‘It’s Important To Have A Succession Plan In Place’
Banks in India have not taken up the issue of HR and succession planning as seriously as they should have, says Ashvin Parekh, managing partner at consultancy firm APAS. Parekh tells Mahua Venkatesh how the exercise of talent nurturing and training must be given more thrust, especially as the going gets tough for the Indian banking industry.
Edited excerpts:
Do you think the Indian banking industry is not grooming next-generation leaders?
There are next-generation leaders in the Indian banking industry. They have not been recognised by the industry yet, but you come across them in industry events or in media interactions. They are becoming rare though as the industry is not compensating talent as it did a decade ago. Also, the risks are out-weighing the rewards. Expectations from the leaders are far more exacting today. Public sector banks (PSB) have more challenges. There is an acute dearth of leadership, and obsolescence and fear of decision making are taking toll on whatever is there. PSBs spend little resource on grooming and training.
Is there a lack of training and grooming in banks?
I agree the private sector banks are not as active as required in grooming their next-gen leaders. This could be because of other micro issues. Since the global finance crisis, there are far bigger phantoms alongwith regulatory requirements. For public sector banking, there is an ever increasing activism on part of shareholders. The regulator’s decision in 2015 to allow leaders to enjoy a longer term of five years has also created a sense of vacuum in leadership.
How dangerous is this?
The focus on training is perhaps missing. This lack of orientation and development training causes more harm to the industry. The banking business is changing rapidly and the lack of orientation is more damaging. The new business risks are moving the banks to examine so many weaknesses that were inherent to processes and technology. The industry is in need of different sets of skills with multiple capability. With capital and resources gradually drying up, the industry may perhaps be at its weakest compared to past several decades.
Is succession planning missing in most private sector banks such as ICICI and Axis after RBI raised the retirement age of top bosses to 70?
The boards of many private banks normally may not announce their succession plans for leadership roles, they can have them though. I suppose as long as there is a proper plan, well-debated and discussed, it’s fine. It may not be announced. But then there is much more to it than just the plan. Does the board plan on a regular basis and involve the concerned personnel in decision making and delegate some key and critical responsibilities? These are the moot questions that need to be answered.
How important is succession planning even if the chief has an extended tenure?
Well, with a volatile external environment and dynamism internally, it’s important to have a well-articulated plan all the while.
What are the specific problems in PSBs?
There are several problems. A weak order of governance, shareholders’ reluctance to give away control on management, and the apparent lack of coordination between policy makers and the regulator, among others.
Do you think norms should be aligned for public and private banks? For example, RBI allows a private bank CEO to stay on till 70 years of age while for PSBs the age limit is different.
They should be aligned. More significantly, the term for the leadership should be at least five years or more.
