HDFC Bank: Does the next CEO really need to be a banker?

Finding a CEO for a large organisation has never been an easy task. Finding one for an institution that has been built over decades, with millions of customers, thousands of employees and a reputation that has taken years to establish, makes the challenge even greater. And corporate India appears to be facing this challenge more frequently than before.

In recent weeks, we have seen leadership transitions and succession questions emerge at some of the country's largest organisations. Godrej has already identified an internal successor, while the search for the next leader of Tata Sons continues to attract attention. Now HDFC Bank has entered the conversation with Shashidhar Jagdishan deciding to retire as MD & CEO and not seek reappointment.

Every such departure immediately raises the inevitable question: Who should take over?

Traditionally, the answer would be fairly predictable. The search would begin among senior bankers, perhaps those in their late 40s or 50s, with decades of experience in banking, a strong understanding of regulation and an established relationship with the financial system. But perhaps it is time to ask whether that is still the only model of leadership that large institutions need.

Does the CEO Have to Know Everything About Banking?

Take HDFC Bank. The bank already has a formidable franchise. It has a large and loyal customer base, deep relationships with corporate clients, sophisticated technology platforms, experienced manpower and a well-established hierarchy. It is not an organisation waiting for someone to come in and build it.

The next CEO will inherit a highly evolved institution. The challenge will be to protect what has been built, strengthen it further and prepare the bank for the next phase of growth.

That raises an interesting question: Does the CEO necessarily have to be the person who knows the most about banking?

The answer may increasingly be no.

The role of the CEO in a large organisation has changed considerably. He or she cannot possibly be the expert on every aspect of the business. There are specialists for credit, risk, treasury, technology, compliance, legal, retail banking and corporate banking. The CEO's real responsibility is to bring all these capabilities together and ensure that the organisation moves in one direction.

The CEO as the Great Integrator

The CEO's role today is increasingly about managing relationships, people and competing priorities. In a bank, this means maintaining a constructive relationship with the Ministry of Finance and RBI, understanding the concerns of shareholders and investors, engaging with the institution's largest customers, giving direction to technology and core teams and, above all, creating an environment in which people can take decisions with confidence.

In my personal view,  the strongest CEOs are not necessarily those who are possessive about their power or position. They are the ones who recognise that their job is to build a great institution rather than make themselves indispensable to it.

They create strong teams, empower people and give capable executives the freedom to take decisions in the best interests of the organisation. When that happens, something remarkable follows: successors begin to emerge even before the No. 1 is ready to leave.

That, perhaps, is one of the true measures of a CEO's success.

Why Not Look at a Younger Generation?

This is where the conversation about younger leadership becomes interesting.

Perhaps the time has come for boards to look beyond the conventional pool of senior bankers and consider younger leaders with strong administrative, technological and managerial capabilities. Even the idea of considering someone from the Gen Z generation, while provocative, is worth debating.

The immediate reaction would naturally be: can someone so young possibly run a bank as large as HDFC Bank?

But perhaps that is the wrong question.

The better question is: What exactly do we expect the CEO to do?

If the expectation is that the CEO should personally understand every banking product, every regulatory provision, every technology architecture and every operational detail, then obviously experience becomes indispensable. But if the expectation is that the CEO should provide leadership, exercise sound judgment, build trust, manage stakeholders and bring together the best minds in the organisation, then the equation changes.

A young CEO would not need to know everything. He or she would need to know who knows what — and how to bring that knowledge together.

Technology Is Changing the Value of Experience

Banking is also changing at a speed that would have been difficult to imagine a generation ago.

Technology has already transformed the way banks operate, and artificial intelligence is now accelerating that transformation. Knowledge that once took years to accumulate is increasingly available at the click of a button. Acts, regulations, RBI circulars, guidelines, compliance requirements and case law can be accessed and analysed almost instantaneously.

A relatively junior employee can today access information that previously required years of experience, a large library and perhaps a team of specialists.

This does not make experience irrelevant. Experience provides context, judgment and the ability to understand consequences. But technology is changing the premium we place on merely possessing information.

The technology team can understand technology. The legal team can understand the law. The risk team can understand risk. The credit team can understand credit.

The CEO's job is to understand how all these pieces fit together.

But There Is One Quality AI Cannot Replace

There is, however, one quality that technology cannot manufacture — integrity.

A bank ultimately runs on trust. Customers trust it with their money. Employees trust its leadership. Regulators trust its governance. Investors trust its disclosures and decisions.

A CEO can be young or old. He or she can come from banking, administration, technology or another professional background. But without integrity, none of the other qualifications matter for long.

The ability to create a culture of integrity, accountability and trust may therefore be the most important responsibility of the person sitting in the CEO's chair.

Perhaps It Is Time to Change the Question

The succession process at HDFC Bank provides an opportunity to think differently about leadership.

Instead of simply asking, "Which experienced banker should be the next CEO?", perhaps boards should ask a broader question: "What kind of leader does HDFC Bank need for the next ten years?"

The answer could still be a veteran banker. It could be an internal candidate. It could be someone from the regulatory or administrative system. But there is also an opportunity to look at a new generation of leaders who understand technology, people and the changing nature of business.

The real test should not be age. It should be integrity, judgment, adaptability, leadership and the ability to build exceptional teams.

HDFC Bank already has the banking expertise. It has the customers. It has the technology. It has the systems. And it has an enormous pool of experienced people.

Perhaps what it needs from its next CEO is not someone who knows everything about banking, but someone who can make the people who know banking work together to build an even stronger institution.

And that could open the door to a very different idea of what the next generation of banking leadership should look like.