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Case Study for Practice Succession Planning

The die was cast. Prem Nath Divan, executive chairman of Vertigo, the country’s largest engineering project organisation, decided to switch tracks for a career in academics. Divan was still six years short of the company’s retirement age of 65. His premature exit was bound to create a flutter at the Vertigo board. Having joined Vertigo as a management trainee soon after college, he had gradually risen through the hierarchy to take a board position as the marketing director of the firm, he had become the President five years later and the youngest chairman of the company at 45. But, by the time he was 50, the whiz kid had acquired a larger than life image of a role model for young managers and a statesman who symbolised the best and brightest face of Indian management. On his wife’s suggestion that it would be wise to discuss the move with one of his trusted colleagues before making a formal announcement of his intention to seek premature retirement. Divan called on Ramcharan Saxena, a solicitor who has been on the Vertigo board for over a decade. Saxena was surprised at Divan’s plan. But he was unfazed. “If that is what you want to do for the rest of your life, we can only wish you well”, he told him. “The board will miss you. But the business should get down to the task of choosing successor. The sooner it is done, the better”. “I think the choice is quite obvious,” said Divan, “Ranjan Warrior. He is good and ...” Divan was taken aback to see Saxena’s grim face. “You don’t have anything against him, do you?” he asked him. “No, no,” said Saxena, “He is good. A financial strategist and a visionary. His conceptual skills have served the company well. But he has always had staff role with no line experience. What we need is someone from operations. Like Richard Crasta”. “Richard knows things inside out alright,” said Divan, “But he is just a doer. No fire in the belly. Vertigo needs someone who understands the value of power and knows how to use it. Like me. Like Ranjan”. “That is just the problem”, said Saxena. “Prem, let me tell you something. Ranjan is a man in your own image. Everyone knowns that he is your protégé. And protégés are never popular. He has generated a lot of resentment among senior Vertigo executives and there would be a revolt if he were to succeed you. An exodus is something we can’t afford to have on our hands. We should think of someone else in the interest of stability of top management”. Divan could not believe what he heard. He had always himself on his hands-on style thought he had his ear to the ground. “How could I lose touch?” he wondered, somewhat shaken. “When you are the boss, people accept your authority without question,” continued Saxena. “In any case, you have been successful at Vertigo and it is difficult to argue with success. But the moment you announce your intention to leave, the aura begins to fade away. And in deciding on your successor, the board will seek your opinion, with due regard to your judgement. The board members must do what in their view is right for the company. Having said that, may I also mention that if there is a showdown in the boardroom, you could always choose to stay on? We would like it. Or we could bring in an outsider”. “I have finalised my career plans and there is no question of staying on beyond six months from now,” said Divan. “The board is scheduled to meet next month. Let us shelve the matter till then. In the meantime, I rely on you, Ram, to keep this discussion between the two of us”. “Of course, yes,” said Saxena. On his way home, Divan thought about the matter in detail. Bringing an outsider would undo all his life’s work at Vertigo. There were considerations like culture and compatibility, which were paramount. The chairman had to be an inside man. “Richard lacks stature,” Divan said to himself. “Ranjan is the one I have been grooming, but heavens, the flip side of it all had missed me completely. There is no way I can allow a split at the top just before I quit. I must leave on a high note in my own interest. I must find a way out of the imminent mess”. Question 1. What should Divan do?

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