we need to get to now is all about understanding about how you denominate the opportunities and manage the risks to be able to grow.
What do you think CEOs are most concerned about in today’s scenario of globalisation? Protectionism or ability to reach out with risk and at the same time be extra cautious because they do not want to jump the gun?
They are most concerned about what businesses need to be concerned about, what we all learned about in biology 101, it’s the 1st Law of Nature ‘Grow or Die’. They need to understand how they can grow, but yet they are overwhelmingly impacted by the sense of pervasive risk. The principal preoccupation of CEOs today is finding the right growth plays and then being able to understand and manage the risks to be able to seize those growth plays.
Do you think Indian CEOs have less of a challenge today, but at the same time they should not overestimate this opportunity?
Indian CEOs have a great opportunity, but they also have a challenge because they have to globalise themselves to be able to ensure that they can stay competitive with the other players from outside India who also have an interest in this market. What we see obviously is Indian organisations, which have been quite successful growing with the Indian market, will now find challenge as they need to globalise and to adapt those best practices, which will allow them to stay competitive along with the other players in the market.
At the start of this recession, there was a talk about how China might end up losing its manufacturing edge at some level because of changes in demand and so on and that India could benefit on the skill set side. Do you think that’s something that might be wishful thinking?
No. Given the very different demographics presented in China with an extremely, rapidly ageing society, China will lose the price advantage of being the world’s biggest manufacturing platform. It will still be among the world’s biggest, if not the biggest consumer platform. China needs to be aware that it has to shift also with the dynamics which will determine what the competitive situation is for China.
What do you think benefits India though from a demographic or a consumer trend point of view?
It is all about the new Indian consumers who are moving up the pyramid. This is a young, upwardly mobile consumer profile. It is a growing consumer market, and it is a market in which consumer demand is more denominated around goods and goods are what have driven economic growth. This demographic profile that India presents is the fundamental strength of the market. Consumers or investors look for two things when they look at markets, what are the fundamentals of growth and whether or not there is a sustained opportunity to drive that growth based upon internal demand.
What you are suggesting is we get away from volume to value and that we need to do that quickly in terms of what we deliver for the world?
There is no question. If there is any lesson that the world has learned as a result of the crisis in the last couple of years, is that there was too much attention on creating wealth and not enough attention on creating value. When one creates value, wealth will follow. If one tries to create wealth without the established base of value, then you have the kind of excesses that we saw on the last few years which ultimately are not sustainable.
So then we do expect a fundamental shift in the way CEOs and strategists look at their markets? At one stage I do remember reading your own comments about how you have to have ‘just do it’ attitude and now it is about how we need to know where to put the ‘Pause’ button and when to release it?
Yes. It is all about powerfully imagining and rigorously assessing the future to be able to inform the present. We are no better at predicting the future today than we were 15 years ago. In fact, probably even worse because of the rapidity of change, but the benefit of looking over the horizon to try and understand the forces that shape the future is that it informs choices in the present. So the key is being forward thinking and at the same time being nimble to take advantage of changes in the forces that will shape the business environment.
For a large number of young entrepreneurs out of India, what do you think is going to be the toolsets to gauge or prepare for the future that you are talking about?
The toolset is that they have to be intellectual omnivores. It is not enough to be successful in business to just focus on your own discipline or domain knowledge. That is necessary but not sufficient. You have to be an expert in your own domain knowledge and then you need the peripheral vision to be able to see the trends that will be shaping the environment in which business will work out its future.
At the same time though, they are obviously not living in a cocoon. So they do not necessarily just have economics driving their situations, scenarios are changing largely because what’s happening in the political world. What do you think is going to be the definition from an impact point of view in the future decade? Is politics going to trump economics or will it be the other way?
Politics always has the ability to trump economics. In fact, the biggest conundrum and the biggest challenge to economic growth will be whether or not we are smart enough to create a new social compact between government, business and labour, civil society.
It is clear that business cannot be successful unless government creates the enabling environment for business and government cannot deliver on the needs of its constituents unless there is robust sustainable economic growth and that’s going to require a new alliance and alignment between government policy and private sector development.
The public sector played a huge role in saving economies. So how do you see this evolving because even if they have to be difficult partners, the point is how will they manage it ahead?
