1

INDEX
SR
NO.
1.

EXECUTIVE SUMMARY

PAGE
NO.
6

2.

INTRODUCTION TO HRM

3.

INTRODUCTION TO SUCCESSION
PLANNING
IMPORTANCE OF SUCCESSION
PLANNING
SUCCESSION PLANNING PROCESS

4.
5.
6.
7.
8.
9.
10.

PARTICULARS

ADVANTAGES OF SUCCESSION
PLANNING
MISTAKES TO BE AVOIDED IN
SUCCESSION PLANNING
SUCCESSION PLANNING:THE INDIAN
PROSPECTIVE
STUDY OF MURRUGAPPA GROUP
SUCCESSION PLANNING
CONCLUSION

12
14
25

27
30
42
46

EXECUTIVE SUMMARY
The project explains the concept of succession planning and how it is important for
the successful functioning of a business. It proceeds to highlight the business
functioning trend in India which mainly is about family businesses. But seeing the
recent trend of few of the big Indian businesses opting for proper professionally
planned succession planning, it isnt long when India will pick up this practice in
every aspect. Many recent examples of succession planning in the Indian
businesses have been stated such as axis bank, Tatas, Infosys, ONGC, Eicher etc.
With main focus on Murugappa group succession planning. Murugappa group of
companies is a great example of family business training their heirs in a
professional manner to lead the business.

INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

Human resources are the most valuable and unique assets of an organization. The
successful management of an organization's human resources is an exciting
dynamic and challenging task, especially at a time when the world has become a
global village and economies are in a state of flux. The scarcity of talented
resources and the growing expectations of the modern day worker have further
increased the complexity of the human resource function.
Even though specific human resource functions/activities are the responsibility of
the human resource department, the actual management of human resources is the
responsibility of all the managers in an organization.
It is therefore necessary for all managers to understand and give due importance to
the different human resource policies and activities in the organization. Human
Resource Management outlines the importance of HRM and its different functions
in an organization. It examines the various HR processes that are concerned with
attracting, managing, motivating and developing employees for the benefit of the
organization.

INTRODUCTION TO SUCCESSION PLANNING

Succession Planning
Thinking About Tomorrow Today
In organizational development, succession planning is the process of identifying
and preparing suitable employees through mentoring, training and job rotation, to
replace key players such as the chief executive officer (CEO) within an
organization as their terms expire. From the risk management aspect, provisions
are made in case no suitable internal candidates are available to replace the loss of
any key person. It is usual for an organization to insure the key person so that
funds are available if she or he dies and these funds can be used by the business to
cope with the problems before a suitable replacement is found or developed.
Succession Planning involves having senior executives periodically review their
top executives and those in the next-lower level to determine several backups for
each senior position. This is important because it often takes years of grooming to
develop effective senior managers.

There is a critical shortage in companies of middle and top leaders for the next
five years.
Organizations will need to create pools of candidates with high leadership
potential.Succession planning involves a careful balancing of the concerns and
needs of a firms founding and senior managers, on the one hand, and its more
junior investment professionals and managers, on the other hand. The founding and
senior managers want to be properly rewarded for their efforts in building and

growing the firm, and this may include rights to continue to participate in fund
economics after these managers have begun to wind down their active
involvement. These desires must be balanced against the need to provide increased
economic benefits and firm governance rights to junior managers and investment
professionals in order to develop the next generation of managers for the firm.
Definition
Succession planning can be broadly defined as identifying future potential leaders
to fill key positions. Wendy Hirsh1 defines succession planning as 'a process by
which one or more successors are identified for key posts (or groups of similar key
posts), and career moves and/or development activities are planned for these
successors. Successors may be fairly ready to do the job (short-term successors) or
seen

as

having

longer-term

potential

(long-term

successors).'

According to Hirsh, succession planning sits inside a very much wider set of
resourcing

and

encompassing

development
management

processes
resourcing

called
strategy,

'succession
aggregate

management',
analysis

of

demand/supply (human resource planning and auditing), skills analysis, the job
filling process, and management development (including graduate and high-flyer
programmes).

Enforcing the succession plan:

A careful and considered plan of action ensures the least possible disruption to the
persons responsibilities and therefore the organizations effectiveness. Examples
include such a person who is:
suddenly and unexpectedly unable or unwilling to continue their role within the
organization;

accepting an approach from another organization or external opportunity which

will terminate or lessen their value to the current organization;
indicating the conclusion of a contract or time-limited project; or
moving to another position and different set of responsibilities within the
organization.

Coverage
Organisations differ in size, scope and type, so it is difficult to point to any single
model of succession planning. However, it is most common for succession
planning to cover only the most senior jobs in the organisation, plus short-term and
longer-term successors for these posts. The latter groups are in effect on a fasttrack, and are developed through job moves within various parts of the business.
This focus on the most senior posts - perhaps the top two or three levels of
management - means that even in large organisations, only a few hundred people at
any given time will be subject to the succession planning process. It also makes the
process more manageable, because it is much easier to concentrate on a few
hundred individuals rather than (say) several thousand. That said, however, many
large organisations attempt to operate devolved models in divisions, sites or
countries where the same or similar processes are applied to a wider population.

The role of HR

Succession planning needs to be owned by line managers, and should be actively

led by the chief executive who has a key role in ensuring that it is given the
importance it deserves by other senior managers; ensuring that there is a healthy
pipeline of potential leaders is about nothing less than the future of the
organisation. But it is not realistic for CEOs and those around them to have sole
responsibility for this; they have neither the time nor the expertise.
The HR function therefore has a critical role in supporting and facilitating the
process, not least in compiling all the necessary information on potential
candidates. Any career move at senior level is a process of multiple dialogues, in
which a senior representative from HR will collect views from senior line
managers in an iterative fashion, testing, challenging and amending them as the
dialogue goes on, making sure that all possibilities are covered, and maybe putting
proposals for decision to a succession development committee. HR departments
are of course also heavily involved in giving career advice and information to
individuals, and assessing and advising on their development needs. The HR
function is also centrally concerned in the design and management of assessment
processes and information support, including the development and maintenance of
computerised databases.

