Month: September 2010

Inheritors in public limited companies

In a recent interview to Business Standard, Kishore Biyani, the Founder and CEO of Future Group made a very controversial quote

“I don’t believe in the hypocrisy of asking family members to join at a junior level. The CEOs would run the business and be accountable; family members would set broad guidelines and manage relationships.”

There is no denying that several business families in India induct the sons and daughters at a junior level initially in their family owned company. Then they make accelerated progress through the ranks of the organisation, before being appointed on the board and then eventually becoming the successor . The Bajaj sons, Ranbaxy inheritors, Birla inheritors, all have gone through this route.

The hypocrisy of this route can well be seen in the recent example of Rishad Premji, son of Wipro Chairman , Azim Premji. In a 2007 article in Rediff,

The elder of Wipro  Chairman Azim Premji’s  two sons, Rishad studied at the Harvard Busines School and graduated from Wesleyan University, Connecticut. With a penchant for software and music, Rishad sure has learnt one thing from his father, and that is to maintain a low profile.

Rishad, who is currently with Bain and Co, had a brief stint with GE before doing his MBA. His move now to join his father’s empire is interesting considering the fact that Azim Premji once said he did not want Wipro to become a family business.

Sources in Wipro maintain that Rishad will have to work his way through to the top. It is said that Rishad was keen on joining Wipro. Like everyone else, he too had to send in his resume and as luck would have it, he managed to find a placement.

Rishad will join the 70,000-employee-strong software-led conglomerate, which also makes soaps and bulbs, as a business finance solutions manager. It is also learnt that he will report to its president, Girish Paranjpe.

In September 2o10, The Hindu Business Line reports :

Mr Rishad Premji, son of Wipro Chairman Mr Azim Premji, has been appointed Chief Strategy Officer of IT Business, Wipro Technologies. In a statement, Mr Saurabh Govil, Senior Vice-President – Human Resources, Wipro Technologies, said Mr Rishad Premji was till recently General Manager – Treasury & Investor Relations and brings with him a diversified experience of Consulting, Finance, Treasury and Operations. In this role, Mr Rishad will report to the joint CEO’s, IT Business.

Within three years, Rishad has moved from an entry level position to become a direct report to the CEO of the IT business. This blogger believes at this rate Rishad will be the CEO in another three years. No prizes for guessing why this movement has been so rapid.

 Azim Premji owns 85 % of Wipro and if he feels his son Rishad is his rightful successor nobody can question him. His dilemma, perhaps, is the cloak of professionalism that he wishes Wipro to project. 

Kishore Biyani has no such dilemmas. His daughter Ashni Biyani has joined directly as Director of Future Ideas and his nephew Vivek Biyani has joined as the Director of Home solutions retail.

 The second part of Mr Biyani’s quote is also very interesting where he says “The CEOs would run the business and be accountable; family members would set broad guidelines and manage relationships.” A textbook role of CEO of any company would include setting broad guidelines  and managing relationships, yet Biyani feels CEOs just stop at running the business. In other words, what he really means is Chief Operations Officers ( COO) will be professionals but CEOs and Board members will be family members. Just that, in these title fluffing times, COOs will be called CEOs, without having the role and responsibility.

Now let us look closely at what a rich businessperson running a public limited company can bequeath to his sons and daughters. He has wealth which he has by virtue of the shareholding in his companies. He can sell his holdings in the companies and bequeath the wealth to his inheritors. He can bequeath the shareholding directly to his inheritors, thereby they becoming claimants to  board positions as owners. He can not only bequeath the shareholding, he can also appoint them as successors to the top job, thereby becoming owner-managers. 

A vast majority of Indian family owned public limited companies choose to bequeath their holding as well as appointing them as successor. Contrast this with what Bill Gates is doing.

Bill Gates, one of the world’s richest men, has said that he is not interested in using his billions to launch a dynasty and would not leave his fortune to his children. Gates and his wife Melinda , 44, have three children –Jennifer , 14, Rory, 11, and eight-year-old Phoebe. 

“I knew I didn’t think it was a good idea to give the money to my kids. That wouldn’t be good either for my kids or society. So the question was, ‘Can I find something that had incredible impact?’ I knew I wanted to do that,” Gates was quoted by The Sun as saying.

So far, Gates and his wife, through their foundation, have given away £18 billion which has helped deliver vaccines to more than 250 million children in poor countries. 

