Larsen & Toubro gained from having a charismatic, all-powerful leader. It was also left with a management void in the end
L&T currently has no one in the board who can lead the company after CMD A.M. Naik steps down. Even if a new person is drafted in by September, he has less than two years to absorb the complex task of running a behemoth like L&T.
Today, as L&T stares at a leadership vacuum, Naik is scrambling to send star performers to Harvard, Wharton, London Business School and INSEAD. That’s also why he’s been forced to break tradition and hire from outside. One of these lateral entrants could become the first senior executive from outside the system to make it to the company’s board in recent times.
It isn’t as if the L&T board hasn’t been exercising its mind on the issue of CEO succession. About five years ago, a senior management consultant says, some of the board members sought his opinion on how to handle this sensitive issue. “At that time, they couldn’t locate an insider of similar stature… so, they decided to wait.” The result: Today, Naik’s stature has gone up significantly but all the reins have ended up in his hands.
And it is now even more difficult to find a successor from within, he says.
McKinsey has been given charge of a leadership development process. The programme will identify 40-odd senior managers eventually who will then be mentored continuously by board members. The leadership development process works in tandem with a fast-track programme, where younger managers are trained to assume leadership roles.
At the same time, each operating company within the group will now have its own virtual board. These new internal boards will come in handy for another reason. L&T plans to hive off some of its large businesses into independent entities. “We have operational leaders for many of our businesses, but I am not sure we have business leaders within the company,” says Naik. Hopefully, before the chairman steps down two years later, the process of creating business leaders will have been put in motion.
(This story appears in the 04 June, 2010 issue of Forbes India. To visit our Archives, click here.)