Tuesday, February 22, 2011

It’s all in the family

Family businesses have been a success both in India and abroad. A look at the reasons why

Photos: Mukesh Ambani, chairman and managing director of Reliance Industries; Dr. Najeeb Zackeria, the managing director of Abad Builders

By Shevlin Sebastian

Author Gurucharan Das recounts an incident in his book, 'India Unbound'. Mukesh Ambani, of Reliance Industries, had just completed his MBA exams from Stanford Graduate School of Business. “Following the exam, he is asked to come back,” writes Das. “Mukesh lands at Mumbai and is driven home. After his evening tea, his mother tells him that his father, Dhirubhai, is waiting in the office. He is immediately taken there. After a brief conversation, Dhirubhai says, ‘Tomorrow, you are going to the Nagothane plant (Raigad district, Maharashtra).’”

Mukesh says, “Can't I take a small vacation?”

Dhirubhai replies, “Nagothane is your vacation.”

For family-run businesses there is no time for rest or relaxation. “They are focused and committed,” says Dr. Francis Cherunilam, Professor, School of Management Studies, at the Cochin University of Science and Technology. He had presented a paper on the success of family businesses at a seminar organised by the Kerala Chamber of Commerce and Industry and the Vidya Bharathi Centre for Entrepreneurship Development at Kochi last week.

“In fact, Reliance Industries always worked very fast,” he says. “They might have secured their technology from abroad, but the speed with which they have executed their various projects, including the huge petrochemicals plant at Jamnagar, is remarkable. It reveals the mind-set of the Ambani family: focused, ambitious, hard-working, determined, and with a vision for the future.”

Family businesses are a global phenomenon. “If you look at the Fortune 500 list, you will see that most of the companies had their beginnings as family businesses,” says Francis. In a recent list, there are eight Indian companies, out of which two are private sector companies. “One is Reliance, which is a family business, while the other is Tata Industries, which began as a family enterprise,” he says.

Some of the large family businesses in India include the industries run by the Birlas, Singhanias, Jindals, Mittals, the Murugappa, and the TVS group. “Name any large company in India and it is usually family-owned,” says Francis.

Asked for the reasons behind their success, Francis says, “There is a commitment to the business, because the owners realise that if the company fails, the fortune of the family will be finished. They are always trying to expand their business and seize the emerging opportunities in the global economy.”

Francis cites the $29 billion Aditya Birla group. “Over 60 per cent of the company's income is from its overseas operations,” says Francis. The group has a presence in 27 countries, and has interests in cement, fertilisers, mobile telephones, textiles, life insurance, and retail.

In Kerala, some of the successful businesses are owned by families. The V-Guard, Eastern, Muthoot, Mannapuram Finance and Abad Group are family enterprises. “The Abad group is remarkable because the fourth generation is involved in running the company,” says Francis.

Dr. Najeeb Zackeria, the managing director of Abad Builders, says that there is a clear understanding about the role of each member of the family. “We also have a tolerance for divergent views, and imbibe the spirit of brotherhood,” he says.

The Abad Group is an exception. Usually, by the third generation, because of conflicting visions and aims, family members are unable to work together. “When this happens it is always better to split up,” says Francis. “In the long run a break-up is good. It increases efficiency, competitiveness, and the chances of growth. And you can avoid bitter battles with your relatives for control.”

(The New Indian Express, Kochi)

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