IMPORTANCE OF SUCCESSION PLANNING

Succession planning is an essential part of doing business, no matter how certain
your future appears. It's easy to put off planning when everything seems to be
going so well, right? Wrong. Now is the time to begin succession planning. Here
are some reasons why it can't and shouldn't wait:
You can't plan for disaster. No matter how good you and your
staff are at revenue projections or economic predictions, no one can truly
plan for disaster. Whether it's an unforeseen illness, a natural disaster, or a
CEO's decision to suddenly retire, the reasons for having a succession plan
in place before it is needed are endless. So while you can't plan for disaster,
you can put into place a series of contingencies that will help your company
stay afloat if, in fact, catastrophe occurs.
Succession planning benefits the business now. Just as
business practices have evolved over the years, succession planning has also
grown and changed. It's no longer a plan that can only be accessed when
leadership is going to change; a succession plan can be used before its "real"
intent is necessary. It can be used to build strong leadership, help a business
survive the daily changes in the marketplace, and force executives to review
and examine the company's current goals.
Succession planning gives your colleagues a voice. If
you're running a family business, the process of succession planning will
give family members an opportunity to express their needs and concerns.
Giving them that voice will also help create a sense of responsibility
throughout the organization, which is critical for successful succession

planning. Resist the temptation to solely carry the entire weight of creating
and then sustaining a plan.
A succession plan can help sustain income and
support expenses. Talking about money should be a priority. People
generally don't want to work for free and things don't pay for themselves. A
succession plan can provide answers as to what you and your staff will
need for future income, as well as what kinds of expenses you may incur
once you step out of the main leadership role. Ask yourself questions about
your annual income and other benefits including health and dental insurance
for you and your dependents, life insurance premiums paid for by the
company, your car, professional memberships, and other business-related
expenses.
Succession planning gives you a big picture. Some
companies mistakenly focus solely on replacing high-level executives. A
good succession plan can go further, however, and force you to examine all
levels of employees. The people who do the day-to-day work are the ones
keeping the business going. Neglecting to add them to the succession
planning mix could have dire consequences. As you develop your plan,
incorporate all layers of management and their direct reports.
Succession
relationships.

planning
When

strengthens

regular

communication

departmental
occurs

between

departments you are more likely to experience synergy, which breeds a

culture of strength. Make sure that you link your succession planning
activities with human resources. After all, HR is about people. By including
HR in succession planning, you can incorporate elements like the employee-

10

evaluation process, which can help when deciding whether to fill vacancies
with internal candidates.

SUCCESSION PLANNING PROCESS

Succession planning recognizes that some jobs are the lifeblood of the organization
and too critical to be left vacant or filled by any but the best qualified persons.
Effectively done, succession planning is critical to mission success and creates an
effective process for recognizing, developing, and retaining top leadership talent.
Success factors
There are several factors typically found in successful succession planning
initiatives. For example:
Senior leaders are personally involved.
Senior leaders hold themselves accountable for growing leaders.
Employees are committed to their own self-development.
Success is based on a business case for long-term needs.
Succession is linked to strategic planning and investment in the future.
Workforce data and analysis inform the process.
Leadership competencies are identified and used for selection and development.
A pool of talent is identified and developed early for long-term needs.
Development is based on challenging and varied job-based experiences.
Senior leaders form a partnership with human resources.
Succession planning addresses challenges such as diversity, recruitment, and
retention.

Effective succession planning

11

The following information includes:

A graphic representation of a six-step process for effective succession planning
A table with descriptions of each step in this process.
Step 1: Link Strategic and Workforce Planning Decisions
This step involves:
Identifying the long-term vision and direction
Analyzing future requirements for products and services
Using data already collected
Connecting succession planning to the values of the organization
Connecting succession planning to the needs and interests of senior leaders.
Step 2: Analyze Gaps
This step involves:
Identifying core competencies and technical competency requirements
Determining current supply and anticipated demand
Determining talents needed for the long term
Identifying real continuity issues
Developing a business plan based on long-term talent needs, not on position
replacement.

12

Step 3: Identify Talent Pools

This step involves:
Using pools of candidates vs. development of positions
Identifying talent with critical competencies from multiple levelsearly in careers
and often
Assessing competency and skill levels of current workforce, using assessment
instrument(s)
Using 360 feedback for development purposes
Analyzing external sources of talent.
Step 4: Develop Succession Strategies
This step involves:
Identifying recruitment strategies:
- Recruitment and relocation bonuses
- Special programs
Identifying retention strategies:
- Retention bonuses
- Quality of work life programs

13

Identifying development/learning strategies:

- Planned job assignments
- Formal development
- Coaching and mentoring
- Assessment and feedback
- Action learning projects
- Communities of practice
- Shadowing.
Step 5: Implement Succession Strategies
This step involves:
Implementing recruitment strategies (e.g., recruitment and relocation bonuses)
Implementing retention strategies (e.g., retention bonuses, quality of work life
programs)
Implementing development/learning strategies (e.g., planned job assignments,
formal development, Communities of Practice)
Communication planning
Determining and applying measures of success
Linking succession planning to HR processes
Performance management
Compensation
Recognition
Recruitment and retention
Workforce planning
Implementing strategies for maintaining senior level commitment.
Step 6: Monitor and Evaluate
This step involves:

14

Tracking selections from talent pools

Listening to leader feedback on success of internal talent and internal hires
Analyzing satisfaction surveys from customers, employees, and stakeholders
Assessing response to changing requirements and needs.