This is again the big challenge. It is what I call the asymmetry of time and space. Governments and business in order to be successful need to be thinking long term and need to be thinking cross border, but governments and business often are constrained because of business cycle or political expediency do think short term and within borders. Both need to work out an accommodation where they understand that this is a zero sum game, either they succeed together or they fail.
You have met several CEOs. Are they willing to let go and participate in what is an open-door dialogue with the government or have they been cagey because there has been an impression that after a comeback in the recession, profitability has gone up and there is that sense of boast that ‘oh, we managed it and now we can deal with it on our own’?
Yes, it is hard to generalize. I meet with a lot of CEOs. Most of them have been humbled by being caught off guard with the tremendous change and dislocation over the last couple of years. Most of them understand that the bonds of trust have been eroded between borrower and lender, employer and employee, even between citizen and government. Those bonds of trust, which our society depends upon for its success, have to be recreated brick by brick and that means it requires humility on all sides of that equation and working together.
So regulation and activism is the huge and integral driver of the future forecast?
No question at all. It was the fifth driver among the drivers that I looked at in World out of Balance and because individuals more than ever feel vulnerable. Coming out of this last recession they feel that their income, jobs and even health and physical security are vulnerable. They look for protection from governments and governments trying to provide that protection obviously are going to be more inclined to regulate and that means that the room to operate will be much more constrained for business and that’s what will require this new dialogue and understanding between the public and private sector.
We have seen an economic recession. Osama’s killing as well. How do you think some of these developments across the world impact on what would be the Middle East and how they view it in the future, how will all of these ideas eventually permeate into what is the global cooperation system in terms of an impact?
I think many of these ideas, post-tsunami nuclear disaster in Fukushima, Japan, the instability in the Middle East, the prospect for renewed outbreaks of terrorism, are all what I call wildcards. Often lower probability, high-impact events, which if they take place, can disrupt any plan. It is critically important that businesses and governments be thinking about not only the drivers of future conditions, but the wildcards which can disrupt the plans in order to try and have contingency plans for dealing with them.
Do you think strategically that’s realistic from a CEO standpoint and was there any sort of a new thinking or restructuring within a corporation that is due in order to cater to some of these challenges?
There is a fundamental shift in how companies plan. Static linear planning processes are not adapted to a highly dynamic and discontinuous environment of change. Most companies, that I believe are forward looking, are in the process of putting into place scenario-based strategic planning protocols, which give them the opportunity to look through the kaleidoscope and see how different patterns emerge from different ways that the drivers of business dynamics might manifest themselves to get the same result.
Most CEOs are obsessed with the idea of profitability and the recession has actually given them the taste of productivity. Do you think that that’s something that will take a while to settle?
Yes, consumer demand is being driven by three factors --simplicity, sustainability and self-fulfilment. Consumers want fewer value propositions, but clear value propositions that meet their needs. Steve Jobs would say that one of the secrets to ample success is that you could put the whole product line of Apple on one table. So simpler, more direct value propositions (are the things). Sustainability (is also important), all things being equal, at least in the industrialised world and particularly Gen-Y consumers would prefer to buy products from companies, which they think are socially responsible from those that are less socially responsible. Then finally self-fulfilment, people are interested increasingly on things that really enhance their ability to feel fulfilled, lifestyle, entertainment, healthcare, education. So that’s what is shaping the consumer profile and it is not necessarily going to be as high growth and opportunity going forward, but it is going to be very careful growth and those companies that get it right, even in periods of contraction like Apple, will continue to grow and succeed and perform at high levels of profitability and those that do not will be displaced.
Protectionism has gone up significantly and India in many ways was at the receiving end because BPO story was under threat, technology outsourcing was under threat. Do you think we will come around this issue and India will not actually see the impact of it drastically because Indian companies have been forced to hire in the United States, to hire in Europe, to hire in Latin America rather than bring work back?
Protectionism will be a function of how easily we get the economic engine restarted. If we continue under economic duress and particularly at high levels of unemployment, the political pressure globally will be strong for market protection, it is the wrong policy and it will have the wrong ultimate impact, but the politics are too compelling for that not to be an easy option for many countries to exercise.
The reset economies that Jeff Immelt keeps talking about is actually in tough times including higher deficit, lower rates like in the US, in India and China higher rates, high demand, we are all in for some sort of a supply shock, are not we?
