Infosys founder NR Narayana Murthy was bang on when he said at the company’s 40-year celebrations earlier this week that his earlier decision to not allow the children of founders or the next generation of promoters to work at Infosys was wrong. As a result none of the founders’ children have worked for Infosys in the past 40 years, though Rohan Murty had a short stint at the company as his father’s executive assistant for a year. Murthy’s point is well made as there is no denying that every individual must have the same opportunity as the other, provided he or she is considered the best person for the job. For example, if Reliance Industries had the same policy, Mukesh Ambani would have never got the chance to come out of his father’s shadow and take the company to greater heights. Rahul Bajaj’s sons also would have missed out on taking their respective companies in new directions, courtesy their abilities and a timely succession plan.
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But there is a catch—corporate history has shown that meritocracy often takes a backseat to hereditary aristocracy. If the founder’s children or relatives are in an operational position in the company, it becomes that much more difficult for outsiders to work or take decisions freely. So what’s the way out? There are no easy answers to this question, but in this hyper-competitive world, the solution doesn’t lie in banning family members from the succession process. That’s an impractical and unfair approach. The solution lies in a proper assessment of whether the family member has it in him/her to take on the assignment. That is where the role of an independent board comes in. The boards of Indian companies must grow beyond their baseline responsibilities and play a more proactive role in succession planning, which remains a key challenge facing a large number of companies in the country. For something as sensitive as bringing in family members in senior operational roles, the board can engage external advisors to help with the process as they can often help the company benchmark internal talent with external talent and help arrive at a more informed choice.
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In any case, grooming and selection of potential successors—whether family members or outsiders—for critical leadership roles should be a continuous process while ensuring that the selected candidate is the right cultural fit. This is more important for a family business as a non-promoter CEO should first be able to fit into the culture of the company before targeting any changes. The role of the chairman of the board is equally critical in setting the tenor and direction of the board. Ideally, family members in the business should report to non-family bosses, who get the reinforcement they need to provide honest assessments. In the real world, however, this doesn’t happen to the extent desired as many board members are beholden to the promoters for giving them a seat on the boards. That inhibits independent decision-making. At a time of market uncertainty and growing complexity, businesses can no longer afford half measures when it comes to conducting succession planning and talent development, which are flip sides of the same coin. It wasn’t Murthy’s job alone to take a call on whether family members of founders should join Infosys—the company’s board should have taken that call objectively.