LEADERSHIP COMPETENCIES FOR SUCCESSION

PLANNING
COMMUNICATION [VERBAL & WRITTEN]
Communicates effectively with others in an open, timely and sensitive manner.
Typical Behaviours:
Demonstrates effective communication: listens generously, seeks to
understand, provides feedback and communicates in a positive manner, and
ensures others understand messages
Establishes trust and credibility in working relationships through open,
honest, consistent and frequent dialogue.
Organizes, interprets and disseminates all information to internal and
external audiences including complex work and advice clearly, concisely
and plainly.
Consults with everyone affected, listens to all views and considers them
fairly.

15

DECISIVENESS
Is proactive and demonstrates the ability to make informed, balanced
decisions in a timely manner and stand behind them.
Typical Behaviours:
Understands fully the effect and consequences of each decision and stands
accountable for decisions.
Deals with performance issues in a timely, fair and constructive manner
Demonstrates commitment to performance management in actions and
words
Takes decisive action/is proactive in moving initiatives forward or solving
problems.
DISCRETION
Demonstrates good judgment
Typical Behaviours:

Shows consistency balanced with fairness

Ensures decisions are consistent with the directional focus of the University
Uses conflict resolution skills effectively
Considers all sides of an issue and balances all interests, including future
impacts

LEADERSHIP OF THE DEPARTMENT/UNIT

Sets and communicates direction to further the Strategic University Plan,
supports the department or unit and provides appropriate opportunities for
individual development.
Typical Behaviours:

16

Establishes scope for decisions by individuals and balances this with need to
make independent decisions.
Administers and supports staff development in a proactive, equitable and
consistent manner.
Provides recognition to support teamwork and individual contribution
Communicates on behalf of the department/unit when required
Ensures the development and application of performance measures and
targets to assess results
Provides opportunities and promotes an environment that encourages
continuous development
Supports [coaches/mentors] others to take responsibility for achieving the
highest possible levels of performance
Builds effective communication links with other departments and effectively
facilitates resolution of issues/needs, which cross-departmental lines.
Pushes decision making down to the appropriate level and provides
necessary guidance and support to other decision makers.
ORGANIZATIONAL COMMITMENT
Demonstrates identification with, support and commitment to the
organization
Typical behaviours:
Puts aside personal preconceptions and self-interests and concentrates on the
common goal and the betterment of the University.
Demonstrates pride in working for Athabasca University
Supports the University [e.g. Its plans, policies, programs] in a positive
constructive manner.
Promotes and acts with integrity in dealing with students and employees.

17

TEAM PLAYER
Works in all types of committees and groups, supports the committee or group
and contributes to its effectiveness.
Typical behaviours:

Respects and anticipates the needs, feelings, and opinions of others

Encourages discussion of issues and concerns
Creates a sense of community; facilitates communication within the group
Recognizes the value of teamwork

VISION
Views current events and future possibilities from multiple perspectives,
develops future oriented scenarios and communicates these effectively to
others in the organization.
Typical behaviours:
Suggests and embraces new methods and ideas that enhance the
achievement of Athabasca Universitys vision.
Clearly understands and communicates the AU vision as it applies to the
department or unit.
Keeps in mind the organization context and direction, looks beyond the
immediate environment for opportunities for improvements and
enhancements.
Continually scans current and future environment and identifies themes and
emerging issues.

18

ANALYTICAL/SYSTEMIC THINKING
Takes a logical approach to planning and problem solving and establishes
priorities. Analyzes issues and problems systematically and thoroughly. Focuses on
critical details while maintaining a broad perspective.
Typical behaviours:
Grasps complexities and critical details quickly and accurately
Develops well-defined, step-by-step approaches to analyze and solve
complex problems.
Identifies relevant alternative and evaluates the potential consequences of
each before taking action
Makes an effort to solve common problems by drawing from previous
experience or similar circumstances.
Assembles and integrates information from a variety of sources to present
what is relevant to a given issue or situation.
ACCURACY AND THOROUGHNESS
Makes sure that work is done correctly, completely, and with high quality in a
timely manner.
Typical behaviours:
Verifies assumptions and information by checking with credible sources,
experts or first hand experience.
Carefully reviews own work for accuracy and completeness
Carefully reviews other peoples work for accuracy and thoroughness.
Identifies and addresses all details that are needed to ensure smooth
functioning

19

Follows up to make sure that tasks have been completed and others have met
commitments.
SERVICE ORIENTATION
Anticipates and responds to the needs of internal and external customers.
Develops and maintains strong relationships with internal and external
customers.
Typical behaviours:
Responds promptly to customer needs or requests of others
Expends significant time and effort to meet important commitments made to
internal or external customers
Offers unsolicited help to those in need.
Takes advantage of opportunities to present examples and scenarios
illustrating importance of client service
Presents examples and/or suggestions on how to improve services to
customers
Presents arguments and/or suggestions that convince clients that their
interests are being well served
CONFIDENCE
Demonstrates a genuine belief in the likelihood of personal success and
communicates a positive self-esteem to others.
Typical behaviours
Creates a feeling of confidence in the department or units ability to provide
timely and quality service.
Shows strong assertiveness skills when dealing with customers and peers.
Demonstrates a genuine belief in the likelihood of personal success.

20

PERSERVERANCE
Continues steadfastly toward results/objectives until the desired result is
achieved or is no longer reasonably attainable.
Typical behaviours:
Leads by example, ensuring actions are implemented and goals are achieved
Focuses on outcome, allows flexibility on how the outcome is achieved.

21

ADVANTAGES OF SUCCESSION PLANNING

Succession planning is an essential part of doing business, no matter how certain
your future appears. It's not easy to put off planning when everything seems to be
going so well. Here are some reasons why it can't and shouldn't wait:

You can't plan for disaster.

