Why did Narayana Murthy come back to Infosys?

Founders coming back to run companies is not unusual. But few of them came back with their sons or daughters

Mitu Jayashankar
Published: 01, Jun 2013

I'm a Delhi girl who managed to embrace the quirks of the South Indian way of life after moving to Bangalore. A sceptic but not a cynic, I'm lucky to have been a part of the Garden City’s journey from a sleepy paradise to a bustling high-tech metropolis. I'm interested in technology and business, education, social entrepreneurship and philanthropy. I began my journalistic career at A&M and passed through the portals of Businessworld and The Economic Times before coming to Forbes India.

(N. R. Narayana Murthy, billionaire founder of Infosys Technologies Ltd. Photo: Getty Images)
N. R. Narayana Murthy, billionaire founder of Infosys Technologies Ltd. (Photo: Getty Images)

On Saturday morning, NRN Murthy joined a long list of founders such as Michael Dell, Steve Jobs and Howard Shultz, in the entrepreneurial hall of fame. All of them like Murthy returned to the companies they had started after either retiring or being ousted from them. Founders coming back to run a company is hardly unusual. Many like Jobs have actually been far more successful in their second stint than they were in the first. So in the global scheme of things, NRN Murthy coming back as Chairman of Infosys is not such a big deal.

Especially when the company is going through a challenging time as Infosys clearly is. At such time investors often feel that there is no one better than a founder to steady the ship.

Murthy has never hidden his or his family’s attachment to Infosys. Infosys had seven founders, but it was only the Murthys who referred to Infosys as their child. A founder’s wife once told me that none of the other founders could match the intensity of how the Murthys felt for Infosys. Murthy has always maintained that if Infosys needed him, he would not hold himself back.

But Murthy’s return to Infosys is a little bit different from the other iconic founders mentioned at the beginning of the article. None of them came back to the company along with their sons or daughters. But more on this later, for now let’s look at some other important issues.

The biggest question is what happens now to the succession planning at Infosys? With the founders back in the key executive roles, what does it mean for the rest of the management team? There are at least three leaders (B G Srinivas, Ashok Vemuri and V Balakrishnan) waiting to take over from S D Shibulal when he retires as CEO in 2015. What happens to them now that Murthy is back as executive chairman? The assumption was that one of them would become the CEO and Kris (S K Gopalakrishnan) and Shibulal would be kicked upstairs as Chairman and Vice Chairman respectively.

If Murthy stays on till 2018, then it means that either (Kris) Gopalakrishan, or Shibulal might have to go. After all even Infosys cannot afford to keep three chairmen in the company.

Now let’s examine the issue of bringing in Rohan Murty into the company. Again there is nothing unusual about this scenario. After all Rishad Premji works at Wipro and Mukesh Ambani succeeded his father at Reliance. Rohan is well qualified, and by all accounts extremely righteous and intelligent. The world in which Murthy ran Infosys (between 1981-2002) has changed dramatically. He has not held an executive role at Infosys for the last 11 years. When he was the CEO, there was no iPad, Facebook, Twitter or Tumblr. At nearly 68 years of age, it is not wrong to assume that Murthy might have fallen behind on some of the big trends driving IT spending today. Rohan has a PhD in computer science from Harvard University. Imagine the scenario. Murthy is meeting the CIO of Apple and Rohan is by his side. Murthy would feel a lot more confident in that meeting and the client would be a lot more impressed.

Except for one detail.

For as far as anyone can remember, Murthy has held that no family member of a founder can ever come to work at Infosys. It is a rule he set himself and all these years he has taken great pride in living by it.

The whole magic about Infosys was that when it gave its word it knew how to keep it. If it made offers to employees and the market tanked, it honored them no matter what. If it made a promise to shareholders about meeting its revenue and profit guidance, it kept it, quarter after quarter. If it said founders would retire at 65, it made sure they were gone by that time. If it said founder’s family members would not join the company, it enforced the rule strictly. Some time back, in an interview with me, Rohan had said that what he most admired about his father was that Murthy never went back on his word. He had said that he would often ask his father jokingly whether he could join Infosys. And Murthy’s answer would always be the same. No. Once a promise has been made, it had to be honored no matter what.

