Why Laxman Narasimhan's appointment differs from other global Indian CEOs

Laxman Narasimhan. Photo: Bloomberg
In the pantheon of Global Indian CEOs (GICEOs), British consumer goods major RB’s (Reckitt Benckiser) recent appointment of PepsiCo’s Chief Commercial Officer Laxman Narasimhan as its global chief executive officer (CEO) is a sharp departure from past practice and history. 

 
The first generation of such CEOs like Rajat Gupta at McKinsey and Rakesh Gangwal at United Airlines and later Indra Nooyi (Pepsi), Arun Sarin (Vodafone), Sundar Pichai (Google) and Satya Nadella (Microsoft) were fully or near total company lifers. They were, the classical insiders, so to say. 

 
But the latest appointment is different: Laxman is a complete outsider. That he will succeed another Indian, incumbent Rakesh Kapoor, who will leave the company at the end of 2019 is also rare. 

 
Says Purvi Sheth, CEO of Shilputsi Consultants, “Generally company outsiders are chosen when there has not been adequate succession planning; when the company is planning a new business strategy; or a completely fresh perspective in leadership and vision is needed towards disruption or due to the enormity of the task ahead.”  

 
What then tipped the scales in this instance? Three unique dimensions of Laxman’s leadership and career evened the odds. 

 
BEYOND DIVERSITY: Reckitt Benckiser poached Narasimhan, passing over 59 internal and external candidates in part because he is a consumer industry veteran with a strong record of rekindling growth in both mature and emerging markets.

Chris Sinclair, Reckitt’s chairman, said: “The board unanimously thought Laxman was ideally suited. At Pepsi, he has proven he can operate at scale, while at McKinsey he dealt with a lot of transformations and M&A, which are vital to us as we look at our next chapter. But mostly he is steeped in the consumer sector and that’s the dimension that really counts.”

 
HR consulting firm Cerebrus Consultants’ CEO Anita Ramachandran believes that in selecting Laxman, Reckitt made a brand new statement in CEO selection. In the past, when GICEOs were selected, priority was often given to aspects like diversity (from other global or emerging regions). Today, Ramachandran believes that Laxman’s appointment is a reflection of true competency trumping other factors. It is believed that Laxman is an outstanding leader who brings wide experience across the entire consumer goods sector.  

 
His track record speaks volumes: prior to his current role, Laxman was Chief Executive Officer of PepsiCo’s Latin America, Europe and Sub-Saharan Africa operations, where he ran the Company's food and beverage businesses across the regions. Managing £14.5 billion in revenues across 100 countries and 125,000 employees, he grew both revenue and earnings at accelerated industry leading rates over the past two years. He achieved this by making the business more consumer-centric, bringing more digital capability, strengthening leadership teams and driving productivity. Adds Sheth of Shilputsi, “Increasingly, global CEOs can come from anywhere in the world. It is the business priority that matters.”

 
TRANSFORMATIONAL LEADER: Company insiders are often status-quoists. In selecting an outsider like Laxman, Reckitt gave out the message that it searched for a leader who would anything but maintain the status-quo. He arrives at a delicate time in Reckitt as it tries to revive sales growth at its health division — its most profitable arm, accounting for nearly two-thirds of group revenue. But the division fell short of its targets by 2 per cent and the company requires a leader who can spearhead the turnaround efforts. That is why Laxman will “directly lead” the health unit apart from being the CEO of the firm overall. The company has been laying the groundwork to separate its two main businesses — health on one side, and hygiene and household products on the other — in a project dubbed internally as RB 2.0. 

 
There is another element. Incumbent Rakesh Kapoor’s first two years of the five years saw robust growth. The latter three years were challenging with question marks over the successful development of a pipeline of products. In this backdrop, what RB requires is a transformational and disruptive leader to revive the fortunes of the company. 

 
Laxman fits the bill very well. Among his rich experience is in leading complex operational businesses and inspiring teams across developed and emerging markets to achieve market-leading performance.

 
THE INDIA FACTOR: As for many multinational companies, Asia and India, have come to play a significant role in their global operations. It is no different for RB with India operations scaling in global revenues and profits. This includes the entire sub-continent with Bangladesh, for example, emerging as an important market. With slowdown in Europe having happened before that in India, in recent years, there were efforts to ramp up India operations so that it could help balance the overall performance. Says Professor Rahul Mishra of IILM Institute of Higher Education, “Those who have served in India bring a completely different perspective at the global headquarters especially with regard to pricing strategies and product portfolios. This is important to Reckitt at this point of time.”

 
Additionally, unlike the GICEOs of the past generation, Laxman represents a new generation of such leaders who have spent significant time in India. Says Ramachandran, “Others like Indra Nooyi, Arun Sarin and Satya Nadella essentially spent all of their working careers overseas. Laxman has had decades of career divided equally between India and overseas markets. This may be a way of the future for GICEOs.” 

 
Professor Mishra adds that best-selling author Jim Collins in his book Good to Great argues that in succession planning it is best to look for company insiders. But in this case, while bring in an outsider like Laxman into Reckitt, there is a risk, but it is a risk well taken because most probably it will pay out since he has demonstrated transformational leadership experiences. 
Laxman Narasimhan missed out on the top job at PepsiCo. In hindsight, it seemed to have been a blessing in disguise.