I think so. The former chairman of the Counsel of Economic Advisers at the United States used to say ‘things that can’t go on forever, sooner or later have to end’ and there are a number of those imbalances that are still on the system and even new ones like the high indebtedness in many industrialised countries, the United States in particular, that absolutely must be addressed, otherwise it will undermine US economic performance and that will erode global economic performance.
India is full of family-led, owned companies. All of them are going through people troubles, succession troubles. What do you think are the new tenet of dealing with it, getting a professional is better, keeping a family person is better, an internal CEO is better, what are the various combinations?
We know that from the assessments we have done of other markets that those companies that promote from within to CEO positions typically have higher sustained performance for those companies than those that recruit outside. If you are able to train and hire from within, you are sending a message through the whole organisation that those who succeed will advance, but also importantly every CEO ultimately at the end of the day is shaping the values and standards of an organisation and is an agent of cultural change. To be able to change the culture of an organisation, means fundamentally you have to understand that culture and that’s not something that’s easy to graft onto, it is possible but it is not easy to do so. So someone that comes from within the organisation intuitively understands where the organisation has come from, but also importantly has enough insight into where the organisation needs to go and that’s the secret, blending the knowledge that comes from legacy and the insight that comes from being forward thinking, CEOs need to do both to balance the present and the future and to move the organisation forward. Proud of its past, but nervous about its future.
So you are saying that the CEOs from outside are not only expensive, but they also do not necessarily deliver as much as internal CEOs might?
That’s what the data would show.
For example, if you were today advising the Tatas, they have been in a hunt for sometime and they have actually come out and said ‘they are not able to find an appropriate replacement’. Would you advise they should go out and look for one or they should find somebody from within?
Every organisation and its own succession plans have to be very much adjusted to the nature of the organisation and the quality of the workforce within. The critical point about succession planning is that boards of directors must understand that it is a critical function of the board for them to be pushing succession planning and leadership development. Organisations that have a long-term view of nurturing leaders from within generally have lots of opportunities for promoting people from within into positions of authority. If you just wake up one morning and say ‘oh my goodness, we have a succession vacuum, and we need to fill it’, but you have not been building the pipeline of leaders with a very well developed leadership development programme, then you are more likely to have a problem and have to look outside the organisation and that may well be required in lots of organisations in this process of transition. But healthy, sustainable organisations have a leadership succession planning process, which gets them out of this box and allows them to promote from within and ultimately with greater success.
Do you believe that when owners who are often called promoters in the Indian context, decide to leave a company and essentially step into the garb of what is called Chairman emeritus, is that an ideal thing to do because at various stages it appears in India that promoters find it very difficult to give up?
It is hard to generalise here, but to the extent that a chairman emeritus helps his or her successor, understand what’s required to be successful and provides them with guidance, this can be net positive to the extent that a Chairman emeritus still wants to keep his or her hands on the controls, then this ultimately can undermine the ability of the successor to do what’s necessary to move the organisation forward.
How do employees take the idea of an external head?
It very much depends on how the succession is positioned. If employees understand and if the successor is skilful at communicating with employees that he or she understands what the needs of the organisation are going forward and is going to listen to the organisation and lead the organisation, then he is more likely to be well received. If this organisation comes as they say in Latin, dues ex machina and just starts with a whole bunch of new ideas that seem to be misaligned with the organisation’s legacy and culture, then this is a much more difficult breach emergence.
Your last book was World Out of Balance. What do you think your next book could be called?
The Great Leap. The working title of the next book is The Great Leap, which is all about what do we need to do to leapfrog over a lot of problems which seem to be constraining us to bring both governments and industry to the next level of development.
Last time we spoke, we were talking about a World out of Balance. It seems that the cycle has come back once again. It is still out of balance?
Yes, indeed, it is. I think the forces that were driving the world out of balance have shifted somewhat, but those forces are still at play. Globalisation, demographics, environment and natural resources, changing consumer preference and increasing activism and regulation, all of those turbocharged by changes in technology are still driving lots of changes in the world.
So if these are the factors that drive change in the world, we are seeing many of them accentuate in directions that have not been in favour of globalisation, including globalisation itself. It certainly had patches of protectionism, which are lurking around the corner still today. Do you think that’s likely to change or this decade is going to be one of caution?
