The big challenge for leaders is knowing when to quit

Former L&T supremo AM Naik, who finally stepped down as the company’s non-executive chairman in February 2023 at the age of 80. Naik was managing director and chief executive officer of L&T since 1999, and its chairman since 2003.

A recent Mckinsey podcast titled How to transition out of the CEO role, featuring Carolyn Dewar, Blair Epstein and Kurt Strovink, three senior leaders from the firm’s CEO Excellence practice, should be compulsory listening for Indian leaders since it addresses an issue that seems to stump most of them. While the Mckinsey podcast refers only to CEOs of companies, it is applicable to almost anyone at the top of companies, institutions, political parties, organisations and even sports teams.

In India, the more important part of the discussion is about when leaders need to quit, for clearly most leave it too late. A good example of that was the events at the All India Football Federation (AIFF), where the late Priya Ranjan Dasmunsi headed the football body for 20 long years between 1988 and 2008 despite the shambolic state the game found itself in and the sharp decline in the performance of the national team in that period. Only a cardiac arrest came in the way of an even longer stint. His successor, former union minister Praful Patel, served three terms and 12 years as AIFF president, the maximum permitted to a national sports federation (NSF) chief under the sports code. He was equally reluctant to leave in December 2020 when his terms ended and was finally forced out only on the Supreme Court’s intervention.

It is the same story across public sector undertakings and quasi-judicial bodies. Witness the jockeying for extensions that top bureaucrats, heads of intelligence agencies and even principals of colleges engage in for months together. In corporate India of course, it is a given that promoters will cling to their position as chairpersons year after year. Even professionals are not immune to that failing as seen in the case of former L&T supremo AM Naik, who finally stepped down as the company’s non-executive chairman in February 2023 at the age of 80. Naik was managing director and chief executive officer of L&T since 1999, and its chairman since 2003. In Naik’s defence, the company prospered under his watch, so maybe there was justification for his prolonged innings.

The impact of an overstaying leader can be damaging for both the person and the institution. As the podcast states “Making an effective exit from leadership is critical to both the organization’s future and the CEO’s legacy.” Much of the stasis the Left parties in Bengal find themselves in is because its former leader Jyoti Basu dragged his term as chief minister of West Bengal to 23 years, lingering on long after he had lost the ability to guide the state meaningfully. By the time he gave way to his successor Buddhadeb Bhattacharjee, Bengal’s economy had already slumped and there was little he could do to arrest the inevitable decline.

The problem, as Lloyd Blankfein, former CEO of Goldman Sachs, told Mckinsey is that, “when things are tough you can’t leave and when things are great you don’t want to leave.” That’s because most leaders don’t have a clear set of markers in their mind for when they should go. Take the Congress party whose fortunes under the leadership of Rahul Gandhi are at their lowest ebb. When does Gandhi accept that he’s not the right person to lead it any further? Maybe he believes that the 138-year-old party could be headed for extinction without him leaving him no option but to continue in the role.

In the podcast, Mckinsey’s Strovink says, “One signal is when you feel that the world around you is changing at a rate that will tee up a different S-curve, or phase of growth, for which you don’t think you are a natural leader.” Is the aggressive Hindu nationalism that the BJP has been able to ride to great success over the last 10 years that point of inflection?

A generational shift is happening among Indian family businesses with many promoters giving way to a new set of leaders. If they do that at the right time and with care they could make the jobs of their successes easier, leaving their companies in a good place. Failing to do so could pave the way for debilitating power struggles which will invariably impact corporate performance and in turn sully their own legacies.

Ultimately, it is the old cliché, you should go when people ask why and not when.