Twist in Tata tale tests India Inc's succession script

Bengaluru|Mumbai: N Chandrasekaran's decision not to seek another term as chairman of Tata Sons has revived a question that boards often prefer not to confront: how prepared are they for a change at the top?

The real test of succession planning, however, is not whether a board has a successor in mind, but whether an organisation can absorb an unexpected departure without missing a beat.

The paradox is that the more successful a leader is, the harder succession can become. Boards may focus on extending the tenure of a proven leader rather than building a pipeline of people who can eventually take over. "The 'very big shoes to fill' factor comes into play in these situations," said Anandorup Ghose, partner at Deloitte India.


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The trustees of the Sir Dorabji Tata Trust have initiated the process of appointing a selection committee to find Chandra's successor, putting the broader question of leadership succession in the spotlight.

"Most companies try and put succession in place. Companies may decide but don't announce it," said a board member of a Mumbai-based conglomerate.

But many are less prepared for what he calls the "hit-by-a-bus" scenario, like when a CMD expected to stay for several years suddenly leaves.

For listed companies, succession planning is ultimately a board responsibility, with the nomination and remuneration committee playing a key role. "When succession planning is not in place, boards have to be blamed," the person added.

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"There is a regulatory mandate to disclose whether there is a succession plan, but whether it's implemented in full spirit, or whether it is just for the purpose of checking a tick box varies across companies," said Shriram Subramanian, MD at corporate governance advisory firm InGovern.

Taking Calculated Risks

Succession is often planned around a known retirement date rather than an unexpected exit. A successful incumbent can also wield considerable influence, making it difficult for boards to have an active conversation about who could eventually replace them.

K Sudarshan, managing director of executive search firm EMA Partners India, said some succession exercises can go awry because certain leaders do not proactively facilitate them, creating a situation of “indispensability”. “Boards have to ensure that CEOs are ‘walking the talk’ on succession,” he said.

A planned overlap between outgoing and incoming leaders can make a transition smoother, but such handovers are relatively rare. When a board has to appoint someone quickly, the choice becomes a calculated risk. “Any new leadership appointment is a ‘leap of faith’ decision,” Sudarshan said. Internal candidates are generally the safer option because they understand the organisation and its culture. But when the internal bench is thin, companies have little choice but to look outside.

Large Indian conglomerates have an advantage in this regard: depth. “By the very size of these groups there is always good talent available either within the specific company or other companies within the group,” Deloitte’s Ghose said. Promoters and founders have also traditionally kept a close eye on talent.

Yet size does not automatically make succession easier. In a group as complex as Tata, the next leader has to navigate businesses across sectors and geographies while balancing commercial objectives with the wider responsibilities of the group.

“Succession is a process like a relay race,” said Kavil Ramachandran, professor and member of the Supervisory Council, Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business. It involves assessing emerging scenarios, identifying the right candidate for the next lap, preparing for a brief overlap and ensuring a smooth handover of the baton.

“This is very challenging in a group such as Tatas that is a huge conglomerate and is driven by both commercial and non-commercial goals,” Ramachandran said. With the operating environment increasingly turbulent, finding someone who can step in at short notice and “hit the ground running” is particularly difficult. Family-controlled businesses face an additional layer of complexity, with family dynamics and multiple potential successors sometimes complicating decisions. Strong governance is needed to ensure individual preferences do not override the organisation’s interests, Ramachandran said.