Succession planning benefits the business now.
Succession planning gives your colleagues a voice.
A succession plan can help sustain income and support expenses.
Succession planning gives you a big picture.
Succession planning strengthens departmental relationships.
Succession planning keeps the mood buoyant.

Besides the obvious benefit of not leaving your company in the lurch of proper
Succession Planning will help your company in other ways, too. Heres a rundown
of the benefits. Remember, not all benefits will apply, depending on your specific
situation. Succession Planning can:
Reduce taxes, in some situations with family-owned businesses. For
example, if a company gets new ownership after an owner's death, lack of
planning can result in steep estate taxes. Other tax issues, such as
transferring ownership to a child, might apply.
Ensure continuity. Customers, clients, vendors, and employees all want and
need to know that a business will continue to function as they know it, even
when theres a leadership change. Choosing and grooming a successor who
fits your mold will help this happen.
Provide training plan for possible successors. If you identify who you
might choose as a successor early, youll know that that person needs more

22

training and one-on-one time with your current leader to gain as much
knowledge for the position while its still possible.
Help you plan for the future direction of the company

MISTAKES TO BE AVOIDED IN SUCCESSION PLANNING

23

Many mistakes are commonly made in establishing succession planning programs.

They are worth enumerating. It is also worthwhile to describe some ways to avoid
these common mistakes.
Assuming that Success at One Level Will Guarantee Success at Higher
Levels. An individuals success at one level is no guarantee of success at
higher levels of responsibility. The reason is simple: the competencies
required for success at each level are different. Hence, it is important to
separate thinking about how well someone does his or her current job and
how well he or she might do a job at a higher responsibility level.
Assuming that Bosses Are Always the Best Judges of Who Is
Promotable. A second mistake is to assume that, for purposes of succession
planning, bosses are always the best judges of who is promotable. That is not
always true. Bosses are self-interested players in the succession game. They
have a stake in what happens to people. Indeed, some bosses do not want to
see their best people promoted for fear of an inability to replace them. Some
bosses grade people by their own standards - with the result that some
individuals who are quite unlike the boss are not considered for promotion.
While the support of a boss is useful in developing individuals, more
objective assessments, such as multi-rater assessment are excellent in aiding
the managers assessment.
Assuming that Promotions Are Rewards. Some employees have an
entitlement mentality in which they feel that long service with an
organization should always be rewarded with promotions. But business
decisions must be based on who will do the best job, not who is owed a
promotion because of greatest seniority. Workers must continually be

24

reminded that doing jobs at each level requires different competencies, and
the best way for them to compete is to prepare for future challenges rather
than expect promotions for past performance at a different level of
responsibility.
Trying to Do Too Much Too Fast. The strong results-orientation of many
organizations today emphasizes quick results. Senior leaders expect to see
all the components of a comprehensive succession system in place
immediately. That is not always realistic. It is advisable to think of
implementing systematic succession in a phased way - either from the top
down or else starting in specific divisions or locations with greatest need.
Giving No Thought to What to Call It. A fifth mistake is to devote no time
to considering what to call the succession program. As any marketer knows,
product names do matter. It is not necessary to call a spade a spade. Many
organizations choose alternative namessuch as leadership development
program, human capital management program, or even talent program.
Assuming that Everyone Wants a Promotion. A sixth mistake is to assume
that everyone wants a promotion. That is not always true today. In many
downsized organizations, workers have seen what pressures their bosses
have to deal with. Some say leave me out of that. Hence, it is unwise to
assume that everyone wants a promotionor even to assume that money will
convince everyone. It will not. Check first. Find out what people want to do.
For that reason, many organizations launch both a top-down succession
planning program and a bottom-up career planning program to galvanize
development

25

Lack of understanding how it works and how it benefits the organization.

Lack of a formal written plan for the person or position(s).
Lack of availability of human and financial resources; lack of budgetary
commitment.
Superficial approach; lack of real understanding of the procedures, processes
and requirements of each area the individual is exposed to during the
process.
The requirements of the Managers/Executives are not fulfilled in providing
dedicated instructions, guidance regarding skills, knowledge and abilities
needed for the candidates to be successful.
Failure to identify key employees who may have concerns with your
succession plan.
Failure to plan for disability.
A rigid, inflexible plan NOT tailored to the needs and abilities of the
personnel involved.
Too long a wait for real movement/promotion, disillusionment, may result in
some people leaving due to apparent inertia in the system.
Selection of unqualified or unmotivated people for inclusion in the
Succession Plan. Quality of the individuals selected is paramount to the
success of the process.

26

Complex program, requiring considerable paper work, follow-up, reporting

SUCCESSION PLANNING: THE INDIAN PERSPECTIVE

Companies in India have approached succession planning in different ways and
experience has shown that few have built strategies that encompass the three
critical facets of the exercise: board succession, CEO succession and building a
leadership pipeline.
Three categories of company exist in India : first, the widely held and
professionally managed companies; second, the family-promoted/family-controlled
companies, but with significant holding by minority shareholders; third,
government companies where there is a significant minority holding. Owing to the
differences in structure and functioning of these companies, succession planning
strategies could differ, though the issues tend to remain the same.
The roundtable discussion detailed here addressed each of the above facets; it
contains numerous insights as well as questions regarding the state of succession
planning in India.
Succession planning is a challenge across the globe but particularly so in India.
Indian leaders, while highly adaptable and strongly entrepreneurial, generally
perform poorly in terms of teamwork and succession planning. Infact, the
KFI/Economist survey ranked Indian leaders