It should be one of caution. We were unrealistic to think, as many did, in the halcyon days of the 1990s that globalisation and integration was an inexorable ever increasing proposition and this is what Alan Greenspan called ‘irrational exuberance’. We know now that globalisation will not continue unimpeded, it will be affected by lots of factors, protectionism, cost of shipping goods, questions about ultimate consumer demand. So the whole global supply chain is in a process of flux and re-examination and globalisation. Whether or not it continues uninterrupted will be the big driver.
The concept of opportunity is also evolving on a daily basis because globalisation was really the chase for opportunity at the right place and the right time?
That’s correct, but globalisation and the integration on which it rests not only bring opportunity, but they also bring vulnerability. In the 1990s, everyone was struck with the opportunities associated from integration and since the turn of the century, it has been more about nominating the risks and the balance that we need to get to now is all about understanding about how you denominate the opportunities and manage the risks to be able to grow.
What do you think CEOs are most concerned about in today’s scenario of globalisation? Protectionism or ability to reach out with risk and at the same time be extra cautious because they do not want to jump the gun?
They are most concerned about what businesses need to be concerned about, what we all learned about in biology 101, it’s the 1st Law of Nature ‘Grow or Die’. They need to understand how they can grow, but yet they are overwhelmingly impacted by the sense of pervasive risk. The principal preoccupation of CEOs today is finding the right growth plays and then being able to understand and manage the risks to be able to seize those growth plays.
Do you think Indian CEOs have less of a challenge today, but at the same time they should not overestimate this opportunity?
Indian CEOs have a great opportunity, but they also have a challenge because they have to globalise themselves to be able to ensure that they can stay competitive with the other players from outside India who also have an interest in this market. What we see obviously is Indian organisations, which have been quite successful growing with the Indian market, will now find challenge as they need to globalise and to adapt those best practices, which will allow them to stay competitive along with the other players in the market.
At the start of this recession, there was a talk about how China might end up losing its manufacturing edge at some level because of changes in demand and so on and that India could benefit on the skill set side. Do you think that’s something that might be wishful thinking?
No. Given the very different demographics presented in China with an extremely, rapidly ageing society, China will lose the price advantage of being the world’s biggest manufacturing platform. It will still be among the world’s biggest, if not the biggest consumer platform. China needs to be aware that it has to shift also with the dynamics which will determine what the competitive situation is for China.
What do you think benefits India though from a demographic or a consumer trend point of view?
It is all about the new Indian consumers who are moving up the pyramid. This is a young, upwardly mobile consumer profile. It is a growing consumer market, and it is a market in which consumer demand is more denominated around goods and goods are what have driven economic growth. This demographic profile that India presents is the fundamental strength of the market. Consumers or investors look for two things when they look at markets, what are the fundamentals of growth and whether or not there is a sustained opportunity to drive that growth based upon internal demand.
What you are suggesting is we get away from volume to value and that we need to do that quickly in terms of what we deliver for the world?
There is no question. If there is any lesson that the world has learned as a result of the crisis in the last couple of years, is that there was too much attention on creating wealth and not enough attention on creating value. When one creates value, wealth will follow. If one tries to create wealth without the established base of value, then you have the kind of excesses that we saw on the last few years which ultimately are not sustainable.
So then we do expect a fundamental shift in the way CEOs and strategists look at their markets? At one stage I do remember reading your own comments about how you have to have ‘just do it’ attitude and now it is about how we need to know where to put the ‘Pause’ button and when to release it?
Yes. It is all about powerfully imagining and rigorously assessing the future to be able to inform the present. We are no better at predicting the future today than we were 15 years ago. In fact, probably even worse because of the rapidity of change, but the benefit of looking over the horizon to try and understand the forces that shape the future is that it informs choices in the present. So the key is being forward thinking and at the same time being nimble to take advantage of changes in the forces that will shape the business environment.
For a large number of young entrepreneurs out of India, what do you think is going to be the toolsets to gauge or prepare for the future that you are talking about?
The toolset is that they have to be intellectual omnivores. It is not enough to be successful in business to just focus on your own discipline or domain knowledge. That is necessary but not sufficient. You have to be an expert in your own domain knowledge and then you need the peripheral vision to be able to see the trends that will be shaping the environment in which business will work out its future.
At the same time though, they are obviously not living in a cocoon. So they do not necessarily just have economics driving their situations, scenarios are changing largely because what’s happening in the political world. What do you think is going to be the definition from an impact point of view in the future decade? Is politics going to trump economics or will it be the other way?
