Selecting a

New CEO- The

importance of
strategic
leaders
 Current CEO’s Woes

• Evidence in US shows that the shelf life of a CEO is not long and continuously
getting shorter.
• In India, where many firms are controlled by families , this may not be true,
but where the CEO is a ‘professional’ appointed by the family, their
accountability also seems to be on increase.
• The brevity of CEOs and top level managers’ tenure means that planning
for and selecting new leaders should be a continuous process.
• Furthermore, the importance of strategic leaders to a firm’s overall health &
success makes selecting effective leaders critical.
 Statistics
• In 2005, the average CEO tenure was 7.3
which has now reduced to less than 6 years
• A survey of boards in US found that over
40% of the firms had no succession plans,
and Indian firms may not be latter.
• In another survey, more than 50% of the
directors rated the board members
ineffective in succession planning.
 Examples
1. In 2009, the CEOs of Toyota, Lenovo & Ranbaxy resigned or were replaced

-The reason was the poor performance. Both Toyota &

Lenovo suffered net losses in 2008 & Lenovo’s market share
declined from third to fourth place in PC industry

2. In 2011, Wipro’s CEO resigned

-Wipro saw erosion in its market shares and profits in 2010 and it being
overtaken by cognizant.
 Apple
• Jobs took time off from the CEO role in 2009 due to
illness.
• Analysts expressed major concerns because of his
importance to the success of the firm.
• While he didn’t design himself, but was responsible
for pushing many products through including the
iconic I-pod.
• He left company for 12 years and the company
floundered.
• He returned in 1997and Apple has had number of
successes since then.
 The Solution

• Companies need to develop succession plans.

• Such plans call for selecting one or more potential successors
and helping them to build the capabilities necessary to be
effective CEOs.
• For Eg, they may be given challenging assignments where they
can build valuable knowledge of critical markets and/or
establish relationships with important stakeholders.
• They can receive mentoring and 360 degree feedback to
identify positive traits and work on negative ones.
 Examples

Infosys
• Mr. Nandan Nilekani was identified as the successor
to Mr. Murthy well before he handed over the reigns.

• Although, Nilekani quit to head the India’s Unique

Card Identification Project, his successor Mr. S.
Gopalakrishnan was also identified very quickly.

• Mr. Nilekani and Mr. Gopalakrishnan were both co-

founders of Infosys along with Mr. Murthy and hence
were fully prepared for the task.
 Examples

Tata

• A nine member search panel was formed with a

mandate to formulate criteria “for identifying the
most suitable candidate taking into account the
global nature and complexity of the group’s
business.”