Business Today

The elephant learns to dance

How the founders of Emami are ensuring a smooth transition to the next generation across two families.

T.V. Mahalingam        Print Edition: September 5, 2010

On the surface, the founders of the Emami Group - Radhe Shyam Agarwal and Radhe Shyam Goenka - are like chalk and chutney. Goenka, 63, is quiet, soft spoken with the easy air of a ghazal singer and ducks out of media interactions. Agarwal, 65, is chatty, animated and loves to deliver monologues on Hindu philosophy, compose pithy poems about the vagaries of life and peppers shop-talk with long contemplative pauses that would make former Prime Minister Atal Bihari Vajpayee sound as breathless as a first-time rapper. Goenka is the numbers and details man, Agarwal the savvy marketer.

But there's a lot the duo have in common other than their first names. They met in school, in second grade, where they shared a passion for sports. After school, they continued to hang out together. Both hold Master's degrees in Commerce and Bachelor's degrees in Law. Both worked for the Birlas - Agarwal for the Aditya Birla Group and Goenka for K.K. Birla. "We loved each other's company and we were thinking of how we could continue to meet each other every day," recalls Agarwal. That camaraderie and the "fire in the belly that we should not be in service", as Agarwal puts it, led to both of them quitting their cushy jobs and striking out on their own in 1974.

The duo have built up Emami from a small-time manufacturer of ayurvedic medicine and cosmetics, founded in the claustrophobic lanes of Burrabazar in Kolkata, into a pan-India group with Rs 3,000 crore in revenues that has taken on the likes of Hindustan Unilever and Procter & Gamble. Today, Emami sells everything from pain relief balms to hair oils that 'cool' your head, from edible oil to ballpoint pen tips. It sells newsprint to some of the country's largest newspapers and hopes to be the largest hospital chain in eastern India. A cement plant, a realty foray and a mining play are all on the anvil. But that's just one part of the Emami story.

The Emami story is also about two families - unrelated by blood - which continue to run the empire amicably. Even though Agarwal and Goenka come into work regularly, it's the next generation who are handling the businesses on a day-today basis. Agarwal has three children; Goenka has two. They handle various parts of Emami (see We Are Family). Things have been structured in such a manner that one Goenka and one Agarwal handle a line of business together.

For example, Aditya Vardhan, the elder son of Agarwal, and Manish, the younger son of Goenka, together run the hospital, edible oil, biodiesel and paper businesses. Similarly, Mohan, Goenka's elder son, and Harsh Vardhan, Agarwal's youngest, are spearheading the company's forays into new areas like cement, power and coal. Prashant, Goenka's nephew, drives the group's international push. Most of the next gen members are also given a basket of brands to handle individually.

So, how easy or tough is it for the next gen - all of them are in their 30s - to work with each other? "It's very easy because we have all grown up together," says Manish. "Take Aditya and I - both of us studied in the same school since Class V. When we started working together, we shared the same cabin till we moved to the new corporate centre," he adds.

At Emami's swanky corporate centre in east Kolkata, the cabins on the eighth floor (where the promoters sit) have glass walls. "All of us have lunch together everyday and hop a ride back home together," says Aditya. The Goenkas and Agarwals stay in multi-storied houses in the same lane. All the Goenkas and Agarwals, about 40 in headcount, make it for an annual vacation, during the Puja holidays in October.

There is no dearth of stories of Indian family businesses being torn apart because of familial tensions and conflicting business ambitions as the next gen gets into the picture. So, what's the House of Emami doing to prevent that? "At a very basic level, we realise that the family is where most of the conflicts begin. Hence we are striving to make things transparent and increase communication within the family," explains Aditya.

For the past eight months, the extended families of the Goenkas and Agarwals have been coming together to form a family forum. "Basically, about 30 of us, in groups of 8-10 people, get together to talk about everything from business to personal matters. The only condition is that siblings and spouses are not allowed to be a part of a group. That way everybody knows everything," explains Manish.

The founders have also listed a set of rules and guidelines for the next gen to adhere to. Take, for instance, the guideline that they cannot invest in stocks or shares in a personal capacity. "We don't want our children to indulge in speculation. We don't want them to get used to making easy money," says Goenka Senior.

The other founder, true to character, is a lot blunter: "Once somebody gets into the stock market, his eyes are likely to be glued to the stock ticker and he is likely to lose focus of his own business."

Similarly, they may not invest in businesses outside the Emami fold in a personal capacity. "If somebody wants to start a new business, he can approach the family and convince us all about the merits of the business and we will gladly invest," says Agarwal Senior. Neither are the inheritors allowed to lend or borrow significant sums of money. "All business projects that need significant capital for expansion should be cleared by other family members. That way we all know what's happening," he adds.

Perhaps, the most interesting guideline of all is the spending cap that has been put on the next gen. Their salaries go into bank accounts that are monitored closely by the founders, who in turn give out a monthly allowance for daily expenditure. Like Mohan says jokingly: "My monthly 'pocket money' is about Rs 7,000. Perhaps, my wife's allowance is a bit more."

If the thought of the Emami inheritors living off just Rs 7,000 a month sounds too good to be true, remember that the Goenkas and Agarwals live in a joint family set-up. Most of the common household expenses are taken care of through the joint family account. "It is not as if we have to live exactly within our set monthly limits. If I asked my father for more, he would not refuse but I would have to give a reason," says Mohan.

His cousin, Prashant, says that he actually manages to save some money every month in spite of family outings to movies, and shopping for clothes. Mumbai-based financier Anand Rathi has known R.S. Agarwal since the early '70s when Rathi used to work for the Aditya Birla Group. "The code of conduct has been put in place to avoid competition between family members and increase transparency," says Rathi, who has been an advisor to the family on matters ranging from education of the younger members to strategic business decisions.

The Emami way is also steeped in the Marwari ethos of frugality. The Goenkas and Agarwals always fly economy class. Only the founders go about town in luxury cars (a Mercedes and a BMW). The next gen members are allowed to buy cars priced below Rs 12 lakh, depending on their years of work experience. Family members, again in true Marwari style, are inducted early into business. Most of the Goenkas and Agarwals speak of attending college in the morning and coming into office after that.

Priti Sureka, R.S. Agarwal's daughter, recalls coming back from school to Emami's cramped offices and manually entering media and research data into forms. "When I was 10, my father would hand me copies of international magazines like Cosmopolitan and ask me to go through the ads and give out assignments based on that. Dinner table talk was invariably about work," recalls Harsh. Such efforts seem to be paying off. Some of the fast-growing brands like Fair & Handsome (a male fairness cream, a first in India), Sona Chandi chyawanprash and Fast Relief pain reliever have been conceived, launched and managed by the next gen. "The difference between Emami and most other Indian family groups I have worked with is that they are not hidebound and straitjacketed in their thinking," says ad guru Alyque Padamsee, who has been working with the group for over a decade now on its advertising and marketing strategy.

There's a catch, though. R.S. Agarwal says that the present model, by its very structure, necessitates one or two clear leaders. Currently, all businesses are jointly and equally owned by both the Goenkas and the Agarwals. And the proverbial buck stops with the founders. "At some point of time, the group will have to choose one or two leaders and the other family members would have to accept them. That would be the biggest challenge for Emami," says a senior wealth management executive with a Mumbai-based private bank. And that would be the real test of the bond that binds Emami.

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