Top-level exits clouding Infosys' turnaround, say brokerages

Aug 30 2013, 08:37 IST
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Three top-level management exits at Infosys in a span of just 50 days have led to some doubts regarding the turnaround plan charted by NR Narayana Murthy. Three top-level management exits at Infosys in a span of just 50 days have led to some doubts regarding the turnaround plan charted by NR Narayana Murthy.
SummaryThree top-level management exits has led to doubts regarding turnaround plan charted by Murthy.

PP Thimmaya

Three top-level management exits at Infosys — India's second-largest IT services exporter — in a span of just 50 days have led to some doubts regarding the turnaround plan charted by NR Narayana Murthy, some brokerage houses stated on Thursday.

Ever since Murthy’s comeback, Infosys has witnessed numerous changes, including reorganisation of portfolios, which has resulted in departures of some key employees. The resignation of Ashok Vemuri, board member and head of the company’s Americas business, was preceded by the exit of Sudhir Chaturvedi, former head of banking and financial services in the US and Basab Pradhan, ex-global head, sales and marketing.

“The exit of two key senior managers in the last week has somewhat spiked Murthy’s efforts at turning Infosys around. With the company already challenged on multiple counts (employee morale, margin turnaround, revenue revival), this was an avoidable battle-front and will once again raise questions on Infosys’ leadership planning,” said Nimish Joshi and Rohit Kadam of CLSA, a brokerage house, in a report.

Another brokerage house Motilal Oswal in its report said, “The unabated exit of senior management at Infosys is increasingly a cause for concern. Three senior exits follow a large number of top-level exits that took place before NRN took over. It is now assuming proportions to deem the trend systemic in nature and may also be driving an even higher number of middle management exits.”

More changes are in the offing, some say. Viju George of JP Morgan in his note said, “While change under new executive management of a company results in some senior management flux, we are watching these developments at Infosys carefully. We think that the senior management structure may still not be fully settled/stabilised and could see more changes as Infosys works through its restructuring programme.”

Ever since Murthy took over the operations of Infosys, the big challenge spoken about was leadership capability within the company and the kind of succession planning that would be laid out once the current CEO SD Shibulal’s term ends in 2015.

“A fresh approach to leadership planning is warranted. Murthy’s return as executive chairman suggested that Infosys’ leadership planning clearly didn’t work out as expected. Ashok’s exit has only exacerbated that. We believe Infosys needs to show greater openness to external candidates for senior roles, which it has been highly resistant to,” said the CLSA report while, adding, “External candidates could get a much-needed fresh perspective on-board while preventing complacency among existing management.”

The creation of chairman's office at Infosys has also led to some troubling questions on how this would be in conflict with the existing executive council set up within the company. “Some questions bear answering such as — How does the executive council (the highest-ranked executive body at Infosys) co-exist without conflict with the newly created chairman’s office? Does the latter interfere with the former in any way? Are the powers, duties and responsibilities well demarcated between the two bodies or is there a risk of the existence of a parallel powerful body through the chairman’s office?” JP Morgan's report has questioned.

However, the biggest question is the role being played by Murthy's son Rohan Murty. Appointed as executive assistant, there are reports that he could be elevated to a higher role, such as vice-president, leading to angst within the company. JP Morgan said, “Typically, VPs have 15 years’+ of experience. To have the founder's son join without notable operating experience at the level of VP may not be viewed favourably by some.”

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