Politics always has the ability to trump economics. In fact, the biggest conundrum and the biggest challenge to economic growth will be whether or not we are smart enough to create a new social compact between government, business and labour, civil society.
It is clear that business cannot be successful unless government creates the enabling environment for business and government cannot deliver on the needs of its constituents unless there is robust sustainable economic growth and that’s going to require a new alliance and alignment between government policy and private sector development.
The public sector played a huge role in saving economies. So how do you see this evolving because even if they have to be difficult partners, the point is how will they manage it ahead?
This is again the big challenge. It is what I call the asymmetry of time and space. Governments and business in order to be successful need to be thinking long term and need to be thinking cross border, but governments and business often are constrained because of business cycle or political expediency do think short term and within borders. Both need to work out an accommodation where they understand that this is a zero sum game, either they succeed together or they fail.
You have met several CEOs. Are they willing to let go and participate in what is an open-door dialogue with the government or have they been cagey because there has been an impression that after a comeback in the recession, profitability has gone up and there is that sense of boast that ‘oh, we managed it and now we can deal with it on our own’?
Yes, it is hard to generalize. I meet with a lot of CEOs. Most of them have been humbled by being caught off guard with the tremendous change and dislocation over the last couple of years. Most of them understand that the bonds of trust have been eroded between borrower and lender, employer and employee, even between citizen and government. Those bonds of trust, which our society depends upon for its success, have to be recreated brick by brick and that means it requires humility on all sides of that equation and working together.
So regulation and activism is the huge and integral driver of the future forecast?
No question at all. It was the fifth driver among the drivers that I looked at in World out of Balance and because individuals more than ever feel vulnerable. Coming out of this last recession they feel that their income, jobs and even health and physical security are vulnerable. They look for protection from governments and governments trying to provide that protection obviously are going to be more inclined to regulate and that means that the room to operate will be much more constrained for business and that’s what will require this new dialogue and understanding between the public and private sector.
We have seen an economic recession. Osama’s killing as well. How do you think some of these developments across the world impact on what would be the Middle East and how they view it in the future, how will all of these ideas eventually permeate into what is the global cooperation system in terms of an impact?
I think many of these ideas, post-tsunami nuclear disaster in Fukushima, Japan, the instability in the Middle East, the prospect for renewed outbreaks of terrorism, are all what I call wildcards. Often lower probability, high-impact events, which if they take place, can disrupt any plan. It is critically important that businesses and governments be thinking about not only the drivers of future conditions, but the wildcards which can disrupt the plans in order to try and have contingency plans for dealing with them.
Do you think strategically that’s realistic from a CEO standpoint and was there any sort of a new thinking or restructuring within a corporation that is due in order to cater to some of these challenges?
There is a fundamental shift in how companies plan. Static linear planning processes are not adapted to a highly dynamic and discontinuous environment of change. Most companies, that I believe are forward looking, are in the process of putting into place scenario-based strategic planning protocols, which give them the opportunity to look through the kaleidoscope and see how different patterns emerge from different ways that the drivers of business dynamics might manifest themselves to get the same result.
Most CEOs are obsessed with the idea of profitability and the recession has actually given them the taste of productivity. Do you think that that’s something that will take a while to settle?
Yes, consumer demand is being driven by three factors --simplicity, sustainability and self-fulfilment. Consumers want fewer value propositions, but clear value propositions that meet their needs. Steve Jobs would say that one of the secrets to ample success is that you could put the whole product line of Apple on one table. So simpler, more direct value propositions (are the things). Sustainability (is also important), all things being equal, at least in the industrialised world and particularly Gen-Y consumers would prefer to buy products from companies, which they think are socially responsible from those that are less socially responsible. Then finally self-fulfilment, people are interested increasingly on things that really enhance their ability to feel fulfilled, lifestyle, entertainment, healthcare, education. So that’s what is shaping the consumer profile and it is not necessarily going to be as high growth and opportunity going forward, but it is going to be very careful growth and those companies that get it right, even in periods of contraction like Apple, will continue to grow and succeed and perform at high levels of profitability and those that do not will be displaced.