For a while now, Infosys hasn't been able to keep up with its promised guidance to shareholders.

Today one more promise was broken.

In the press conference today Murthy labored on that Rohan was only coming into help him. Rohan has not been given any leadership role at Infosys and he is not even going to draw a salary. As his executive assistant, his job is merely to make Murthy work more efficiently and effectively.

The question is, could Infosys find no one of Rohan’s caliber either inside or from outside the company? Does this mean that other founders can now send their children to work at Infosys?

Murthy’s coming back will definitely make shareholders happy. It is highly likely that on Monday morning the Infosys stock price will validate the Board’s decision to bring him back.

Company officials tell me that when they would go on investor meets; they would always be greeted with this one question, why don’t you bring Nandan and Murthy back? They say that old customers would prefer to talk to Murthy even after he left the company. At the last AGM Murthy chaired in 2011, I witnessed for myself the intense emotions shareholders felt for him.

So did the company bend under shareholder pressure and ask Murthy to come back? Did Murthy fear that if things continued the way they were at Infosys, shareholders would demand for Shibulal to go? In his press conference today he said, more than once, that the other two CEOs (Nandan and Kris) had the advantage of his support and guidance, something that Shibulal did not have. Is he coming back to Infosys to protect Shibulal and Kris from further criticism? Clearly with him back in the saddle, it will be very difficult for anyone to directly take on Shibulal or Kris.

So will things change for Infosys with Murthy back at helm? My colleague Ramnath has an interesting take on that.

Murthy though has refrained from making any predictions for the future. But earlier in the day, Kiran Mazumdar Shaw, Biocon Chairperson and a close family friend provided some interesting insights. Speaking on a news channel she said that Murthy was concerned about how the strategy was being executed at Infosys. One way to interpret this could be that he won’t make too many changes to the strategy but focus on putting it to work. Infosys has gone through a very long and painful restructuring in the last two years. It would be dangerous to put the company through too much change again.

It is difficult to predict the future. Looking back at the past is so much easier. The years before Murthy gave up his executive role were some of the best years of Infosys. The pressure will be on Murthy now to deliver the same results. It will be interesting to see if Murthy still has the midas touch.

As they say in Bollywood, picture abhi baaki hai mere dost (the story is still unfolding)

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  • Sashi

    Indeed looks like a prophesy of sorts:-) Losing 8 execs (read professional management as opposed to promoters) exiting in 6 months, was Narayan Murthy's return meant to drive a specific agenda? Speculations have been rife on this in media, and among investor community. Stock market has reflected sentiments when Murthy Junior was brought in to "help" the founder father. With Bala gone, would B G Srinivas be seeing writing on the wall? So, is succession planning in place? Lately speculation of an outsider CEO seems to have been denied by NRN citing it'd be an insider. Would that mean the deck is being cleared for someone? Or, that with founders having squatted for such long there were too many in leadership pipeline, and the act of Bala moving on was one of doing away with avoidable conflicts? There was an interesting article when K V Kamath was brought in as the "outsider" Chairman. After an uneventful stint, he silently made his way out. With that experience, is the organization trying avoid potential mistakes and hence planning to install an insider with loyalty gained through lineage? Lot of questions to be answered between now and 2015. Indeed a case study in the making. I certainly am going to follow this. Anyone wants to take a bet!

    on Dec 21, 2013
  • Vijay

    Infosys has become irrelevant. Companies that came after infosys and beat infosys: Google 1999. 50B, Facebook 2004 5B, Amazon 1994 60B, Dell 1984 56B.

    on Dec 1, 2013
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  • Prof. Bhagabat Nath

    Good qualified skilled resource with 5 years’ experience, particularly the Odiya techies are discouraged to continue with Infosys at Bhubaneswar (Odisha) by their immediate seniors. They are harassed and exploited and compelled to leave either Bhubaneswar or Infosys. Their industry, dedication and output are not rewarded. Flattery is encouraged as a key to career advancement. Since NRN has taken charge I hope, he should take immediate steps to prevent exodus of experienced techies save the reputation of Infosys as company that cares for the skilled.

