Posted by: John Elliott | June 22, 2007

Family succession and bonding, Infosys style

Is Infosys, one of India’s top three IT giants, really a family company, controlled not by blood relations but by the bonding of five of its seven founders who still work there, own 16.5% of its stock, and are taking turns running the show?

The mischievous thought was put to me by an executive in another more obviously family-controlled IT major, because S. Gopalakrishnan, the COO, has taken over this afternoon as CEO from Nandan Nilekani, who has moved slightly upstairs as executive chairman alongside Narayana Murthy, the first CEO and now non-executive chairman and chief mentor.

That leaves two other founder-directors – S.D. Shibulal, who has stepped up today as COO, and K. Dinesh – waiting in the wings. Shibulal looks like a shoe-in when Gopalakrishnan (always known as Kris) decides to join the elders – though they are all much of an age, between 52 and 55, apart from Murthy who is 60. But no one, of course, is saying Shibulal is next in line, and all stress that the decisions are based on ability and potential.

“We have said many times we are a professionally managed company,” says Nilekani, adding that leadership at Infosys has been exercised, since it was founded in 1981 in Murthy’s Pune home, on the basis of “being first among equals.” Gopalakrishnan had been chosen “not on the basis of the job being passed to another founder but as the best person for the job”.

No-one quite believes that of course – Gopalakrishnan was the only candidate considered for the promotion when the Infosys board decided late last summer that it needed an executive chairman, and Nilekani said that he wanted to broaden his beat to focus on big client relationships, large-scale initiatives, and other client work.

A nominations committee of non-executive directors, headed by Claude Smadja, a former managing director of the World Economic Forum who runs an advisory firm, then took three months to confirm Gopalakrishnan’s appointment. Nilekani will now be a very executive chairman, so it remains to be seen how effectively Gopalakrishnan, who is a much lower profile character than either of his predecessors, emerges alongside him as the public face of Infosys.

In addition to being COO, Gopalakrishnan has been Infosys’s president and a joint managing director since 2006. Known for his technological strengths, he has been responsible for customer services, technology, investments and acquisitions, and heads the Infosys consulting activities.

On the broader blood relations issue Nilekani says that “family members of the founders can’t work here.” Murthy told me that neither his son nor daughter, now both in their 20s, will join the company.

That must be a relief, given the dynasty that is beginning to emerge at Wipro, one of India’s other top IT giants. Azim Premji, the 62-year old chairman, controls over 80% of the stock and his 30-year old son, Rishad, is joining at the end of this month from the London consultancy office of Bain & Co, to work initially on financial services.

Family-controlled companies have dominated India’s business scene for generations and, though some of the top names have changed over the years, they remain a major force, controlling more than 15 of the top 20 businesses (excluding banks and public sector corporations).

Many of these family groups become embroiled in serious rifts and splits, most recently Reliance Industries (the Ambani brothers) and the Bajaj scooter-to-sugar group.

But the close-knit team of people at the top of Infosys seem to share their roles in the $3 billion company with no such animosity, jealousies, or infighting – despite their varying stakes that range (curiously in the order of the succession so far) from Murthy’s family with 5%, to the Nilekanis with 3.46%, the Gopalakrishnans with 3.36%, Dineshs with 2.51% and Shibulals with 2.21%.

As he walked into the annual shareholders’ meeting this afternoon where the changeover was approved, I asked Nilekani (over the phone) how they all manage to get on so well – or were there fights that their personal public relations skills managed to bury.

“No,” he said laughing, “we all have the same values…. we are all from the same simple middle class backgrounds…. and we have enormous bonding.” His last line capped it all: “The important thing as an entrepreneur is to choose partners you can grow old with.”


Responses

  1. They have done many firsts in Indian Corporate world viz. stepping aside voluntarily gracefully even though being very successful and appearing indespensable at THE moment. Though all corporate decisions are very Considered, at times they are personal exeriance and pre-judice of the person concerned. Thus for an ongoing concern a moribund or predictable atmosphere stifles creativity. The change in helmsman just breathes in a fresh air,creates a tumultous situation, while all the X’s are still avilable for consultation/guidance

  2. Success of Infosys now on will depend on how well new CEO manages regional politics of his own State managers vs rest that has cost many excellent careers..and is so well predominant in infosys

  3. Very interesting to read this wonderful piece of insight from Infosys. No wonder they grwo from strength to strength. Just one concern though, what will be Murthy’s role going forward? Chief Mentor only?

  4. No one expects that all is hunky dory at Infosys, but I guess they put the company above themselves when they take decisions, which is the reason why they stick together through thick and thin.

    On a slightly different note, I have been a reader of this column for sometime now and am waiting for the day you get to write on the Tata group, arguably India’s best group.


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