Company Outsider: HUL's rare outsider hire signals potential strategic shift

HUL’s current leadership team comprises people like CEO Rohit Jawa who started his career with the company; chief financial officer (CFO) Ritesh Tiwari who joined as a management trainee; and chief people, transformation and sustainability officer B.P. Bidappa who has been with the Unilever group for over three decades. Even Shiva Krishnamurthy, a member of the company’s executive committee and the man who Kohli is replacing, was with HUL for the last 25 years.

Both moves, Kohli’s to HUL and Krishnamurthy’s away from it, have an air of mystery about them. Krishnamurthy was named head of HUL’s foods and refreshment business, the second largest for the company, just last year. At 49, he’s likely to join the ranks of HUL alumni like Sudhir Sithapati, Lina Nair, Gopal Vittal, Ignatius Navil Noronha, Anand Kripalu, and Suresh Narayanan, who have gone on to head other firms. Kohli’s exit from Britannia is more puzzling since he was just two years into his role as CEO of the ₹16,186 crore company, whose growth momentum has slowed over the last two years. Still, Britannia remains an iconic company and to settle for a non-CEO role heading an HUL division with slightly lower sales, seems surprising. But given his age, just around 50, and his successful stints at Coca-Cola and Dominos, he would fancy a shot at the top job once current CEO Jawa, now 58, steps down.

For HUL though, this is an unusual call. The company has been extremely successful by growing on the shoulders of internally promoted talent. Lateral entries, at such senior levels, have been rare.

Its decision opens up the debate about companies staffing leadership positions from within versus hiring from outside.

The best companies typically identify and groom at least two generations of leaders, the first to take on the role the next day if something were to happen to the current CEO and the second, candidates who’ll be ready for the job a decade hence. In the past, HUL has been well-served by having in place potential leaders ready to fill the shoes of departing CEOs. Past CEOs before Jawa including Sanjiv Mehta, Nitin Paranjpe, Harish Manwani, MS Banga, Keki Dadiseth and AS Mathur, were all company veterans.

By throwing Kohli into the mix of potential successors, is HUL signalling a change or at least the need for change?

Companies consider outsiders when they need dramatic change in strategy. That’s on the presumption that bringing outsiders into the top management team can offer fresh perspectives since they are not yet bogged down by internal politics or ingrained company culture. Large, successful companies which have entrenched leadership teams also tend to develop an echo chamber of ideas. An outsider, thus, is needed to challenge the status quo and introduce new ideas and approaches.

Yet, outsiders haven’t always been successful when brought in to head a company. HUL’s parent company Unilever brought in Hein Schumacher from outside (he was CEO of the Dutch dairy cooperative FrieslandCampinaas earlier) in July 2023, but parted ways with him less than two years later. He was replaced by a company veteran and CFO Fernando Fernandez. Yahoo brought in Marissa Mayer from Google with high expectations to turn around the struggling tech company. Despite raising initial optimism, Mayer failed to reverse Yahoo's declining market position. In India, Vishal Sikka was an outsider to Infosys when he came in as CEO in 2013. As the first non-founder CEO in the company's history, it seemed like an inspired choice, but cultural misalignment meant he failed to deliver and quit in four years.

By contrast, Tim Cook who joined Apple from Compaq as Chief Operating Officer (COO) and seamlessly transitioned to CEO after Steve Jobs, is considered one of the most successful transitions from No.2 to CEO. In India though, there are very few examples of external COO hires becoming CEOs. Most such transitions are carefully planned internal movements.

Kohli’s move to HUL, therefore, is an interesting experiment, one that will be keenly watched by other Indian companies, long used to taking their cue on HR strategies from the FMCG giant.