    on Jul 5, 2013
  • pratiksha Jadhav

    Its realy awesome to read the live story....i get inspired from this.

    on Jul 4, 2013
  • umesh bhagwat

    Unless Infosys can re-invent itself it is doomed!

    on Jun 26, 2013
  • Kannan parthasarathy

    Until unless infosys changes his policy of recruiting the employees , they will be facing the same kind of problems in future too and also they are loosing the assets especially a good skilled resource. Till now infosys has a very good qualified resource in which all the resource is having more then 60% marks but still why infosys failed in IT market? It doesn't mean that those who finish the BE in regular college with more then 60% will perform good in the company and it all depends on the resource hard work and a dedication towards the company. Suppose a good skilled resource will be having good exp but he/she will would have been done his degree through distance education at that point of time everything will match to the job requirement except the qualification of the resource. Only due to this qualification HR will reject the resource candidature . In this way infosys is loosing there assets by not recruiting the dedicated resource whereas they will provide an offer to the fresh BE holder and with out project they will be paying the salary in bench. If this is the case definitely any company will go to sick. so my message to infosys is to grab the skilled resource and make a good asset that will be beneficial for company also and company growth as well. Good luck to MR. narayana murthy to grow infosys and stand up in IT market.

    on Jun 23, 2013
  • K Patel

    Make Infy a home. Now it is like a market. Employees do not talk through their heart. Just remember, 'coming from heart, going to heart'. Oh! yes, Let your employees love Infosys. And let Infy love its employees.

    on Jun 5, 2013
  • Raja Tadvai

    Your magazine Forbes India is responsible for this , you named it with cover story "Infosys need this ( K V Kamath ) man " now you are guilty and don't know how to express but asking reverse question to public , both are Brahmin community well respected , well try and say sorry to public

    on Jun 5, 2013
  • Gun

    Two things are true in this article. The concern of NRN for Infosys, as a brain child, and not to protect Soren and Co. Then where else could his genetic child could get a good apprenticeship for his future endeavours? It is amusing to watch The comments from Infys posing that they always stand on their word! What is wrong if a policy is changed for the benefit of the company? These same fellows would join the future such endeavours of NRNs and Rohans, make their both ends meet and Lo! They start criticising their bosses!

    on Jun 4, 2013
  • K A PRASANNA

    NRN came back because they hold considerable percentage of Infy shares. The stock is a under performer for many years. apart from dividend receipt, NRN's net worth has been going down. His venture investment company has lost heavily, having invest in in SKS micro Finance company. The return is obvious.

    on Jun 4, 2013
  • PR Ganapathy

    I was NRN Murthy's first Executive Assistant, in 1998. Please see my blog post on this: www.prganapathy.com/1/post/2013/06/nr-narayana-murthy-returns-to-infosys.html

    on Jun 3, 2013
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  • bmniac

    It is difficult to predict the future. Looking back at the past is so much easier. How true!

    on Jun 3, 2013
  • K A PRASANNA

    NRN family holds around 5% of equity. At the current growth rate the stock will trade around Rs 500 in two years time. To protect its fall and family wealth NRN has stepped in.

    on Jun 3, 2013
  • Srinivas

    Infosys used to be a company which set standards in leadership. Unfortunately it became victirm of its own success. Infosys is just an example of a CMM Level 5 company where a process to identify and developing leaderships failed. Instead of correcting the process, they are involved in becoming person dependant. What happens if NRN fails? Will there be another saviour?

    on Jun 2, 2013
  • Dr.A.Jagadeesh

    Dynasty rule is common in Indian Politics and Film field and now IT is no exception! Dr.A.Jagadeesh Nellore(AP),India

    on Jun 2, 2013
    • peter

      You are saying as if he snatched your company and ruling it. Grow up.... it's he who shaped that company... comment something realistic man....

