The Year that Was: The One-Man Show

L&T currently has no one in the board who can lead the company after CMD A.M. Naik steps down. Even if a new person is drafted in by September, he has less than two years to absorb the complex task of running a behemoth like L&T.

Today, as L&T stares at a leadership vacuum, Naik is scrambling to send star performers to Harvard, Wharton, London Business School and INSEAD. That’s also why he’s been forced to break tradition and hire from outside. One of these lateral entrants could become the first senior executive from outside the system to make it to the company’s board in recent times.

It isn’t as if the L&T board hasn’t been exercising its mind on the issue of CEO succession. About five years ago, a senior management consultant says, some of the board members sought his opinion on how to handle this sensitive issue. “At that time, they couldn’t locate an insider of similar stature… so, they decided to wait.” The result: Today, Naik’s stature has gone up significantly but all the reins have ended up in his hands.

And it is now even more difficult to find a successor from within, he says.

McKinsey has been given charge of a leadership development process. The programme will identify 40-odd senior managers eventually who will then be mentored continuously by board members. The leadership development process works in tandem with a fast-track programme, where younger managers are trained to assume leadership roles.

At the same time, each operating company within the group will now have its own virtual board. These new internal boards will come in handy for another reason. L&T plans to hive off some of its large businesses into independent entities. “We have operational leaders for many of our businesses, but I am not sure we have business leaders within the company,” says Naik. Hopefully, before the chairman steps down two years later, the process of creating business leaders will have been put in motion.

- This article was earlier published in Forbes India magazine dated March 5, 2010.

WHY DID WE DO THE STORY
Larsen & Toubro has been one of the stars of the stock market rally since March 2009, as the company considered India’s GE, moves from winning one big project to another. But as we took a closer look at the company, we realised most people had failed to notice the coming management void.

Ther term of Chairman and Managing Director A.M. Naik will soon come to an end. And all his colleagues on the board, except two, will retire.

L&T is too big a company to leave its succession plan to last minute decisions. Its business is as sensitive as it is diverse. It has a strong portfolio of contracts in the defence sector and plans to enter nuclear power in the coming years. But it does not have a deep pipeline of business leaders capable of replacing Naik.

As Naik enjoyed a larger-than-life image and took extensions to remain at the helm, two generations of senior executives retired. So the question was how was he going to groom the next generation of leaders before moving on.

WHERE DOES THE STORY STAND
In our interview with him, Naik had said he had not shortlisted any candidate yet and even if he had, he wasn’t telling anyone about it.

But somewhere in the chat, he dwelt on the potential of L&T’s power business and spoke highly of Ravi Uppal, who he had brought in to head the power business. Naik did not confirm or deny rumours that Uppal was being groomed to be next CEO.

If it indeed turns out to be true, L&T would be breaking a tradition since inception of choosing the leader from within the ranks.

Recently, Uppal and his team in L&T Power held a media briefing, another rarity at L&T, where Naik has been the public face.

Uppal is also said to be leading several large contract negotiations, an indicator of his growing role. There is also talk that L&T will split the posts of chairman and managing director, making room for Uppal.

The contours of Naik’s solution are slowly becoming visible now.