27

among the lowest performers on this count. This is evident in the fact that today,
fewer than 20% of Indian businesses work to develop future leadership, or to
engage actively in succession planning. Strong Indian leadership has been
emerging across multinational companies (both Indian and foreign), but these
competitive traits, and the drive to succeed in global markets, have not yet been
focused on developing people. India now requires its leaders to work towards
nurturing its pool of future managers, instead of merely driving their companies.
According to the ABB (Assocham Business Barometer)report of 2007
Corporate India not ready with succession plan, says Assocham Business
Barometer
India Inc. has a long way to go for putting in place its succession plan at top level,
which has an important bearing on the market valuations of the companies,
confidence of the business associates and morale of their employees, an Assocham
Business Barometer Survey has revealed.
The ABB Survey of 275 leading management consultants, corporate, academicians
and professionals on Missing Link in Succession Plan found that a select few
companies in India formulate and effectively implement succession plan for the
key positions in their organization structure. This was confirmed by 75 per cent of
the ABB respondents. They rated Indian companies four on a scale of 10 in terms
of long term planning and grooming of the successor to the head of a firm.
Ninety two per cent of those surveyed said a considerable weightage is being given
to the companies, which have a hierarchy in place top-down. The analysts rate
succession planning as a crucial component of an impeccable management
structure.

28

The leadership acts as a catalyst in building goodwill and brand valuation of an

organization. Such factors play deciding role in determining the worth of a
company in the bourses. The share market has rewarded the corporate entities
having properly structured succession plan with higher valuations.
Eighty-nine of the management consultants and academicians said a well-placed
succession plan is an important component of corporate governance. Nonexistence of a second in command of a business entity could harm the interests of
minority and widely dispersed shareholders as an element of uncertainty prevails.
Leadership performs an instrumental role in laying down the long-term
foundation and imparts strength to the organization. As a good corporate
governance practice the board of directors and management should set up a clearly
defined succession policy defining the number two and three positions in an
enterprise, even among the family-owned and run businesses, Mr. Venugopal
Dhoot, President, ASSOCHAM said.
Corporate governance calls for setting of guidelines to be followed by the Board of
Directors and the management of the company in order to safeguard the interest of
stakeholders,

which

include

shareholders,

investors,

employees,

consumers, suppliers and the society.

The long-term competitiveness and efficiency level of a firm could get adversely
affected due to lack of a succession plan, according to 83 per cent of the experts
surveyed by ABB. The performance of a company gets hampered without a welldefined hierarchy and affects the team spirit of the staff.
As many as 67 per cent of the respondents expressed their concern that employees'
morale gets affected in the absence of uncertain management chart. They feel that a

29

question mark is put after a stage in the growth path of even the best performing
official due to the absence of clearly laid succession policies.
Management line of command becomes highly concentrated in a company with a
single individual at the helm. It does not trickle down through a well-defined
structure. Fifty-nine per cent experts felt that in a highly concentrated command
structure, a ''coterie'' is established among the CEO who is not fed the true picture
by those who benefit from such a situation. Well performing employees with selfdignity get demoralized lot and become vulnerable to high attrition.
About 55 per cent of the consultants were convinced that the movement of
professionals across the companies is to some extent influenced by the succession
plan and overall hierarchy structure of these organizations.
Family run business is a way of life for India Inc. However, it has not come as a
hindrance for the growth of these business concerns. Although it is easy to define
succession planning in such firms, off late instances of intra-family disputes are
being increasingly witnessed. This could hurt the interest of minority shareholders,
as this is an evidence of gaps in corporate governance among such
companies, 72 per cent of the ABB respondents felt.
Around 60 per cent of the survey respondents were optimistic that the family run
businesses in India are moving fast towards professionalising their organization set
up. Twenty five per cent of them believed that the change in the management set
up of these companies is taking place at very slow pace. Some of the IT companies
in India have set excellent example of timely identifying, planning and grooming
of the successor to the key person leading the organization.
The factors like lack of long-term vision, self-confidence of existing CEO,
majority shareholders exercising control over management, are responsible for

30

absence of successors at top position in large number of Indian companies, the

ABB found.
When asked about the performance of India vis--vis other mature economies like
US, UK, Germany, Japan in terms of corporate head selection, 59 per cent of the
ABB respondents said that India Inc is catching up fast . As the Indian companies
are going global making their presence is felt around the world with large number
of overseas mergers and acquisitions taking place, it is imperative for the Indian
business houses to realize the need and importance of identification and grooming
of the heir to their leaders.
The management of a business enterprise is not driven by an individual.
Companies commanded solely by one person holding top position can run into the
risk of ill health, natural disaster, possibility of frauds, dispute with the Board.
According to reports in 2010 Indian companies are more ready to have
succession planningEconomic Developments in India have put the focus on
how to develop and prepare leaders to manage in a growing economy. The
primary business priorities for Indian organizations according to their top
executives are growth and improving and leveraging their talent.
Organizations in India are more effective at clearly communicating the importance
of such leadership modules by monitoring them at regular levels and intervals.
Commenting on the Leadership Forecast
Report findings, Richard Wellins, Senior Vice President, DDI, said, Leadership
transition can be one of the most stressful experiences in a persons life, most
notably because leaders are expected to be successful in the new role. Good
leadership will be important in the future, to help control costs, cope with

31

increasing

change

and

tackle

the

expected

upturn".

Economic Developments in India have put the focus on how to develop and
prepare leaders to manage in a growing economy. The primary business priorities
for Indian organizations according to their top executives are growth and
improving

and

leveraging

their

talent.

DDI has spent the last 40 years developing leaders at every levelnearly 6.3
million worldwideand helping organizations optimize their leadership talent.

