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Challenges that Indian business houses face

Challenges that Indian business houses face

Nabankur Gupta says the best within the family need to earn the respect of non-family colleagues.

Nabankur Gupta is co-founder and chairman, Blue Ocean Capital and Advisory Services Nabankur Gupta is co-founder and chairman, Blue Ocean Capital and Advisory Services
It is well-known that most large Indian family businesses have outperformed traditional non-family companies, including several MNCs, on metrics of financial stability, performance and sustained growth. Nevertheless, many Indian family businesses of medium size, typically Rs 1,000 to Rs 2,000 crore companies, continue to grapple with challenges related to managing growth within the country and outside.

The impediments appear to be arising from inadequate understanding of corporate strategy and a lack of focus on family governance. There are exceptions: Some large family business operations of sizes exceeding several thousand crore, such as the erstwhile Satyam Computer Services, have had to deal with issues emanating from lack of governance while there have been cases of a very high order of governance being demonstrated by smaller players like Emco Transformers and Hemas Holdings, or other players who have scaled up quickly, like Magma Fincorp.

Mentoring is an effective tool that organisations use to nurture and develop their top family managers as well as to groom the next generation. The mentor's job is to hand-hold and facilitate a system of intense learning; to use experiences as a learning tool through case examples. The family managers at top functions need a sounding board when trying to audit proposals and help resolve relationship management issues between family and non-family managers. Companies like VIP Industries and HRH Group (a major chain of luxury hotels in Rajasthan) have successfully used the mentoring tool. The essential elements of mentorship in family business include facilitating, coaching, setting goals, auditing performance and sharing experiences.

A very important aspect of Indian family businesses which does not emerge as important elsewhere is the issue of family tradition and culture. Sensitivities concerning emotional bonds can be major impediments to implementation of good governance practices. But emotions will have to be addressed and cannot be wished away. Today, about a third of Indian family businesses address this issue against maybe a tenth a decade ago.There can be no defined family governance process unless there is 100 per cent ownership and commitment to an organisation's vision, mission and values. These must under no circumstances be conflicting with family traditions, ethos and value. Once this is achieved, the formulation and implementation of a corporate strategy becomes much simpler and sustainable.

Another aspect of family business governance is the need to have a professional and harmonious relationship between family and non-family managers. Similarly, only the best within the family must be assigned responsibilities, and must earn the respect of their non-family colleagues through their achievements and sincerity of purpose.

Many family businesses in India suffer from the display of what is loosely called the malik attitude of senior board members from the family. They may display arrogance, which destroys relationships between non-family and family managers, and harms values openly espoused by all. This attitude could erode the value of an organisation rapidly. I have seen some very capable managers leaving a company for just this reason.

The author is co-founder and chairman, Blue Ocean Capital and Advisory Services and has mentored many business heads. He is on the board of 12 companies and was the former CEO of Videocon

Published on: Jul 20, 2011, 2:27 PM IST
Posted by: Navneeta N, Jul 20, 2011, 2:27 PM IST