Business as unusual
The mood was tense. The son, struggling to control his emotions, could not meet his father’s eyes. Stress from fatigue, both emotional and physical, was sapping the father’s energy. The root cause of the tension between the two men was the sale of the family business. The father had presented it almost as a fait accompli. The bewildered son could not understand why. Implicit in the sale was the father’s belief that the son was not a leader capable of growing the business and taking it to the next level. Both men were hurting. But for different reasons.
This scene would never have played out a decade ago. Tradition would have prevented it from being played out. Only recently has the idea that family wealth can be, and is, distinct from the family business begun to be accepted by patriarchs. The reasons for this new liberalism are myriad.
A large part is due to changes in taxation. Today income-tax in India is more or less in line with the rest of the world. Earlier they were penal, forcing businessmen to buy their residences and pay for other expenses through their companies instead of individually. Building personal wealth was difficult and costly.
Knowledge about how other societies handle identical challenges trickled into India via consultants, lawyers and bankers, but more particularly from professors of international business schools. In India, it is hard to find a firm that has been with the same family for over four generations. Europe is full of companies that trace their ancestry to eight generations and more. In Japan, a noodle company has been with the same family for 600 years.
Faculty from Lausanne’s IMD business school, for example, has spent a considerable number of decades studying family businesses. They have developed many solutions for the challenges that family firms typically face. For über wealthy clients, Citibank offers the services of experts who can advise on a wide spectrum of matters ranging from good parenting to succession planning. Lawyers have mushroomed who whip up family shareholder agreements and design family offices. Today’s forward thinking patriarchs can choose from a wide selection of robust tools and models.
In another office, a very different scene is being played out. Here a curious secretary strains to hear the heated debate in the chairman’s cabin between father and daughter. She is a freshly minted MBA from an ivy league college, with work experience gained in a large US multinational. He earned his spurs in the chaotic mandis across India, knowledge that helped him build his empire. The debate is tightly focused on the strategy for the next financial year. Both use data to support their opinions. Neither is interested in using the father-daughter relationship to force agreement or score brownie points over each other. The fact that she is 30 years younger than him is not an issue in this tense atmosphere. This is business.
This level of liberalism is incredible in a country fettered for millennia by gender and respect for age. What is happening in the higher echelons of urban India will perhaps filter downwards to other conservative bastions.
Let’s move to the third scene being played out in corporate India. This time, two cousins, sons of the two founders of the family manufacturing firm, want to diversify into a related service business. They want a new IT backbone. They dream of a large marketing campaign. The fathers sense the opportunity presented by the youngsters but are nervous of things they know nothing about.
The two cousins approach a private equity (PE) fund company, and their slick presentation convinces the hard-nosed fund manager. The PE manager designs a new organisation structure where the founders retain the majority holding, but some is earmarked for the cousins and the PE fund. If and when certain milestones are met, the PE fund will cash out. The firm will grow bigger, and the two business families far wealthier, albeit at the cost of a reduced equity position for the fathers.
Reluctantly acknowledging that a small part of something big is better than a big part of something small, the founders accept the deal. Earlier such deals were limited to large businesses. Today similar deals are sweeping across the small and medium sector (SME) and mark one more silent attack on the conservatism raging within business families. An imaginative financial sector is designing ever more ingenious organisation structures, liberating entrepreneurship at all levels of corporate India.
Allow me to present one last scene. The head of one of India’s top business groups chairs the annual management conference where CEOs and top managers of all group companies meet to network among themselves, review performance, and share their targets for the next year. There are over 1,400 men (and a few women). Chinese, Americans, Europeans, Africans — 46 nationalities — are represented. Less than 25 per cent are Indian.
A brand discussion dominates the conference. The mood at the conference is much more energetic, confrontational with people stating their views than at earlier meetings. The first one, held almost five years ago, was virtually silent as the “foreigners” waited for their Indian masters to tell them what to do. During the intervening five years, both the local managers and the Indian promoters have learnt to live and work with each other. Indian family businesses are fast learning the art of managing a multi-cultural workforce at both the blue-and white-collar levels.
The scenes presented here are not mythical illustrations but real examples, viewed at first hand, of trends inside India’s business families and the firms they control. As with all trends, shades of ambiguity abound. Conservative parameters are being tested, and the give-and-take is frequently stressful.
I would like to quote the French philosopher, Simone Weil. Writing in 1937, she suggested, “The struggle between the opponents and defenders of capitalism is a struggle between innovators who do not know what innovation to make and conservatives who do not know what to conserve”. Had she lived in today’s times and in India, she might have been tempted to substitute “family dynasties” for “capitalism”.
Gita Piramal is a businesswoman and business historian
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