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NR Narayana Murthy has come out of retirement to put the company he co-founded in 1981 back on track. Murthy's son, Rohan, a PhD in Computer Science from Harvard University, will join the firm as his father's executive assistant. These developments have been announced at a time when Infosys is struggling with sagging revenues, when its margins are getting squeezed, employee attrition is high and the overall morale low. Our panel of experts discuss if all the signals point to a failure of the company's succession planning strategy
Infosys needs a leadership ecology
DEBASHIS CHATTERJEE
Director, IIM Kozhikode
Leadership by rotation is just about as safe as settling a dispute with Russian roulette. Leaders can be made provided they are born with certain qualities that emerge when they encounter challenges in their environment. Leadership is thus an emergent process. Leaders emerge both through aspiration and desperation. Narayana Murthy Part I was a story of aspiration. Seven years later, Narayana Murthy Part 2 is borne out of desperation.
While aspiration demands a high degree of idealism; desperation calls for pragmatism and practical intelligence. Practical intelligence teaches you that not everything happens quite as planned and that the model is not the reality.
Murthy has both charisma and character required to fight this leadership crisis challenge. He is a 'practical' idealist and confesses to be a socialist at heart and a capitalist in the head. However, it is inconceivable that charisma alone will deliver results given the high attrition rate, low revenue growth and dwindling morale plaguing Infosys.
What Infosys needs today is a leadership ecology that has the vision as well as the resilience to respond to the changing market realities. Murthy had the advantage of a growth team consisting of the likes of Nandan Nilekeni, NS Raghavan and Kris Gopalakrishnan as part of his leadership ecology. Now, not labour arbitrage but service differential and high value creation will be the mantra of Murthy's new leadership team. Whether they succeed or not, only time can tell.
If you go by market capitalisation, TCS is worth today more than twice the size of Infosys. Cognizant has overtaken Infosys in terms of revenue. The landscape of the IT industry is not the same today as when Murthy stepped down in 2006. TCS and Wipro have demonstrated that they have got their acts right so far. Once, Murthy's Infosys was way ahead of the pack in industry leadership. Now, he has to play catch up.
While retiring in 2006 Murthy was asked if Infosys could continue to grow and prosper in his absence in the years to come. He responded by saying that he was not sure. However, he asserted that as long as Infosys stuck to its core values, it could continue to lead. My own sense is that in the past few years there has been an erosion of professional values in the rank and file of Infosys. This is also reflected in the high attrition rate of its employees. An organisation fails not just because it fails to adapt to market realities but also because it fails to stick to those values that lies at the core of its business: transparency, meritocracy, relentless innovation and sustainable profit by ethical means.
If Infosys can hold on to the consistency of its core values in an inconsistent world, it may survive this crisis.
Learn from the Tata Group
KAVIL RAMACHANDRAN
The Thomas Schmidheiny Chair Professor of Family Business and Wealth Management, Indian School of Business
As Narayana Murthy makes a comeback to rescue Infosys from its current financial mess, it exposes the company's vulnerability in leadership, succession planning and strategies related to the growth of the top-line management of the company. The story of retired CEOs coming back to rescue the companies they once founded is not new. But what poses a problem in the case of Infosys is Murthy's homecoming along with son Rohan Murty, an undoubtedly talented youngster but one - who by virtue of a core policy of the company - should not have joined it.
Murthy has no hidden agenda in bringing his son to aid him in 'relaunching' Infosys, increasing its market shares and garnering back the faith of investors that seems lost at the moment. It is a classic case of an old, experienced hand using the invaluable insights of a talented youngster to keep up with the changing times. However, it is sending mixed signals not just to the investor community but also to the employees and many other seasoned hands who are already in various leadership roles at the moment in Infosys. By bringing Rohan into the company, a core value of the company has been compromised.
According to the company policy, no one from the bloodline of the company's founders or top management can join Infosys because they too hold shares in the company. So the leadership pipeline was based on hiring only the best, competent and professionally qualified people. Infosys clearly didn't have a succession plan in mind and two years ago, when the share price of the company started tumbling, the board members should have begun planning for succession.
Even if Rohan is here for a short term, it will make everyone - investors, clients, employees - wonder if Murthy himself lacks the faith and trust to hand-pick someone from within the company other than his own family member. Is there no one in the company whom Murthy senior could turn to? Was no one being groomed for such a crisis? Why is the core company policy being compromised on? Is this a backdoor entry for Rohan to finally be the successor? Can children of other senior management now enter to "save" the company? These are some tough questions that will need to be answered.
Infosys should have learnt something from the Tata Group, which had a foolproof, well-planned succession strategy that was chalked out two years in advance. It was a systematic approach and done keeping in mind the company's global position.
Infosys should now form an internal team (comprising board members) and develop the next 10 years' strategy and convey the plan transparently to its employees. It should develop a leadership model, identify, train and groom 'one' leader within the next two years. Murthy should continue being the chairman for the next two years and focus on putting back Infosys on the right path.
Train an insider to spearhead the company
ANUPAM SIRBHAIYA
Regional Director, APAC, Centre for Creative Leadership
The succession planning strategy at big companies should be devised keeping two things in mind: looking inward for leadership at the promoter level and keeping a close watch on candidates with high leadership potential. In the case of Infosys there was a gap in monitoring the second aspect of the strategy. Not enough thought was given into building a leadership pipeline. Globally this concern of 'who will step into my shoes if I die' has gathered steam with the likes of IBM and TCS emphasising the importance of a readily available leadership pipeline for distress situations.
In the past, many Indian conglomerates were forced to look outside their respective companies for leadership roles. However, the benefit of bringing an insider for the leadership position is immense given the required understanding that the candidate already has of the company. Infosys has done nothing new by inviting NR Narayana Murthy (who comes as a package deal with his son) back to turn around its fortunes. Yes, this has led to a branding crisis. Infosys is known as a professional set-up and Murthy's decision of bringing his son will attract criticism.
This is a fair step as it is in the interest of stakeholders. For Murthy, it will be all about reinventing himself.
