Beware the Founder Syndrome: Claude Smadja

Q. How long have the founders been thinking about the transition issue? How have they prepared themselves and the others for it?
A. If I look at my eight-year-long experience at Infosys, this issue has always been on the mind of the founders. I would say the awareness of the need to plan for this issue is an integral part of the DNA of the company.

I am also on the board of a few other international companies and this issue of leadership succession is, of course, part of the board agenda and responsibilities of directors. Infosys is different from other companies I know because of the level of attention and care put on that issue. It is among the highest.

This is even more interesting because in many entrepreneurial companies you have the “founder syndrome” that the founder/founders are emotionally reluctant to face succession issues despite the fact that their mind and brain tell them that this issue needs to be addressed. It is remarkable how the founders at Infosys are able to manage this emotional aspect and bring it in line with good corporate governance.

Murthy continues to play a tremendous role as a mentor, as a wise man, as a kind of statesman or business leader. Of course, he has tremendous in-depth knowledge of the company and the industry. When it comes to day-to-day executive matters, he is now out of the picture and he is playing the role of an elder statesman. Nandan Nilekani is more and more doing the same. In some ways, both represent the New India.

What I can see as a board member is how at one-two levels below the executive director level, there are a number of very good people who are not only very good in terms of professional expertise, but also in terms of the kind of personality that is developed.

Of course, as every company and especially in this kind of domain, Infosys has the challenge of nurturing talent — and retaining talent. This cannot be underestimated.

Q. How did the existing system of having an Executive Council to nurture new leaders come about?
A. The issue was how to create this kind of structure and platform where people who have obvious qualities required for leadership can not only be nurtured, but also be given exposure and responsibilities, and can also find a platform for some sort of an ‘expertise exchange’ with the founding directors. In a way, it is also by associating new members to this decision-making structure that you help mature decision-making capabilities, you help mature the ability to integrate many diverse factors in taking decisions, to develop abilities for lateral thinking.

Q. The founders are a tight-knit group, and have run the company like a family. What kind of transition issues could the company face?
A. You already have on the board among the executive directors, people who are not founding members and you can see that the integration has been achieved extremely well. And so it goes back to the point I made before — to the ability to align the emotional aspect you have in every single founder-based entrepreneurial company, with the vision of what it takes to ensure the long-term sustainability and success of the company.

It means that adding new blood is an absolute prerequisite after some time to ensure sustainability, the preservation of the values of the company, as well as continuous growth.

Q. How much is the board involved in this process of grooming the successive generation of leaders?
A. There is very deep involvement at three levels. At the level of the nominations committee which has been deeply and intensively involved in that. If I look at last succession issue [when one executive director was being promoted to take over Nandan Nilekani's position], it was important that all independent directors be involved also in the process and that this was also discussed with the executive directors. And this was beyond the nominations committee. There was an opportunity for in-depth discussions with the candidate, to also discuss the implications of the nomination and how the structure would work out in future. Once this process was done, the discussion was then taken at the full board level. This took about three to four months altogether.

Q. The last time around when the board took nine months to approve of Kris and Shibulal’s respective appointments, did they look at external candidates? How was that process managed by the board?
A. It took less time than that. The question of looking at external candidates was discussed in the nominations committee, and whether or not we should look at external candidates. The conclusion was that at this stage, we had enough good options inside the company. But even on that point the nominations committee felt that this also needed a discussion with the group of independent directors. The consensus was there were good resources inside the company. And the inconveniences or the delay in looking at outside options could be avoided. So the decision was made to move forward which ended with the nomination of Kris and Shibulal.

Q. What about life after Murthy? What is that going to be like?
A. This would be more a question to ask to people who have executive positions in the company than to us as independent directors. I don't want to substitute my response which is more legitimate for people working day-to-day in the company. In a way, this issue of succession has been addressed upstream and not downstream — because it’s part of the culture of the company, and the process of adjustment has come out quite well. In some ways also, Murthy, from what I have seen, has been very careful that there would be no confusion on his role before and after his retirement from an executive position. In many cases, people retire but don't know how to retire — they keep the same office as before, for instance. Only the nameplate on the door changes in terms of title. Murthy has been very successful in [understanding] how to change his role. He is a mentor, and also the ambassador of the company inside and outside India.

Q. Some companies use induction of new leadership at the helm to infuse fresh thinking into the organisation or to change certain ways of doing business. Have those aspects been factored in while choosing the GenNext leaders at Infosys?
A. Yes. Definitely. If you look at the software industry in India it is clear that after the outstanding successes, and progression of the last 10 years, this industry is facing a number of challenges and a new global business environment. The challenge today is ensuring non-linear growth. There are other challenges — the challenge created by global economic crisis, the challenge created by political conditions in Europe and the US. There are a number of challenges in the environment the industry has been operating in. This needs new thinking, sometimes new modus operandi, a new structure maybe. This is part of the issues that the board of course has to address. And it is addressing them through various means.

In some cases, yes, it means bringing in the company people who will help answer new business expectations, new requirements. It may mean pushing a different kind of talent, of expertise that was less in demand a few years ago. It means trying to find what should be the right balance between organic growth and growth through other means.

(Claude Smadja, president of Smadja & Associates Strategic Advisory and former managing director of the World Economic Forum, has been on the Infosys board since 2002.He is currently an independent director at Infosys and earlier was the chairman of the nominations committee.)