Leadership Transition at Infosys

            
 
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Case Details:

Case Code: HROB156
Case Length: 17 Pages
Period: 2000-2013
Organization: Infosys Ltd.
Pub Date: 2013
Teaching Note: Not Available
Countries: India
Industry: Information Technology and Consulting

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"Leadership changes do end up creating distraction for people, and companies lose precious time from that perspective. In case of Infosys, this is more pronounced because of the exit and superannuation of people who had significant span of control over the company".

- Avneet Singh, VP-Global Sourcing at advisory firm Everest Group, in September 2011.

"The current debate on the leadership transition at Infosys, at a time when business leaders are confronting challenges posed by a rapid escalation of complexity, is helpful to introspect on certain fundamental attributes of a sustainable and responsible business enterprise. Successful businesses are not just built on talent, technique, and temperament. They are also equally balanced by a right dose of trust, truthfulness, and transparency. Seven co-founders with different styles came together under the leadership of N.R. Narayana Murthy to nurture a first class global enterprise of enormous value built on values. If the understanding among the co-founders which may be more than two decades old is still being respected and honored, it speaks volumes about the delicate chemistry of governance being practiced at Infosys. I think Infosys has managed to strike a healthy balance continuing to lead with wisdom".

- V.V. Ranganathan, a co-founder of Values Centered Innovation, an Innovation Enablement Company, in May 2011.

"Infosys wants a seamless transition but the IT services market at the moment is a battlefield".

- Herminia Ibarra (Ibarra), an INSEAD professor of organizational behavior, in May 2011.

Introduction

For decades, Bangalore-based information technology and consulting company, Infosys Ltd. (Infosys) had been the undisputed role model for IT companies in India by setting a benchmark on categories such as governance and leadership. However, since the fourth quarter of 2012, the company lost its coveted position of being India’s most respected company not just for its growth and margins but also for its best practices in talent management and shareholder transparency thanks to a not so smooth process of leadership transition. This was in stark contrast to its reputation as a company which had managed succession planning well over the years followed by a seamless leadership transition.

Human Resource and Organization Behavior | Case Study in Management, Operations, Strategies, Human Resource and Organization Behavior, Case Studies

Infosys, founded in 1981 by Narayana Murthy (Murthy) and six others, was known for leadership development and succession planning. In 2001, the company had set up the Infosys Leadership Institute (ILI) to nurture and groom future leaders. Since most of the company’s founders were nearing the retirement age, it developed a strong leadership pipeline and defined clear successors to lead the company. Ever since Murthy had announced his plans to retire by August 2011, the company had been focusing on bringing in a new successor. In May 2011, Infosys chose banking veteran, KV Kamath (Kamath), former CEO of ICICI Bank, the largest private sector bank in India, as the non-executive chairman of Infosys. Soon after Kamath took over his position in August 2011, Kris Gopalakrishnan (Gopalakrishnan) was made the executive co-chairman and SD Shibulal (Shibulal), the CEO and managing director.

The company was optimistic that the leadership changes would help it get back onto the growth trajectory. Infosys had been reporting disappointing results for the last four quarters of FY 2012-2013.

Despite the key leadership changes, the company’s performance continued to decline. The company, known as the sector bellwether for providing quarter guidance which it usually exceeded, not only failed to meet its guidance for the Q4 of 2012 but also gave a lower revenue guidance of 5 percent growth for the FY 2013. This was lower than the guidance of 11 to 13 percent projected by the National Association of Software and Services Companies (NASSCOM) for software and services companies for the FY 2013.

The leadership changes at the company met with mixed reactions. Some analysts felt that bringing in an outsider like Kamath who had proven his skills at ICICI Bank would work in favor of Infosys. On the other hand, some investors felt that had the company brought in outsiders for the positions of executive co-chairman and CEO and MD, the stock markets would have reacted positively. Some industry experts felt that the internal restructuring at the company had come at a time when the company was underperforming compared to its peers. Moreover, a challenging macro environment had also led to a drop in the company’s growth.

Despite several problems affecting the company, Infosys said that it had carried out seamless transitions in the past and would continue to do so, considering its depth of leadership.

Early History of Infosys - Next Pages >>

 

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