Third Party Oversight

Understanding Governance Risk: How to Respond to Leadership Changes In Your Suppliers’ Executive Team

Written by

A change in management, especially in the executive team, can have significant impacts on the overall operations of an organization. It can signal upcoming changes in strategic direction, new processes and functions, and even a new corporate culture.

For instance, Indian global IT services and solutions provider, L&T Infotech, has had several key changes in its executive team recently. Last week, our Supply Wisdom Alerts reported on Sanjay Jalona’s appointment as CEO & MD of L&T Infotech. Sanjay Jalona previously held the position of Executive Vice President at Infosys, where he served for a period of 15 years and held senior leadership positions across US, Europe and India. Jalona is one in a series of recently hired senior leaders at L&T Infotech to come from a large company. Others include former Infosys executive Chandrasekhar Kakal as COO and Wipro’s Rajat Mathur as the head of the emerging markets segment. These experienced leaders carry with them deep knowledge, experience and understanding of the industry, which are expected to boost the growth and revenue of L&T Infotech.

When these types of leadership changes take place at a supplier organization, it’s important to understand how the new leader’s appointment may impact your relationship with this supplier. Take the time to ask the right questions and incorporate the right monitoring practices within your supplier governance program.

Is it possible that a change of executive in an organization might temporarily disturb regular operations or a client’s business? Typically, this is not the case considering the impeccable delivery standards and operational reputation of these organizations.

However, a change in leadership of a key role of an ongoing globalization initiative could create temporary disturbance to the project, as it might take time for the newly appointed leader to transition into the role and understand the structure, culture and needs of the assignment. As a protective measure, buy-side organizations should incorporate an organizational update from the supplier company and add these updates into the quarterly engagement governance meetings, to know more about the status of the transition of these executives and how it might impact your project. These updates can enable you to make necessary decisions that can help your business with the company. Though an organization has robust governance structure and mechanisms, you should still focus on the governance of the relationship and establishment of strong structure and mechanism for managing service delivery performance and account management.

Also, keep in mind that even when a governance model is strong, corporate practices may be missing at the engagement level. It is important to have a strong understanding of the corporate methodologies, etc. in order to notice if those best practices are being applied on your engagements specifically. If not, take measures to ensure that the account management team resolves any gaps.

Having a clear and comprehensive understanding of the governance structure of your suppliers is critical to the success of your globalization initiatives.