If Indian businessmen cannot do what Bill Gates has done, they should go by what Kishore Biyani says and spare us the hypocrisy.
  

 

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Death pangs for the MCA course ?

It is perhaps, the first time that an MCA has risen to the top job in a leading software company. The MD and CEO of Tata Consultancy Services, N.Chandrasekharan is an MCA from REC Trichy ( now, NIT ).  Just when it appeared that the MCA course was getting its due recognition, it appears that there are question marks for its survival.

As per a recent Careers360 article on MCA,  “there are 75,021 seats in 1089 institutions. Andhra Pradesh and Tamil Nadu account for nearly 60 percent of total number of MCA seats in the country.”

The MCA admissions for the year 2010 are nearing completion.  The news from Andhra Pradesh which has the largest number of MCA seats in the country is depressing. Deccan Chronicle  reports that :

As many as 367 of the 660 MCA colleges have applied for “closure” due to poor response from students in the current academic year 2010-11. While a total of 34,451 seats were on offer in the convenor quota during Icet counselling, only 13,104 have been filled. This is of course apart from seats in the management quota.

The vacancy data  from Tamil Nadu is not readily available, but preliminary information gathered indicates, that the picture is not very different either. There are nearly 240 colleges offering MCA courses in TN. The total number of seats for MCA would be in the region of 15,000. As per the counselling schedule put up by a web-site, only 8543 candidates have been called for counselling. Even a candidate scoring  3.00 marks out of 100 is being called for counselling. Assuming that a small percentage of candidates called for counselling, do not show up for counselling, a vacancy of 50 % of seats in Tamil Nadu MCA colleges can be expected.

Why this situation has arisen ? It could be a mix of several factors.

Firstly, Information technology and Computer Science as a career is losing its sheen, thanks to the recession of 2008-09. This is showing up even in choice of disciplines in IIT. For the first time, Electrical Engineering has closed earlier than Computer Science at IIT-Bombay, reports TOI.

Secondly, inspite of MCA being a specialised post-graduate course, focussing on computer applications, it is treated at par with B.Tech in Electronics/Computer Science /IT by most IT services companies for the purposes of recruitment. Given the huge number of seats created in the engineering disciplines, MCAs compete directly for placement with B.Tech graduates.

Thirdly, MCA programme competes with the MBA programme. In AP, the entrance test is common. Many colleges offer both MCA and MBA programmes. Many students prefer MBA over MCA because it is one-year less and more importantly the placement of MBA is not dependent on the fortunes of one industry, namely the IT industry.

Fourthly, MCA is competing with its own under-graduate version the Bachelor of Computer Applications (BCA) course. Now many universities are offering the BCA course.  Good software programmers can get recruited right after their BCA, without waiting three years for an MCA.

Fifthly, for many science graduates, IT companies are offering jobs just after graduation. TCS , Cognizant  and Infosys hire science gradautes. Wipro has gone a step further. It not only offers a job but an opportunity to get an MS in Software Engineering from BITS Pilani through their WASE programme.

Lastly, the ballooning of seats in MCA was a highly opportunistic response from the private educational institutions, not unlike the NIIT/ APTECH. When NASSCOM and the IT industry kept lamenting about the manpower shortage facing the IT industry, many responded by adding an MCA programme. Both engineering colleges as well as MBA colleges started offering MCA courses. They added seats with little thought about faculty or course or infrastructure. Until 2008, when the IT industry was hiring in thousands, this problem was not visible.

The IT companies continue to hire MCAs but only from the top institutes. It is clear from the industry response that even the top institutes in India, whether MCA or engineering do not prepare the students well for a career in the IT industry. TCS is building a huge training campus in Kerala.

Tata Consultancy Services (TCS) has announced that the company is setting up a new learning and development campus in Thiruvananthanpuram (Trivandrum), Kerala. The new campus will house up to 10,000 professionals when fully completed and will offer TCS’ learning curriculum to those who join the company from colleges.

Whereas, there is surplus capacity in private engineering colleges and MCA colleges, the IT industry is creating its own campuses. This is because of the huge gap in quality.

The shakeout was imminent and augurs well for the sector. This will bring a lot of pressure on the colleges which have managed to fill-in their seats to improve quality. Or else, it could be well their turn to close down in future.

As for the MCA aspirants, it should be understood that the MCA course is a specialised course. It prepares the students for a career in building and maintaining software applications. It should be taken up only by those who enjoy software programming and should be only at the good institutes.