Gaps in succession planning leading to dearth of internal talent pool for top job

 

Mumbai: Indian chief executive officers and managing directors in India can expect a 10% salary hike in 2014, according to a report by global management consultancy, Hay Group. The annual Top Executive Compensation Report 2013-14 said that median salary for the MD / CEO expected to increase by 10 cent in 2014, up from 9% last year.
The report said that the CEO’s top team is also expecting a double-digit pay rise of 10.4%. It added that a large part of CEO compensation mix in India skewed towards guaranteed pay. The firm in its report also said that gaps in succession planning are leading to dearth of internal talent pool for the top job.

 

Sridhar Ganesan, Country Head for Hay Group India said, “This year, we see a return to double-digit pay increases for CEOs and their top teams, after a dip last year. Despite a very conservative economic outlook, organizations believe that this year’s general elections will give a spurt to their business prospects.”

 

The study found that CEO salaries are 2.9 times those of Business Core roles, and 2.8 times those of Business Enabler roles. Further, it said that that CEOs in India are earning 78 times the salary of an entry-level professional, a ratio that has consistently been on the rise. Contiguous to this is the trend of companies preferring to recruit external CEOs rather than hiring internally from the senior management pool.

 

Sridhar explained that external recruitment of CEOs has grown in both number and intensity. He informed that spotlight falls on the need for robustness in the senior team’s succession management processes, to make the internal talent pool relevant for leadership succession.

 

With respect to the CEO compensation mix, the study said that Indian CEO pay lags behind in its correlation to performance, with a large part skewed towards guaranteed pay. The mature markets, such as USA and Europe, lead the way, in terms of a greater focus on alignment of CEO pay to business performance and shareholders. Hence, total remuneration is heavily biased towards variable pay in the form of long-term incentives and short-term incentives.

 

Hay Group’s Top Executive Compensation Report 2013-2014 aims to provide an analysis of compensation practices for top executives in Indian organizations. This year’s report features insights based on the analysis of 2,524 jobs across 176 organizations. All information analyzed is of December 1, 2013.

 

Business Standard, 28 January 2014
Source: IBEF
Disclaimer: This information has been collected through secondary research and NICCT is not responsible for any errors in the same.