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Leadership crisis in Indian IT: Top companies opt for outsider CEOs

After several years of playing it safe and appointing internally-groomed candidates as CEOs, India’s $146-billion IT industry is waking up to a new reality and increasingly picking outsiders for the top job, a trend that possibly reflects a deeper internal leadership crisis in companies.

With the appointment of Abidali Z Neemuchwala as CEO of Wipro, three of India’s top five software exporters — Infosys, Wipro and Tech Mahindra — have opted for outside leaders, a sign that companies are starting to recognise that some of their big internal leadership betsare not working, experts said. This is despite companies such as Infosys building fancy, Greek-styled, multi-million dollar leadership institutes that aim to groom and churn out hundreds of world-class leaders every year.

“There is strong evidence, globally, that under normal conditions, promoting an insider to the top job is by far the safer choice, but at times of significant industry change and disruption, bringing in a CEO from the outside yields better results despite the cultural risks,” said Ravi Venkatesan, chairman of Bank of Baroda and a board member at Infosys.

“You need that external perspective to rethink the rules of the game. The most famous example of this, of course, is Lou Gerstner coming to IBM from American Express.” Most companies have given secondary importance to internal succession planning, experts said.

“The other issue, of course, is that most companies are doing a terrible job of grooming internal talent. People get promoted for loyalty and hitting the numbers,” said Venkatesan, a former chairman of Microsoft India. Mid-cap companies such as Hexaware, L&T Infotech, iGate (before it was acquired by Capgemini), Polaris and Aricent have bet on leaders from outside over the past few years.

Matt Barney, former head of the Infosys Leadership Institute, said the problem is deep-rooted at large companies where executives have enjoyed tremendous success over the years and are not motivated enough to push themselves to become better leaders.

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