In a well-funded, high growth economic environment, it is imperative for

India Inc. to craft effective leadership transfer mechanisms. Be it family-run
businesses, PSUs or professionally-managed companies, the responsibility for
effective succession planning and its implementation rests with shareholders
representatives the companys Board
January 2005:
Reliance Group, Indias largest private sector enterprise, is split as the two Ambani
brothers agree on a legal segregation of assets. While Anil Ambani would take over
the telecom, infrastructure, media and power businesses, elder brother Mukesh
Ambani would take charge of Reliance Industries, which operates in
petrochemicals, oil and gas exploration, refining and textiles. The death of business
monarch Dhirubhai Ambani in 2002 without leaving a will triggered a drama that
resulted in the division of assets between the two estranged brothers.

Succession Planning in India

32

The Indian business environment is largely driven by family-run businesses, public

sector enterprises and professionally managed companies (mostly MNCs). Without
doubt, family-run businesses make for a huge percentage of business houses in
India. Family-run companies account for roughly 50%* of the market
capitalization of publicly traded companies in India and contribute to around 55%*
of GDP; hence, the relevance of these companies for the overall economy.
If number are to be believed, only 13% of family-run businesses survive till the 3rd
generation and only 4% go on to the 4th generation. Additionally, one third of the
business families disintegrate because of generational conflict at the leadership
levels. Professionally run succession planning is key for the sustainability of
businesses. Family disputes and the lack of succession planning has triggered the
decline in fortunes of many business families. Traditionally, succession planning in
family-run businesses has always been a hush-hush affair, clearly depending upon
the life expectancy of the founding chairman or patriarch. Succession planning in
family-run businesses is generally an intuitive process with the family patriarch
taking the decision as to who will take charge of the business empire. Dr. Ganesh
Shermon, Partner & Country Head - People and Change Practice, KPMG says,
Traditionally, family-run businesses focused on dividing the silver among the next
generation rather than grooming the right person to take up the job. However, with
changing times, family-run businesses need to ensure that the chosen successor has
necessary education and skills and should be made to work his / her way up the
management. Alternatively, companies should be bold enough to appoint a
professional manager when there is no suitable candidate within the family.
Companies such as Ranbaxy, Murugappa Group and Eicher have set a precedent in
this regard. In 1998, when Dabur India realized the might of behemoth MNCs and

33

their scale of operations, it valued the need for a professional to run the operations
of the company in order to build a professionally-managed company with strategic
business outlook. And thats when Dabur India roped in an outsider as its CEO,
Ninu Khanna, rather than passing the reins to a family-member. Sunil Duggal,
Daburs CEO since 2000 has taken the business to new heights by strategic
acquisitions and has expanded the product portfolio to make Dabur a
comprehensive FMCG company from an Ayurvedic products seller. Today,
majority of the Board members at Dabur do not belong to the Promoter family. The
Tata Group too is on the lookout for a successor to Ratan Tata, who retires in 2012,
and for other group companies too, as the Heads of Tata Steel and Tata Motors
head toward retirement.
Passing on the reins of the organization to a family member has a lot of legal
implications too. Hiralal Walchand, Director, Walchand Associates, which deals in
will trust services and family law, says Family members (sometimes even far-off
relatives) join companies as employees but demand legal ownership rights during
division of assets. This should be avoided as dividing assets amongst so many
claimants completely devalues the company. In case of listed family-run business
houses, the first step towards planning a strategic succession is to increase the
holdings in various group companies. Explains Walchand, Increasing holding by
the parent company wards off the risk of future acquisition. B. K. Birla, for
instance has been working toward increasing the familys stake in its group
companies of cement, textiles, et al. Once that is achieved, the patriarch can
appoint either family members or internal and external candidates to take on the
mantle. This ensures that when the patriarch steps down, there is no change in the
way business is done. In the recent succession plan chalked out by RPG
Enterprises, Group Chairman R. P. Goenka segregated the ownership and control

34

of various group companies amongst his sons Harsh Goenka and Sanjiv Goenka
where the former was named the Chairman and the latter Vice Chairman. The
business will, however, continue to run the same way with each brother continuing
to control and run the companies they were handling previously.
In spite of the political stifling, some PSUs have formulated very strong succession
planning practices. Dhruv Prakash, Managing Director - India, Leadership and
Talent Consulting, Korn/Ferry International, says, PSUs are unique in that almost
invariably grow their own timber. Public sector companies really do not have a
succession planning system per se, they have an internal promotion system.
Companies like Indian Oil, Bharat Petroleum, Hindustan Petroleum, BHEL,
NTPC, ONGC, State Bank of India have worked on establishing leadership
competency frameworks, assessed managers for development and taken follow up
actions in terms of internal training and developed courses in collaboration with
the IIMs.
Some of these practices can be compared to the best in the private sector. For
instance, ONGC conducts succession planning three levels below the Board and
NTPC conducts rigorous succession planning two levels below the Board. NTPC
has constituted a high level Succession Planning Committee (SPC) comprising of
the Chairman and the Functional Directors to own the process of succession
planning. NTPC has identified 28 unique leadership positions for succession
planning. Most of the positions fall under the two top executive levels - General
Managers and Executive Directors. Against each position at least three potential
successors are identified for grooming. This is done to ensure that sufficient depth
is maintained in the leadership pipeline at all times. Succession planning is a
shared responsibility of the HR function and the organizations leadership. NTPCs

