Succession ≠ Success

After a fifteen-month search, Cyrus Mistry was chosen to succeed Ratan Tata as chairman of the Tata group. It was the most high-profile succession for a long time and was done after looking at options within and outside the group. To smoothen the process, Mistry was appointed deputy chairman in November 2012, a year before RNT was to hang his boots up. On the face of it, it appeared to be well thought out and perfectly executed.

Now, with the unexpected and acrimonious ouster of Mistry as the group chairman, the search for a replacement is underway. In a terse note to group employees, RNT, who has taken over as the interim chairman, said a successor will be appointed in four months.

However, the whole discomfort surrounding the issue of succession remains. Going by how events have unfolded over since Mistry was abruptly dismissed, there is little to suggest that the process of choosing his replacement and how that plays out will be smooth.

This is not the first time succession in Indian business has been messy. It remains difficult, be it for family-run groups where bifurcating the business is the norm or when a professional CEO takes charge.

According to Kavil Ramachandran, who specialises in family businesses at the Indian School of Business, an orderly transiiton turns out to be difficult when there is ambiguity on the role to be played by each person. “This becomes tricky, especially, for the person who is stepping down. In many cases, they actually do not retire and remain in office till they die,” he says.

In the instance of FMCG major, Marico, Harsh Mariwala made way for Saugata Gupta to take over as managing director. While Mariwala remains chairman, the lines are very clearly drawn on who does what. “I had sat down with Saugata and there was a very high level of clarity on our respective roles. It was all put in writing and approved at the board level,” he explains. Mariwala says the chemistry is maintained by the two men meeting often. “There is a structured monthly review that takes place.”

In India, the instances of individuals staying on as chairman for a long period of time are not unknown. Those like YC Deveshwar at ITC or AM Naik at L&T have had long stints constantly raising the obvious question of succession. Ramachandran says holding a position as prominent as that of a chairman gives a person not just identity but power as well.

“It opens up access to resources and a network,” he thinks. Besides, there is the added advantage of deciding the constitution of the company’s board. “Very often, it comprises friends and well-wishers who will not ask you tough questions. The culture of the board gets created by these leaders.”

In the case of Mistry and Tata, two men separated by three decades, the bonhomie seems to have collapsed. “If there was an issue, someone should have intervened and could have been even a coach,” thinks Mariwala. He maintains the Tata group’s brand equity has taken a serious beating and finding a replacement for Mistry will not be easy. “It may have to be an internal candidate for the top job,” he says.

Given the stature of this position, all eyes are focused on the group to see who will step in and more curiously, what takes place after that. “When the chairman is larger than life, the problem becomes more magnified,” says Ramachandran. There is little doubt that RNT, after taking charge in 1992, gave the position a lot more than just acting honorary.

The successor, in that context, will have to step well beyond. The earlier Tata group successors have done just that, be it JRD or more recently RNT. Succession in the group has seen many a tricky situation like in the early 1990s, when one satrap after the other had to make way for RNT. Whether Mistry lucked out by virtue of not having the Tata surname will never be established. The question now is how much of a Tata his successor will be.