About half (52%) of the companies refreshed their corner offices in the past five years, with more than two-thirds of them elevating internal candidates and less than a third turning to external hires, showed the data, put together by executive search firm Xpheno.
Every second managing director and CEO in the Nifty 50 companies has been with their respective companies for longer than 15 years, while 36% have worked for more than 25 years, showed the data. It is the result of a sharper focus on succession planning from the company boards, said senior executives.
“The root cause of this is that over the last five years the nomination and remuneration committees of boards have focused heavily on succession planning-having backups and backups for backups ready to take charge if such a situation arises is very important,” said Shailesh Haribhakti, chairman at audit and accounting firm Haribhakti & Co, who is an independent director at several Indian companies. “There is always an ‘understudy’ (for the CEO position), a designated seasoned professional within the organisation who is given more exposure internally.”
Greater regulatory pressure, prompting companies to focus on robust corporate governance, has also led to an increase in elevation of in-house talent.
Overall, the CEOs of 31 (62%) of the Nifty 50 companies were assigned their current roles through internal elevation, showed the data.
“Long tenures with vertical or functional growth, especially when one moves up the experience scale, hold high weightage in leadership hiring conversations,” said Siddharth Verma, head, Xpheno Executive Search. “A market defining cohort like the Nifty 50 valuing long tenures and opting for internal elevations of tenured professionals to CXO roles is an endorsement of the same. The enterprise familiarity and operating fluency that get built with long tenures translates to enterprise confidence when picking candidates for the corner office.”
The data also showed that the Nifty 50 top bosses, with a mix of those occupying the position for a long time and recent appointments, have an average tenure of seven years in their current role. This is nearly double the overall tenure of 3.2-3.5 years on average for Indian CXOs.
Sandeep Bhalla, head of consulting business at Korn Ferry, said, “The risk of a person not being able to do the top job is far less in case of internal elevations vis-a-vis betting on a person based on market reputation.” It also helps retain leaders by meeting aspirations of the CXOs, he said, adding, “That apart, the cost of hiring is significantly lower, even though in case of a CEO search cost is not the top most consideration.”
“Cultural fitment is an important aspect of this,” said Arvind Usretay, regional client manager, Asia at Mercer Asia. “Also, an internal candidate will have better understanding of the organisation dynamics and have a better ability to manoeuvre through internal politics and power centres which may not be easy for someone from outside unless he/she is an industry stalwart who may have wider acceptability.” Six out of the eight CEO appointments in the past 18 months were internal elevations.
Recent elevations include K Krithivasan at TCS, Rohit Jawa at Hindustan Unilever, SN Subhramanyan at L&T, Jayant Acharya at JSW Steel and Niranjan Gupta at Hero Motors.
