India Inc taps virgin areas, but not the top dogs  ( December '27,2000, ET)

AS MOST of Corporate India rushes headlong into new business areas, promoters haven’t thought about where to find the talent to run these businesses.

India Inc is facing a huge shortage of CEOs and over the next two to three years, this problem is going to be compounded as more companies get into new business areas.

“At least 60 per cent of the top 500 corporates in India is talking about getting into new businesses over the next two to three years, which is when the real shortage of talent is going to be felt. Companies have the cash, they have the plans, but they just don’t have the people,” says Vikram Chachhi, project leader, Amrop International.

Rajeev Vasudeva, managing partner, Egon Zehnder, feels that the real reason corporate India’s facing a huge CEO crunch is its failure to invest in building up talent for the future. Large corporate houses like the Tatas have only now begun talking about succession planning.

However, Vasudeva feels the problem is far more serious. “It’s not so much an issue of succession planning as it is of career planning. You need to groom your managers for the future right from the start,” avers he.

Until now, Indian corporates have waited until a CEO leaves before starting the hunt for his successor. There is a lesson to be learnt from the US. Some of the largest American companies have had the smoothest succession of CEOs only because the entire exercise was planned well in advance.

Ken Chenault’s succession to the post of CEO at American Express has gone down as a case study at American business schools on how a smooth succession should work.

Harvey Golub, Chenault’s predecessor, will completely relinquish charge in April next year. The entire succession exercise stretches over a two-year period.

The reason Indian corporates, mostly in Old Economy businesses, want to get into the new space is not too hard to see. India’s software industry is expected to grow more than 50 per cent this year, registering revenues of over $8.75 billion, and IT-enabled services are expected to grow 66 per cent with $860 million in revenues this year.

With more companies getting into IT-related businesses, the demand for CEOs is only going to increase further.

The entry of private players in the insurance business has also increased the demand for CEO material. “In financial services, two sectors — asset management and insurance — are facing a severe shortage of CEOs. The issue is not that of finding functional people, it’s leadership,” says Sunit Mehra, partner, Horton International.

However, it is the IT sector that has been the worst-hit with an increasing number of companies getting into the business. Some of the large corporates which have lined up big plans in IT-related businesses are Mahindra & Mahindra, the A V Birla Group, the Industrial Development Bank of India and HDFC, to name just a few.

However, Reliance Infocom’s plans are probably the most ambitious. The company is developing a nationwide broadband network connecting the top 115 cities in India. The optic fibre network will offer a bouquet of services and high quality end-to-end connections. The gamut of data services will include co-location, secure VPNs, e-commerce, media-casting, bandwidth selling and trading and call centres.