A new book tries to unravel legacy issues in largely conservative, family-run businesses, but falters
In the mid-1980s, the conservative and staid Indian business milieu was shaken up by a “breaking” story, front-paged by the Business Standard : a prominent Birla family member was carving up his business empire into three parts for his three daughters.
This incident was epochal for Indian businesses: one, because Indian family businesses abhorred sharing such details in public and, two, because this gentleman was breaking with tradition by not handing over his business to his nephews or other male members of the family. Also, from the standpoint of management practice, he was indulging in advance succession planning (well before it became a buzz-word in corporate boardrooms), and retiring to a life of active social service and politics.
Many business families since then have seen daughters take on the reins of family business, run it efficiently, add value as a custodian and leave a visibly richer company.
In fact, it is interesting to note that Marwari business families, considered deeply conservative and devoutly patriarchal, were first among all Indian business communities to allow women to run businesses. For example, the family constitution of a southern business family, with scions educated at universities overseas, still prohibit women from joining the family business. The example of Balrampur Chini Mills, an on-off stock market darling, is illustrative.
When Kamal Saraogi decided it was not possible for him to stay and work in remote Balrampur, Uttar Pradesh, his wife Meenakshi Saraogi — an educated housewife dedicated to running the household, rearing children and playing wife and hostess till then — decided to relocate herself to Balrampur and take over the running of the family-owned sugar company.
She had no prior experience but was able to transform the company — she expanded it by acquiring other sugar mills and adding other lines of business (such as cogeneration, production of ethyl alcohol and ethanol). Starting from a single mill sugar company, Balrampur Chini today has 11 factories with about 70,000 tonne per day crushing capacity. Succession planning is an integral part of a family business anywhere in the world.
In India, the family structure, given its overarching patriarchal framework, invests the process with an additional complexity. Negotiating this consumes enormous energy, requiring a combination of tact and politesse. One would have expected a book on Indian family business so late in the day to navigate through these choppy waters and provide some insight with the help of case studies and real-life examples. Instead, the book is an addition to the overcrowded shelf of jejune handbooks, masquerading as serious DIY guides to managing family business issues.
For example, on articulating values, the authors recommend: “Despite India favouring an oral tradition for transmitting family values across the generations, we recommend that family business people write these things down because it provides a focus for agreement and helps avoid confusion.”
Really? Sample some of the other colourless and sententious pieces of advice offered as “mantras”.
On professionalising family businesses: “The decision to professionalise should be clearly explained to everyone in the organisation. It should not be enforced or implemented in a top-down fashion — rather it should gradually become part of the work culture of the organisation.”
On succession planning: “Consideration of succession candidates from within the family can raise difficult issues. Before the process starts, however, it is important for the family to reflect upon its values, vision and goals, using these as a guide for decision-making.” To be fair, there are examples in the book, and some of them are indeed interesting.
But most of these do not illustrate or buttress any hypotheses or help in building up a credible and sustainable theoretical base for the practice of managing family businesses. Some of the examples do not even go any distance. For example, while fatuously expounding on how education “is a key factor in the evolutionary process underway in India’s family business sector…”, the authors argue that Aditya Mittal’s Wharton degree and stint with Credit Suisse helped him earn his stripes as a successful chief financial officer of Mittal Arcelor; such a generalisation doesn’t give him any credit as an individual, nor does it do any justice to father, Laxmi Niwas Mittal, who imparted the business knowledge.
A lot of talk
It is evident from the book’s tenor that the authors have sacrificed research in favour of tedious rhetoric. Nothing else explains why the book lacks relevant illustrations from Corporate India; a good example is “primogeniture”, or the unwritten ancient law under which the oldest sibling inherits the kingdom or the family business.
There are a profusion of contemporary examples where the family has foresaken the time-tested primogeniture formula and selected the younger sibling over the older one to run the family business. And, then there are the famous examples of the younger brother refusing to fade gently into the night.
It is mystifying what exactly the second author brings to the book, apart from some fresh, India-based examples relating to middle-sized companies, especially from southern India. His reputation as a Vedic scholar builds up expectations, but the surfeit of banal homilies soon shatters them.
The typical Indian business family — like many other business families around the world — is not usually like a pot on the boil, or a soap opera confection of intrigue and drama.
But they do have their interesting moments, which are inflection points in the history of that organisation. Mapping those would provide greater value to Indian family business students.
Book Review in The Hindu Businessline