      on Feb 25, 2014
  • Mukul

    Hi Mitu Your article seems to create too much hype and hoopla around NRN getting his son along. You tried to over encash on a single event and attempted to read too much into that though nothing came out! You also seem to be very worried about the other 3 founders who were waiting for their turn to the high chair. Please do not forget that Infosys is a 1500000 strong organization and there is enough to keep all of them ocupied. NRN in his stint was a CEO for 30000 strong company and Shibulal is handling something 5 times over. Your musing about NRN not keeping up with latest Apple gadgets and social networking trends and hence might depend on Rohan to assist him gave me a hearty laugh. Thanks for entertainment. Today when politicians like Narendra Modi, Nitish Kumar and social activists like Anna Hazare can use them effectively; you doubted NRN's capability. I will ask sincere forgiveness from Lord for you as you do not know that you do not know! I agree with you that the result is to be seen. With so many speculations; the truth remains. Your guess is as good as mine. Regards Mukul

    on Jun 2, 2013
  • Infosys Employee

    Correction: It is just "Infosys Limited" not "Infosys Technologies Lim ited" anymore! (Getty image). Getting Rohan in to the company saying he doesn't draw the salary is like saying "I'm not a doctor but I still give medicines because I'm the owner of a medical store". NRN should change his own statement "None of the founders children will get a salary even if they join Infosys". Well beginning is half done. NRN, this time has lost even before he started! Indirectly, NRN has admitted that they don't have courage to think beyond their own founders and their families! Neither Rohan nor NRN can change the fate of Infosys. The 2012-2013 Infosys's investor presentation mentions about high attrition rate. Remember what happened to Mohandas Pai? If Infosys failed to honour someone like Mohandas Pai in top management, whom are they going to respect except their own families and their children and the brilliant HRs like Nandita Gurjar! There is literally nothing Infosys can gain by bringing back NRN back because no employee is going to be back nor the employees stick to Infosys who want to leave just because NRN will be back. I wonder even if any client will be bothered about this change! It is not NRN who is going to work to impress clients. Just wait and see how many more clients leave Infosys in next few years right after their agreement period. Infosys should be an example to every IT company in India recognizing the significance of employee satisfaction both at top level and the ground level. "Game Over".

    on Jun 2, 2013
    • spu

      hi i wanted to know factors resposible for decline of infosys, and leadership transition from nrn to sikka,..

      on Oct 15, 2014
    • Former Infy Employee

      Agree with some of your insights. Being a former employee, I feel the rot is too deep. Literally, the middle management which is strength of any company is non-existent. Lot of good people left and created a void in Middle management, Technical people were treated like dirt.

      on Jun 2, 2013
      • Mukul

        Dear former Infosys Employee I agree with you on the middle management crisis. Lets accept this; it is part of growing up. Surely TCS can be appreciated more for having a consistent growth. Wipro had their share of hiccups. CTS is the new blue eyed boy on the block and needs to be watched for some more time. For Infosys, I am looking forward and open to any change that can deliver results. If the existing management thought of trying to bring NRN back in desperation and if NRN is comfortable getting his son along; let's not make a big deal out of it. Good thing on his part is; he and his son are not charging a penny (may be just 1 rupee) to the company and have accepted to put their best effort to turn the company around. If they had charged; people would have got another excuse to murmur. :-). People do not have solution but very strong opinions. They may or may not succeed but what is the harm in letting NRN do that noting his track record? I will be very happy if Infosys does a turnaround under the leadeship of NRN; even if it doesn't do; what has Infosys to loose?

        on Jun 2, 2013
    • Mukul

      You sound like a proxy for Mohandas Pai. If you truelly an Infosys Employee; I am very curious to learn from you what was the contribution of Mohandas Pai to Infosys except hightened attrition rate?

      on Jun 2, 2013
  • Alok Asthana

    I add another angle to the Murthy recall. The forced recall raises a very serious question on the leadership training and succession planning systems of Infosys. More so, because they have such a large training academy. Is there no one in the formally leadership trained force of Infosys who can run the affairs? If so, the whole leadership and succession planning dept should be closed down, and pronto. From my army service, I have learnt that leaders who become indispensable are actually selfish. Personality oriented leadership that works out of a black box is a bad idea. The midas touch approach is passe. At this rate, the army will have to resurrect Field Marshal Manekshaw!

    on Jun 2, 2013
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