Succession- The Dynamics of Dynasties

Succession- The Dynamics of Dynasties

800 371 Kamal Karanth

In any succession is the baton handed over to ensure success in the future or just to maintain the status quo?

The long-term legacies of people, businesses, political parties, sports teams have been defined by the next leader. But, this process of succession has different complexities. Viewed from the outside, it appears that often emotion dictates decisions rather than logic.

Let’s look at how succession is playing out in Zimbabwe, in the Congress Party, the AIADMK, Infosys, Tatas, Wipro, Godrej, Bajaj, Reliance or the Kapoor and Bachchan clans in Bollywood. Succession has had different impacts on each one of them. In some cases, the challenge began much before the succession and in others, the unwanted happened after the succession. In a few, it worked so seamlessly that nobody even realised there had been a change in guard.

The science of succession

Unlike political parties and family-run businesses, there is some science to succession planning in corporate settings. Even then not all get it right. But the process provides some comfort to most stakeholders. The philosophy of reputed organisations is to create a fair, neutral and transparent succession process.

This process starts with the identification of key competencies required for the role. Organisations decide on the parameters that need evaluation based on the forecasted future. They look for demonstrated capability on a set of parameters and then run psychometric profiling assessments on leaders. Furthermore, employers subject aspirants to multiple discussions with senior leaders and board as applicable. They also compare internal candidates versus external candidates on all parameters before making the final call.

But in many family-run organisations, succession is linked with DNA. The owner or promoter typically brings his family into play sooner or later. Many of them are blatant about it and bring their children directly onto the board. Some make their kith and kin grow through the ranks. Either way, most professionals working in these firms know that the succession is fixed. They either curse their fate and stick around for the spoils or leave for greener pastures.

Three types of Succession

I would categorise “unsuccessful” succession in three baskets. The first category is the “reluctant heir” who is neither confident nor interested in taking over. S/he is only interested in the material benefits that the family is entitled to. These successors take guard to protect their family assets rather than display capability and take a serious interest in the business. We all know what happens to businesses when there is no intent.

The second category is even more dangerous. “Incompetent heirs” are rushed into the job by insecure or over-loving parents. Everyone knows it’s a recipe for failure. But, who will bell the cat? Nobody can predict the future for sure, only time will tell. But for employees who work hard to take the organisation to great heights, it hurts to see the decline. This is where the organisation’s ability to retain or recruit top talent takes a body blow.

The third category is when loyalists are placed on the throne. Every organisation has superstars and loyalists. Yet promoters and CEOs often tend to hand over the baton to loyalists rather than the star performers. This allows them to reward the loyalist and also to control the organisation which they are reluctant to let go. Though the organisation can claim that a professional has been roped in to lead, most employees would know it’s a sham.

Corporate India has also seen many examples where professional CEOs have warmed the chair for the scion.

The consequences

Whether it is the reluctant heir apparent, the incompetent family member or the loyal professional, billions of rupees of the organisation’s market capitalisation is eroded. This has seen unprecedented reactions from the board and investors.

In fact, the corporate world’s failed succession stories have prompted many a promoter or former CEO to return to the fold. We have seen this at home and globally in companies such as Starbucks, Dell, JC Penney and Apple. The major reason in these cases can be attributed to the poor choice of successors.

It is widely believed that succession planning is a critical process to retain top talent or to de-risk the organisation’s future. But many examples that we see around us illustrate how dynasty-based, loyalty-linked succession is still very common.

For corporates, poor succession can cost billions of dollars and a fair amount of brand erosion. When it happens with political parties it could cost the nation a few generations of development.

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