35

CMD, R. S. Sharma was recently succeeded by Arup Roy Choudhury, former

CMD of National Buildings Constructio Conrporation (NBCC).
The search for a successor for CMD (Chairman & Managing Director) is done
pretty much the same way as the search for other Board level appointments where
an advertisement is put up for the vacancy by the Enterprise Selection Board and
shortlisted candidates sent to the ministry. The final decision for appointment is
made by the Cabinet Committee. The concurrent CMD is not involved at all in this
process. In July, state-owned telecom units, Bharat Sanchar Nigam Ltd. (BSNL)
and Mahanagar Telecom Nigam Ltd. (MTNL) advertised vacancies for the post of
CMD. The Enterprise Selection Board, formed under the leadership of K. M.
Chandrashekhar, Cabinet Secretary, has received close to 100 applications and will
soon announce the successor to Kuldip Singh, CMD of MTNL and Gopal Das,
CMD of BSNL.
Professionally-run companies in India, mostly MNCs and a handful of homegrown companies like Infosys, are more forthcoming when it comes to chalking
out a strategic succession planning process. Professionally-managed companies
have definite processes and employ latest techniques while identifying potential
successors. Take for instance Larsen & Toubro (L&T). Well before two years of
current Chairman A. M. Naiks retirement, the organization has systematically and
strategically put in place a succession planning process and will announce the
name of the new Chairman six months before Naik retires so that s / he is able to
get proper handholding. In many of the MNCs operating in India, the decision to
find a successor is more in tune with business strategy and growth vision for the
future of the organization. Kellogg India recently roped in Sangeeta Pendurkar,
former VP-Strategy & Commercial Leverages at Coca Cola India to head its Indian
operations as MD, replacing Anupam Dutta. Pendurkars experience in revamping

36

Coca Cola Indias tea and coffee business (Georgia) and introducing innovative
regional brands such as Minute Maid and Nimbu Fresh made her a suitable choice
for Kellogg Indias strategic plan to strengthen the companys stranglehold on the
breakfast segment by introducing more regional flavors.
In certain other professionally-managed organizations, senior leaders have the
responsibility to design their own succession planning process, as in Lucent
Technologies, where senior managers are expected to develop at least two potential
successors using job rotations, challenging work assignments, special projects and
executive coaching. Companies like Hindustan Unilever, P&G and ITC have
traditionally groomed most of their senior management internally using a
combination of talent review sessions, comprehensive training programs, job
rotations and a combination of HR and leadership metrics.
Role of the Board & the CEO

For corporate Boards, CEO succession planning should be one of the most
important commitments toward the organization. Even though Boards across the
spectrum realize the need for an effective succession plan, they seldom devise
processes and practices and devote sufficient time to this activity. Dr. Arvind
Agrawal, President and Chief Executive Corporate Development & HR - RPG
Enterprises, says, It is imperative for the management / executive Board to
participate in the whole succession planning process. I am talking about the
involvement of management or executive Board and not the legal Board. The
process of succession planning is simple but the real difference lies in its execution
and thats where most companies falter. The process demands full dedication of the
top management and not mere compliance as one of the points on a meeting

37

agenda. Not having a strategic succession planning process and an effective CEO
successor is a potential risk to companies and it is the obligation of the Board to
timely address this risk. This is also lacking because most companies do not have a
Chief Risk Officer (CRO) to identify the potential threats that may arise due to
little or no succession planning. In simple words, it is the responsibility of the
Board to make sure that the framework and guidelines for succession planning are
in place and are practiced to evaluate the developments on a regular basis. While
corporate Boards play a critical role in succession planning in professionally
managed companies, their role is limited in family run businesses where the family
patriarch is generally the one who takes such decisions. In PSUs, the final decision
of choosing the successor is taken by an external authority (generally the Cabinet)
in consultation with the Board.
The Leadership Pipeline
A recent research by Heidrick & Struggles and Stanford Universitys Rock Center
for Corporate Governance (based on a survey conducted on 140 CEOs and
Directors on Boards of North American public and private companies) found that
while 69% of respondents think that a CEO successor should be ready to replace
the departing CEO, only 54% are actually grooming executives for this position. In
the Indian context, the 2010 DDI India Leadership Report findings highlight that
while 44% of multinational organizations in India have a process to identify
leaders, only 26% have a process to develop them.

38

A STUDY ON MURUGAPPA
GROUP SUCCESSION PLANNING
The Murugappa Group, headquartered in Chennai (Madras), India has grown from
humble beginnings to become a very important conglomerate. The company
started as the dream of a driven entrepreneur in Burma in the early 1900s. Today it
boasts revenues of US$ 850 million and employs 22,500 people in its 27 business
units. The company is presently undergoing a major change, as it restructures its
family governance system. It realises that change is necessary if they want to
continue to compete in the world marketplace. Though adaptation is not always
easy ,the Murugappas find strength through their heritage and values.
Adaptation and growth
In India's government-regulated economy, the Murugappa Group found it
necessary to adapt in order to prosper. In the 1980s, Indian law prohibited
formation of a business group, so the family followed the system of crossholding
controlling shares among separate public companies. Recently that law has

39

changed, and the family is restructuring again to become a holding company.

Because of government regulation in the past, it was difficult to obtainlicenses for
new businesses. Between 1964 and 1980, the Group appliedfor 17 licenses. Out of
the 17 license applications, one was granted and their values. Consequently, to
grow, they sought acquisition of sick unitsto turn around. In the last 20 years, 17
addition a companies have been acquired.
The most well publicised acquisition occurred in 1981 with the purchase of Madras
based EID Parry - a huge, decrepit, yet symbolic business that the Group had been
interested in since 1958. Parry, the second oldest commercial name in India,
included fertilisers, pesticides, confectionery and also sugar mills. For years EID
Parry's creditors were asking the Group to take over its management, given the
Group's management reputation and acumen. The family repeatedly turned down
the overtures, responding that without control EID Parry wasn't in the family
interests. Eventually, the creditors relented and the family gained control of the
publicly traded company. The agreement made headlines because it showed the
Group's commitment to invest in what many in India felt was a risky venture, but
what they saw as an opportunity to grow. EID Parry is now a business with US$
265 million in sales and is 41% family-owned.With EID Parry came a 7% holding
in a joint venture fertiliser company,Coromande Fertilisers Ltd Chevron and IMC
Global partnered in the fertiliser growth area then later sold out. EID Parry
developed a unique organic pesticide from indigenous neem seeds that is of ten
acclaimed tobe the best in the world. EID Parry is also in the sanitary ware
business.However, not all businesses have been a success. For example, the Group
has divested a cement company, sold its electronics business and faced difficulties
with its long held construction company.
Business and philanthropy

