Ensuring A Smooth Transition Of Leadership At Patni
22 May 2009, 0737 hrs IST, Dibeyendu Ganguly, ET Bureau
It was the Indian IT industry’s biggest-ever man hunt. A global search for a CEO for one of the country’s oldest software companies, who would replace the founding doyen. The hunt lasted four years and targeted the IT industry’s top executives world-wide , some of whom were pulled in, then let go.
Then the process was derailed by the possibility of a change in ownership, with a section of the owners preparing to sell their stake. But that’s all over now and Patni Computer Systems (PCS) finally has a new CEO in the 54 year-old Australian expatriate Jeya Kumar, Sathya Sai Baba devotee and former CEO of MphasiS.
For the 66 year old Narendra Patni, who is now designated non-executive chairman, the denouement comes as a relief, even if it marks the beginning of the end of his long reign in the company he founded fresh out of MIT and Sloan Business School. The long search for a CEO, mandated by the company’s board, has been fairly painful for the company’s top management, with many falling by the wayside.
Patni appointed a CEO in 2006, with the idea of grooming him for the CEO position, but things didn’t go according to plan and he resigned two years later. Then there was the CEO of Cymbal Corporation, USA, acquired by PCS in 2004, who was also in the running but failed to make the grade.
And finally there was Dutch expatriate Loek van den Boog, appointed as executive director in charge of operations as an interim measure, who has now handed over responsibilities to the new CEO and become nonexecutive director on the board.
“It’s one of our failings that we were not able to generate a successor internally,” says Patni. “But I’m delighted that the process has come to an end. We needed someone with international experience and we found the right combination in Jeya, with his 14 years at Sun. Now his mandate is to revive and rejuvenate the company.”
In Kumar, PCS has an ideal combination of a CEO with an Indian face, but very global experience . An MBA from Australia’s Curtin University, he had worked in Singapore and Japan before being promoted to Sun’s headquarters in the USA and put in charge of its $5 billion software services business.
When PCS began head-hunting him last year, Kumar had moved to India for the first time, as CEO of MphasiS in Bangalore. “I heard from friends and associates that PCS was making enquiries about me,” he says with a laugh. “By the time they approached me, they had spoken to everyone but my mother-in-law.”
Bored with MphasiS, which had become a captive unit of Hewlett Packard after its merger, Kumar was keen on the Patni offer — but had to convince his wife, Philo. “We had moved four times in six years, from one end of the globe to the other and it was hard for her,” he says. “I think it was Naren’s wife Poonam who finally convinced her over dinner that the move to Mumbai would work out fine.”
Since he joined three months ago, Patni has introduced Kumar to all major customers and to the rank and file of PCS through a series of 16 town-hall meetings. Kumar has also made it a point to attend ceremonies to facilitate employees who have spent 25 years with the company, which occur more regularly at PCS than one might imagine.
“I think our employees have accepted the change very well,” says Patni. “They understand that we need to change. Our structures have become outdated and inefficient over the years. Jeya needs to transform the company.”
So is the charismatic chairman finally ready to withdraw and leave the running of the company to his new CEO? Patni remains wonderfully ambiguous on this point. “I’m technically the non-executive chairman according to clause 49, but I intend to remain fully participative in the company,” he says breezily.
Given that one of the objectives of Kumar’s appointment is to separate ownership from management at PCS, Patni’s statement might be expected to cause the new CEO some heartburn. But Kumar is ready for a little ambiguity at this stage of the transition . “Naren loves the company, it’s in his blood, so he wants to help in any way he can. But he is the non-executive chairman and the role is clearly defined,” he says.
One role that’s not as clearly defined is that of Anirudh Patni. A graduate of MIT and Wharton, with work experience at McKinsey & Co. Narendra Patni’s 32 year-old son is a senior vice president at PCS. Is Kumar expected to groom him as a successor as Brian Tempest did with Malvinder Singh at Ranbaxy?
“I don’t know too much about Ranbaxy but I like the example of Wipro, where Premji has kept his son on the sidelines ,” says Patni. “Nobody should be anointed crown prince. It’s very discouraging for the professionals.” But then he adds: “But I’m a strong believer in owner-management . If it works out, it can be very good for the company.”
Kumar, on the other hand, is more categorical when he says, “Anirudh will be evaluated on the same performance matrix as everyone else. The process will be very transparent and available for all to see on the company web-site. It should make no difference that he’s part of the promoter family.”
Narendra Patni and his brothers Gajendra and Ashok hold an equal stake amounting to 49% in PCS, with General Atlantic holding 18% and 33% with the public. The other Patni brothers had made a move to sell their stakes two years ago, when the PCS scrip was ruling at an all time high.
This had hastened the search for a CEO who would separate management and ownership, but made the process that much more difficult since few were interested in joining a company that might soon change hands. Today, the scrip is down to a level close to the company’s cash reserves and there’s no more talk of a stake sale.
Kumar’s focus is to now on improving PCS’ valuations with a clear competitive strategy in the rapidly evolving market for IT services. “Right now, I’m building an A-team from within the company and outside,” he says. “Fortunately, people are available like never before.”
Filed under: Cymbal Corporation, General Atlantic, Indian Institute of Technology, Indian IT, Jeya Kumar, Narendra Patni, Patni Computer Systems, Sai Baba, sathya sai baba, Software Companies | Tagged: Bangalore, CEO, India, Kumar, Management, MIT, MphasiS, Patni, PCS, Software, Strategy, Technology, Valuation, Wharton |