Staying alive: A fireside chat on success of family businesses

Statistics say that most family businesses – worldwide – wither away after the third generation. But there are others that carry on. How can a family business achieve long-term growth, without breaking apart from the cauldron of business goals, emotions and family relationships? Three of India Inc’s top family business leaders – Shiv Nadar, Founder-Chairman, HCL; Harsh Mariwala, Chairman, Marico; and Arun Bharat Ram, Chairman, SRF – took to the stage to discuss that. Nadar told Bodhisatva Ganguli, Executive Editor of The Economic Times, who moderated the chat, about how his learnings of running a business were rooted into his stint at SRF. “Back in those days, they realised the importance of hiring professionals to manage a business. They carefully brought in people in their 20s, trained them and put them in responsible position at various divisions. They did the shuffling really well.” Explaining the move, Bharat Ram said his grandfather realised that family members were not the only ones with the brains and ability to run a business. “He brought in exceptional professionals into the business.”
On a lighter note, Ganguli asked Bharat Ram if he regretted letting go of Nadar, to which Bharat Ram quipped: “Certainly! I would have been a much richer man today,” to laughter from the audience. Mariwala, still very much in tune with the business he once headed, stated how accountability is the biggest barometer of success and longevity. “Family members should be held accountable for their decisions and performance.” At the same time, Nadar felt that “there is a loss of appetite in every subsequent generation that joins the business”.

Bharat Ram’s stance was that the next generation must not be pushed into the family business and forced to succeed. “Families should encourage the younger generation to pursue what they want and not push them to undertake tailor-made positions within the family business. Such forced participation actually kills the business’s wealth,” he said. In his own case, Bharat Ram indicated to both his sons early on that they need to prove their worth to run the business.

Professionalism was a key element of the discussion. While Nadar said he completely stays off HCL’s strategy and decisions, Mariwala indicated both he (as chairman) and Marico’s MD are guided by detailed, written roles that were designed when Mariwala stepped down as CEO of Marico. “That has really helped us in carrying the business forward. In short, (the company) is on my mind 24/7, but my hands are off it,” he said.

One important aspect highlighted by the leaders was that for business to prosper and continue in the long term, the women in the family need to be involved. Said Bharat Ram: “I realised long back that if the women within the family are not in harmony, it’s not going to work. For example, my wife and my daughter-in-law were equally involved in the making of the family constitution as we were.” Agreed Mariwala: “Having a constitution and involving the women is a good idea as it helps to curtail the probability of conflicts.”

Nadar added another layer to the issue of potential conflicts. “The size and scale of the risk you undertake is most crucial,” he said. “For a company like HCL, which has over 1 lakh employees worldwide, we need to understand what can be the scale of the risk. So, the opinion of the CEO and key committee members becomes crucial. But if there is a difference, you have to live with it.” The underlying insight from the discussion: When in doubt, the business’s interest comes first, family’s second.