Analjit Singh steps down at Max India

In another article in the Times of India, 62 year old Max India Chairman Analjit Singh has stepped down from the Chairmanship of his companies, making way for professionals to run his companies.

An admirable step if you consider that scores of companies are today still being run by almost octogenarian patriarchs. This is a leading issue in family businesses where the next-generation get frustrated waiting for the previous generation to hand over and let go.

In fact this could be a very good example of how to handle succession, where the senior generations could make way for the next-gen or professionals  to take over and run the companies while the seniors plan the next steps in either floating a new venture, mentoring someone, looking after the charitable interests of the family or even pursue a long desired passion! What is important however is, that this new activity keep them fully occupied.

In any  case, this is a good example worth emulating for the many family businesses all over the world.

Vadilal’s Icecream cold reality

A recent article in the Economic Times on 29th Dec, 2015  mentions about the owner family the Gandhis, filing cases seeking settling of some family and business issues.

Both sides have made claims and counter claims against each other, alleging diversion of funds to some other companies.

The article makes for some interesting reading, but is a prime example of successful families feuding, which oftentimes is first harbinger of troubled times. The business is the first to get adversely affected and the cash flows, which had led to the success of the family gets affected.

Increasingly, there is a need for families to have a structure in place and to work out these issues well before hand, before things are decided in courts.

This is the underlying logic for family structures which are an important topic in family business planning, covered in the SPJIMR course outline.

Readers of this blog may be interested in a one day workshop to be held later this year in SPJIMR which will seek to address this issue and what families can do to avoid such scenarios. contact me if you are interested in being put on the mailing list to be informed for this program.

 

Planning in Families

A recent article in Times of India on Sarabhais, the family behind Arvind Mills makes for interesting reading.  It states that Sanjay Lalbhai’s efforts to structure his family for the long term. He has also stated that the Lalbhai’s are currently in their 17th generation!

What is interesting is the realization in the family, to plan for the next generation, and to put in place a structure for the future. The fact that recent generations are increasingly choosing not to join the family business, it puts a great deal of stress on the existing families to plan accordingly.
An interesting survey by E&Y and University of St. Gallen, (link) have shown that less than 10% of the next-gen are looking to join their family businesses, immediately after their education! And over 60% would want to work outside for about 5 years, before they consider the family businesses! This has huge implications for the succession process and perhaps the Lalbhai’s have shown foresight in providing for this contingency.

In contrast is the experience with the Piramals, where Ajay Piramal’s son Anand, has preferred to join the family business. (link to article).  What is noteworthy, is the mentors that are guiding Anand during his induction. These include Nitin Nohria, the Dean of Harvard Business School, Deepak Parekh, undoubtedly the foremost expert in housing and finance. What are the learnings from this?

Choose the right mentors: having experts in the domain that one is operating in, gives you an insight which would be invaluable. External knowledge helps to overcome the bias that may occur while operating in successful family businesses. And more importantly, to listen to them!

Focus: Despite the fact, that the competition is spread all over India, the Piramals have chosen to focus on the Mumbai market, which brings us to the next learning,

Choose to compete on your own turf, and not where the competitors are: this gives you the advantage of redefining the rules, instead of just blindly following what the competition is doing.

And most important, Humility: to recognize that there is lot to be learnt and one can gain a lot from external help.

The other article of interest is one on the Baba Kalyani family where the niece has sued for a one-ninth share of the family wealth. (link). The article has drawn a similarity with another reputed family where the patriarch was similarly sued by a sibling.

These incidents emphasize the basic need in business families, to ensure that there is clarity of communication and expectations are set right. Very often, elders may choose to avoid asking the tough questions, with the expectation that these issues may not arise, and if they do, they would be solved amongst the siblings. there is always the danger of public perception that if a matter is made public, there may be much more than what meets the eye, like the proverbial iceberg, where over 90% is hidden and is below the surface.

The need for proper family structures usually done under the guidance of a family consultant does help to resolve issues in an impartial manner and ensures the survival of the family which otherwise could become subject to various disagreements. If we consider strictly the family longevity, then we can see that this has probably being put in place, with the Piramals and Sarabhais, and which challenge many business families are facing today, including the Kalyanis, Singhanias. Where there is clarity of thought and purpose, the family gains eventually.