The ‘succession’ issues in MNC’s…!!!

When Vishal Sikka stepped down from the CEO position of the prestigious Infosys, the question that he left behind him is about the problems that brew up between a Company head and the management, when the company head happens to be an outsider.

Vishal Sikka’s is not a rare case. There were Company head’s in many companies who resigned from their position due to the clashes between them and the management.

In most cases the ideologies of the two sides doesn’t match. Even though, the management and the head go well during the initial stages, grudges began to arise gradually. This is due to the differences in hereditary , Culture, and values they possess. If the Head is a family member of the Company founder, then there will not be any problems like this, since, blood is thicker than water.

Let’s have a look at some Company Heads who have gone through these kinds of circumstances.

Before, Vishal Sikka, we heard about the resignation of another CEO in July. FlavioCattaneo, resigned from the position of CEO of Vivendi Universal, the French media and Entertainment giant. Telecom Italia said Mr. Cattaneo’s exit was related to his meeting the company’s financial targets ahead of time and the need for a manager with different skills.

But people familiar with the matter said it follows disagreements between Vivendi management and the Italian executive.

Vivendi was upset about Mr. Cattaneo’s apparent unwillingness to work closely with its managers, the people said. It tried to limit  

Mr.Cattaneo’s powers by appointing a Managing Director to assume some of his powers but that option was shut down by the Italian executive who wanted more autonomy to complete a turnaround of the company.

With Cattaneo’s service, the Italian Company’s first quarter revenue rose 8.5% from a year earlier, while operating profit climbed nearly 23%.

Another one was Cyrus Mistry. Even the Tata group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as Chairman of Tata sons as the board had lost faith in him, but his refusal led to the removal via majority vote.

We have to notice that Tata group market value doubled under Cyrus Mistry. Combined market capitalization or M Cap of all listed companies of Tata group almost doubled during the four year tenure of Cyrus Mistry. The market capitalization showed a sharp rise to Rs 8.5 lakh crore at the time of Mistry’s resign, which was Rs. 4.6 lakh crore when he joined the firm. Look at the difference!!

Seven out of nine directors of Tata sons voted for his replacement after Mistry was declared ineligible to vote as he was an interest director.

Tata son’s affidavit says that during his four years at the helm “several disturbing facts” emerged about his leadership. The affidavit said that Mistry focused only on the problems from the past and blamed them on “legacy issues” but identifying these hot spots, the execution and follow through  was slow and lacked a sense of urgency.

Tesla’s Klaus Grohmann was also a 

victim of ‘ego’ of the superiors. Klaus Grohmann the former head of Grohmann engineering, the German manufacturing firm recently acquired by Tesla, was ousted as an exec at tesla following clashes with CEO Elon Musk.

The rumored clashes were reportedly relating to strategy concerning the future of Grohmann Engineering’s legacy clients were, reportedly to be considered less important than Tesla’s own internal development.

Jeff Jones, the president of Uber has stepped down from the company after less than a year. His resignation was due to the differences between him and his superior over the company’s beliefs. The sources said that, Jones determined that the situation at the company was more problematic than he realized.

What we learn from these people is that, many multinational companies employs their own family members or close acquaintances as the company heads. If so, the wavelength matches. There will be fewer chances for a clash.

These guys will not always be able to produce innovative ideas, since they are coming out from the background of an already popular company. They don’t know the beginning of a company. They only know a company after success.

When someone outside the company heads the firm, they are actually starting from the scratch. They have a vision and a clear idea of how to make the firm more profitable. Most of the time, their vision and ideas collide with the management. Even the management will never let them do what they want to do, since; the person doesn’t belong to their family.

 

In fact, these company heads who were forced to resign from their jobs are victims. They have done every possible thing to make the company profitable. But their hard work remains unnoticed. Most of the time, the management board will try to discourage the innovative thoughts put forward by these people. Even though, their moves makes the company profitable, the ‘outsider’ thought will always pulls back the management board from praising them.

These people were excellent in academics and have a good caliber in leading a firm. But they all became the victims of ego centrism of the management board.

The cultural differences between the management and company head can also be a reason for the grudges. Earlier, when a The company heads gives more freedom to their staffs now.  The environment inside an office has  become a friendly one replacing the older bossy one. The older generation could not digest this difference easily, since they are too conventional. If the views of the company head and the management are different, there is a chance of grudges growing up in between them. In most cases, the company heads remains silent in front of the management board in order to avoid a clash. If not, they will end up like the above said people.

Most of the time, these companies appoint heads by looking at the profits they have earned in the  past. They never think whether

this person gels with their culture. Every company has its own positives and negatives. Even if, it seems negative for us, for the company, they are the ways to make profit. For an outsider head it may seem a little odd. He will definitely try to wipe out these negatives and set an independent culture in the company, which the management might not be able to cope up with. This is the primary reason for the clash between management and newly appointed heads of a company. Both the sides are strong and both of them have already cemented their position in the society. Even though, they have lot to study from each other, sometimes they couldn’t. Companies have to be more careful in selecting their heads. Besides, learning about the profits they have earned for another company, they have to try to understand whether this person goes hand-in-glove with their company’s already set rules and ethics.

In spite of the noise around Infosys created by its co-founders, it is to Sikka’s credit that Infosys showed a better annual performance in FY (Financial Year) 17. The company’s dollar revenue was up at $10 billion for the first time in FY17 against $9.5 billion in FY16.

See, how he transformed the company. He had never done anything wrong for the firm. But still, what he received from the management is disrespect. This is the case of all self-made people. They will not have any god fathers. All they have to do is to struggle again and again. Because there are more number of people to discourage them than encourage!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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