CASE STUDY ON SUCCESSION PLANNING AT RANBAXY Formation of the Company: Ranbaxy Laboratories Limited was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. The name Ranbaxy is a combination of the names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir and Gurbax. After Bhai Mohan Singh’s son Parvinder Singh joined the company in 1967, the company saw an increase in scale. Summary of the Case Study: Ranbaxy ranks No. 1with a 2007 turnover of Rs 4,198. 96 crore (Rs 41. 89 billion) by sales, Ranbaxy is the largest pharmaceutical company in India. The case discusses about the CEO succession planning controversy at Ranbaxy Laboratories Limited, one of India’s largest pharmaceutical company. The founder of Ranbaxy Mr. Bhai Mohan Singh established this company in 1961. By 1967 his son Dr. Parvinder Singh (Dr. Singh) joined the company and worked hard to take the company to great heights, by 1982 he became the Managing Director of his company. Since the retirement of Mr. Bhai Mohan Singh in 1993, his son (Dr. Singh) took full control of the company’s business affairs.
Dr. Singh adopted highly professional work standards and was well known for his commitment to corporate governance and corporate ethics. Although it was a family owned business, Ranbaxy was managed and run by professional managers. He wanted to internationalise Ranbaxy in order to transform it into a multinational pharma giant, to accomplish this task, he carefully chose a team of professionals. He retired in the year 1998 after he was been detected to be suffering from cancer. At his day of retirement, he chose Devinder Singh Brar (D. S. Brar) as the MD and CEO of the company. Dr.
Singh wanted his sons (Malvinder Singh and Shivinder Singh) to earn their positions through hard work and merit to enter their company. Devinder Singh Brar (Brar) had joined Ranbaxy in 1977 as a business development manager. A thorough professional and hard worker, he soon rose through the company’s ranks to become one of Dr Singh’s most important and trusted men. Dr Singh had the overreaching vision for his company; he reportedly relied on Brar’s knowledge and professionalism to implement it. In the early 1990s, differences cropped up between Dr Singh and Bhai Mohan Singh over the growth route the former was charting for the company.
Dr Singh wanted to take the risk of investing huge amounts into basic R and in expanding operations to other countries. Brar supported Dr Singh’s vision of internationalising the company by setting up operations in various countries like China, US, Ireland, and others in Europe. In the late 1990s, Brar chalked out a strategy to shift half the company’s business to the US, a decision which was staunchly opposed by members of the Singh family. Questions: 1) Was Brar’s decision to step down as the CEO a forced one or a personal choice? When Brar took over as Ranbaxy’s MD and CEO, the company did not have any family representation on the board.
It was a company managed by professionals. His leadership and managerial skills were responsible for the company’s excellent performance in both the domestic and the international markets. In 2002, Ranbaxy was one of the fastest growing pharmaceutical companies in the US and was very close to achieving the $1 billion revenue mark in 2004. However, there were other analysts who believed that Brar’s resignation would not affect the company’s performance. This was because he had laid down a well-crafted vision (Garuda Vision) for the company and the strategies to execute that vision had already been put in place.
In the given case study it clearly states that there has been a big misunderstanding between Brar and the promoter (Bhai Mohan Singh) over Dr. Singh’s vision of shifting half the company over to US, this decision was strongly opposed by Bhai Mohan Singh. Regardless of this opposition, Brar went ahead with Dr. Singh’s plan and made the company to emerge in the top level in the international market globally. Therefore, his decision to step down as the CEO is both a forced one and a personal choice. The forced one is not shown directly but it is indirectly indicated by Bhai Mohan Singh which led Brar to step down on his own (personal choice).
Below is a paragraph to prove that Brar’s decision was both a forced one and a personal choice. Commenting on the conflicting views in the media regarding this issue, an analyst remarked, “We feel that this slight aberration is mainly because of the sentimental issues involved. ” According to Business Today Magazine dated July 1999, for six years, Bhai Mohan Singh has harboured a major grouse; he attributes the fallout with his son to certain ”elements” in the company. ”I realise that some people in Ranbaxy influenced his (Parvinder’s) mind,” he says, while refusing to divulge their identities.
Therefore, the patriarch is apprehensive that history might be repeated. Two other things bother Bhai Mohan Singh. How would Brar & Co. decide to induct Malvinder without grooming him and giving him a chance to prove himself in a responsible position? He warns: ”If things go wrong, I will intervene. ” And what will happen to Ranbaxy once Brar retires by 2004? In an interview to BT last year, Brar, 46, said: ”I am going to give up all the executive powers when I turn 51 years. ” Other possible reasons for Brar to step down: He might be unwilling to continue the role within the company, because of the disinterest shown and the dispute between Bhai Mohan Singh and him. ?He might indicate the conclusion of a contract or time – limited project which was Dr. Singh’s vision of internationalising the company and also set the company for a bigger goal of reaching $1 billion in sales by 2004 (Dr. Singh’s Vision) and Brar planned it out strategically and successfully. Brar helped the company to emerge successfully to achieve Dr. Singh’s vision; by 2002 Ranbaxy’s sales turnover was Rs. 39. 4 billion.
In December 2003, Ranbaxy’s consolidated revenues crossed Rs. 44 billion ($960 million). Brar comfortably lead the company towards accomplishing its goal of earning $1 billion in revenues by 2004. ?In the case study it indicates clearly that he wants to look at other opportunities. He said “Having fulfilled my role in the company, I would like to devote my time to other pursuits in the next 10-15 years of my working life” Therefore, Brar’s decision to step down was both forced shown indirectly and his personal choice. 2)Between Tempest and Malvinder who will be a better successor at Ranbaxy and why?