40

Today the Group includes seven substantial business units comprising 2 companies
in a variety of industries: CUMI, TlI, Coromandel, Parry Agro,EID Parry, CIFCO
and the only private company, Arnbadi Estates, holder, of some of the plantations.
TlI now has four significant lines: bicycles,chains, industrial tubes and roll
forming. CUMI is a full line, vertically integrated abrasives company and
Coromandel is a very profitable fertiliser business. With Arnbadi and
Parry Agro, the Group remains active in rubber, tea and coffee plantations. EID
Parry includes an assortment of businesses including fertilisers, sugar mills,
pesticides and sanitary ware. The Group is in the food industry with Parrys
Confectionery Ltd. CIFCO is in the financial
services of brokerage, vehicle finance, insurance and mutual funds. TheMurugappa
Group and family also continue to build on the example of philanthropy initiated
by Dewan Bahadur. His decision to set aside a major portion of his wealth for
charitable causes, starting in 1924 when he built a hospital in his home village,
commenced a tradition of helping, guiding and supporting others in communities
in which the companies do business. The family's trust, the AMM Foundation, is
sustained by a fixed percentage of annual business profits and family contributions.
To date it has built and nurtured four high schools of 8000 students, a polytechnic
institute of 1000 students, four no-fee hospitals and a rural research centre. The
rural research centre focuses its activities on developing such things as proteinefficient algae, natural dyes, organic farming and technologies for the rural and
urban poor. Although by custom, the sister sand wives of the Murugappa men do
not work in the businesses, they are the major sources of leadership and guidance
in the family's foundation and the institutions it supports. Vellayan trained as a civil
engineer in England and used his expertise to successfully scout unique new lines
of industrial products to manufacture and sell in India. He took over the

41

Managing Director position of CUM I when Muthiah died and continues as

Chairman of CUMI to this day. Since 1999, he has been the family elder, but
decided against the leadership of the business, deferring to his younger brother,
Subbiah. Subbiah, the youngest son of Vellayan, has his college degree from the
University of Aston in England. He is credited with a major role in turning ailing
EID Parry into a successful business in, the 1980s, serving as Vice-Chairman and
Managing Director. He also had leadership positions at TI Cycles, as the Chairman
of the Murugappa Group and the Executive Chairman of ElD Parry. In 1996 he
was appointed Group CEO.
Muru, the oldest son of AMM, studied mechanical engineering in England,
followed by on-the-job training at Tube Investments Group UK.

Future focus
As the business moves from family-operated to family-governed, formalising the
family's business approach is being discussed within the family and among the
MCB members. The family has taken steps towards articulating what they stand
for by developing their Corporate Values and Beliefs. These are listed prominently
on their corporate materials, website, and Bill of Rights and Responsibilities for
Family Member Owners, all of which can be amended by family consensus but not
by vote.
The development of a Family Constitution is seen as the next important step, but
the form the Family Constitution takes - whether it should be a formal written
document or an understanding by custom and practice is under discussion.
Independent directors are trying to get the family to formalise procedures because
the businesses' complexity demands it.

42

Family and independent directors of the board realise that the future role of family
members in the business is evolving. They are aware that family members in future
generations will have more choices in terms of profession than in the past and may
opt out of the business. Those who enter the business need education, development
and training to be future leaders in the family business at the governing level,
although they wil not be managing directors of units. Up until April 2001, the
MCB was headed by a family member, Subbiah. At that time, he stepped aside and
independent board member NS Raghavan took over as the MCB's first independent
non-family executive chairman on an interim basis. The reasons for this change
were to create an environment that encourages creativity and fuels growth and to
make decision-making even more rational and less personal.The board is
proceeding slowly to find a permanent non-family MCB chairman, preferring to
wait for a person who is just right for the position. In the last decade, the Group has
looked at its portfolio of businesses with

CONCLUSION
One of the main purposes of succession planning is to identify groups of
employees that state an intention to leave due to retirement or for some other
reason. Another purpose is to identify factors that might either influence the
employee to not leave, delay exit, or, in the case of retirees, induce returning to
work in some capacity after retirement. This will continue to be important in the
future as the states employees continue to age. Currently, nearly one in three
employees in these three agencies the Department of Employment, Department
of Family Services, and the Department of Workforce Services is age 55 or
older and another third are between the ages of 45 and 54. This means that in the
next 20 years 60% of these employees could potentially retire. Without a strategy
to transfer knowledge, they will take with them years of experience that will be

43

difficult to replace This study was initiated by management in three state agencies
to investigate employee plans and attitudes toward their work environments.
Because of a high response rate, we are confident that the results of this study can
largely be generalized to all employees in these agencies.
Although there are some things over which agency management has little direct
control, such as wages and benefits, this research has shown several areas in which
action can be taken that may result in greater employee satisfaction. There are
other avenues of study that we have not covered in this report. In the future, it
would be useful to investigate gender differences in workplace satisfaction. We
will also be able to test the idea of predictive validity in the near future. As
described in this report, Research & Planning can use our administrative databases
to determine whether respondents who said they planned to leave their jobs did so
at a later time, and what were the characteristics of those who changed jobs.

BIBLIOGRAPHY
http://en.wikipedia.org/wiki/Succession_planning
http://hrcouncil.ca/hr-toolkit/planning-succession.cfm
http://www.entrepreneur.com/topic/succession-planning
http://www.murugappa.com/companies/
http://www.livemint.com/Companies/ Murugappa-Group-From-Burma-to-ParrysCorner.html