Protectionism has gone up significantly and India in many ways was at the receiving end because BPO story was under threat, technology outsourcing was under threat. Do you think we will come around this issue and India will not actually see the impact of it drastically because Indian companies have been forced to hire in the United States, to hire in Europe, to hire in Latin America rather than bring work back?
Protectionism will be a function of how easily we get the economic engine restarted. If we continue under economic duress and particularly at high levels of unemployment, the political pressure globally will be strong for market protection, it is the wrong policy and it will have the wrong ultimate impact, but the politics are too compelling for that not to be an easy option for many countries to exercise.
The reset economies that Jeff Immelt keeps talking about is actually in tough times including higher deficit, lower rates like in the US, in India and China higher rates, high demand, we are all in for some sort of a supply shock, are not we?
I think so. The former chairman of the Counsel of Economic Advisers at the United States used to say ‘things that can’t go on forever, sooner or later have to end’ and there are a number of those imbalances that are still on the system and even new ones like the high indebtedness in many industrialised countries, the United States in particular, that absolutely must be addressed, otherwise it will undermine US economic performance and that will erode global economic performance.
India is full of family-led, owned companies. All of them are going through people troubles, succession troubles. What do you think are the new tenet of dealing with it, getting a professional is better, keeping a family person is better, an internal CEO is better, what are the various combinations?
We know that from the assessments we have done of other markets that those companies that promote from within to CEO positions typically have higher sustained performance for those companies than those that recruit outside. If you are able to train and hire from within, you are sending a message through the whole organisation that those who succeed will advance, but also importantly every CEO ultimately at the end of the day is shaping the values and standards of an organisation and is an agent of cultural change. To be able to change the culture of an organisation, means fundamentally you have to understand that culture and that’s not something that’s easy to graft onto, it is possible but it is not easy to do so. So someone that comes from within the organisation intuitively understands where the organisation has come from, but also importantly has enough insight into where the organisation needs to go and that’s the secret, blending the knowledge that comes from legacy and the insight that comes from being forward thinking, CEOs need to do both to balance the present and the future and to move the organisation forward. Proud of its past, but nervous about its future.
So you are saying that the CEOs from outside are not only expensive, but they also do not necessarily deliver as much as internal CEOs might?
That’s what the data would show.
For example, if you were today advising the Tatas, they have been in a hunt for sometime and they have actually come out and said ‘they are not able to find an appropriate replacement’. Would you advise they should go out and look for one or they should find somebody from within?
Every organisation and its own succession plans have to be very much adjusted to the nature of the organisation and the quality of the workforce within. The critical point about succession planning is that boards of directors must understand that it is a critical function of the board for them to be pushing succession planning and leadership development. Organisations that have a long-term view of nurturing leaders from within generally have lots of opportunities for promoting people from within into positions of authority. If you just wake up one morning and say ‘oh my goodness, we have a succession vacuum, and we need to fill it’, but you have not been building the pipeline of leaders with a very well developed leadership development programme, then you are more likely to have a problem and have to look outside the organisation and that may well be required in lots of organisations in this process of transition. But healthy, sustainable organisations have a leadership succession planning process, which gets them out of this box and allows them to promote from within and ultimately with greater success.
Do you believe that when owners who are often called promoters in the Indian context, decide to leave a company and essentially step into the garb of what is called Chairman emeritus, is that an ideal thing to do because at various stages it appears in India that promoters find it very difficult to give up?
It is hard to generalise here, but to the extent that a chairman emeritus helps his or her successor, understand what’s required to be successful and provides them with guidance, this can be net positive to the extent that a Chairman emeritus still wants to keep his or her hands on the controls, then this ultimately can undermine the ability of the successor to do what’s necessary to move the organisation forward.
How do employees take the idea of an external head?
It very much depends on how the succession is positioned. If employees understand and if the successor is skilful at communicating with employees that he or she understands what the needs of the organisation are going forward and is going to listen to the organisation and lead the organisation, then he is more likely to be well received. If this organisation comes as they say in Latin, dues ex machina and just starts with a whole bunch of new ideas that seem to be misaligned with the organisation’s legacy and culture, then this is a much more difficult breach emergence.
Your last book was World Out of Balance. What do you think your next book could be called?
The Great Leap. The working title of the next book is The Great Leap, which is all about what do we need to do to leapfrog over a lot of problems which seem to be constraining us to bring both governments and industry to the next level of development.
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