Tough market forces CEO churn in consumer-facing companies.
Kala Vijayaraghavan, Lijee Philip & Deepali Gupta, ET Bureau Dec 26, 2013, 04.00AM IST
MUMBAI: At least 16 high profile CEOs from three consumer facing industries — FMCG, and — switched jobs in 2013. Volatile market conditions, demanding stakeholders and in some cases, poor performance, led to the unprecedented churn at the top, say industry leaders and top officials at executive search firms. "Companies doing badly tend to rope in a new CEO hoping for a turnaround from somebody with a fresh perspective," says RC Bhargava, chairman of Maruti Suzuki. A few changes though were also routine rotations made by multinational companies.
Many other changes in the FMCG sector, executive search firms say, have been almost incestuous, with companies tapping a very limited pool of tried and tested CEO talent. For instance, when Anand Kripalumoved from Mondelez India to Diageo, former Pepsi CEO Manu Anand moved in as Mondelez CEO and former Nokia India MD D Shivakumar filled the vacancy Anand left at Pepsi.
"Three CEO changes can lead to CEO changes in 10 other companies," says Navnit Singh, Managing Director-India Korn/Ferry International. "Usually, only a few known faces are part of this merry go round. We have been advising companies to ensure that there is a strong succession pipeline within." The same trend was also partly visible in the automotive sector, where Maruti Suzuki, Volkswagen, Toyota Kirloskar, Ford,Skoda and Fiat and Chrysler all saw new CEOs this year.
A shallow talent pool, particularly of senior managers, is providing top executives opportunities to move across companies. These external CEO replacements are a reflection of the senior-level gaps in organisations, says RR Nair, ex-HR head of HUL and a CEO coach and advisor. "Organisations also opted for talent with an outsider perspective to drive change at a faster rate," he adds.
Several other consumer-facing companies also had new CEOs — Sanjiv Mehta at HUL, Gopal Vittal at Bharti Airtel, Varun Berry at Britannia, and Vivek Gambhir at Godrej Consumer Products. Nestle India predictably placed another expat Etienne Benet as the MD. He took over from Antonio Helio Waszyk, another expat.
Britannia CEO Berry attributes the big changes to "very tough economic conditions and intense competition that have forced consumer goods companies to fight for a share of meagre growth". For example, Indian subsidiaries of Volkswagen and Toyota Kirloskar have initiated major reshuffles in the top management as the two car makers take fresh guard to tackle the slowdown.
Uncertainty and slow growth which marred the business environment during the past six months to a year could be one reason behind the churn, adds Sunil Goel, MD, GlobalHunt
Mahesh Kodumudi, president and MD of Volkswagen India, has just taken on additional responsibilities at Volkswagen Group after Gerasimos Dorizas, the chief representative of Volkswagen Group India, left citing personal reasons. The changes are coming when the group's mass market brands have seen a decline in sales.
"There is a lot of pressure to generate and sustain revenues. Organisations expect leadership to be innovative," says Global-Hunt's Goel.
Toyota Kirloskar MD Hiroshi Nakagawa is moving back to Japan and is expected to be replaced by Yoshimasa Ishii. And at Maruti Suzuki, the country's largest car maker, Kenichi Ayukawa succeeded Shinzo Nakanishi as the new MD this May. At Ford India, Joginder Singh succeeded Michael Boneham about a year ago. Fiat and Chrysler appointed Nagesh A Basavanhalli as president and managing director.
2013 was a forgettable year for consumerfacing companies, says Sunil K Alagh, chairman of SK Advisors. "There were arrogant innovations and a lack of communication with consumers. New CEOs have to quickly understand consumer needs and work out a refreshing growth strategy," he says.
In the telecom sector, a different set of dynamics was at play, causing CEO-level churn.
Except for Airtel and Jio Infocomm, all other CEO changes in this sector have been through internal promotions as companies deal with regulatory uncertainties and an urgent need to arrest losses.
Russia's Sistema, which operates under the MTS brand, replaced CEO Vsevolod Rozanov with Dmitry Shukov. The change of guard was on account of Rozanov being promoted to group CFO. In Rozanov's words: "I came here because I wanted a challenge. Now, I need a new challenge and Dmitry is here." Yogesh Malik, the India head of Norway-based Telenor's Indian arm, quit only five months after taking charge. Asia head Sigve Brekke is stand-in chief for now.
Most of Aircel's top management quit over the last two years, and stand in chief Kaizad Heerjee, was promoted from COO to CEO after a year's trial and achieving operational breakeven.