Business Today

On succession and its planning

The key point is not what the family-led businesses in India are doing, but the growing awareness on the need for succession planning.

E. Kumar Sharma        Last Updated: February 17, 2015  | 19:36 IST

Associate editor E Kumar Sharma
On the sidelines of an event to unveil the memoirs of Dr Reddy's founder Kallam Anji Reddy, Sun Pharmaceuticals founder Dilip Shanghvi had revealed that succession planning is "engaging his attention". However, he had stopped short of elaborating on it. In his usual mild tone, he said: "My general approach is not to talk too much about things I am actively involved with. This is one such area."

Barely a fortnight later, speaking at the inauguration of Thomas Schmidheiny Centre for Family Enterprise, Adi Godrej, Chairman of the Indian School of Business board and Godrej Group, too, underlined the importance of succession planning. His plans at Godrej are also under wraps.

About six months ago, Apollo Hospitals Founder and Chairman Prathap C. Reddy had gone a step further by rolling out a one-of-its-kind succession model, defining and restructuring the roles of his four daughters, who had already been driving Apollo Hospitals in different capacities. What was unique about Reddy's proposal was the apparent structure where, eventually, the four daughters would take turns at the top job.

The key point is not what the family-led businesses in India are doing, but the growing awareness on the need for succession planning. "In the past two years, we have witnessed a lot of interest, curiosity and alertness in the families about the challenges and the need to address such issues. Be it the challenges of communication, challenges of consensus, of ownership, transfer of ownership or even retirement," says Kavil Ramachandran, Executive Director, Thomas Schmidheiny Centre for Family Enterprise at ISB.

Ramachandran says around 40 per cent of family businesses in India at least have a clear understanding of the need to plan for the future, and most among them may have already started working on it. "This is much higher than what it was five years ago," he says.

According to Ramachandran, many Indian business families are working towards a comprehensive plan of succession, detailing and bringing in clarity to ownership structures and shareholder agreements, and going beyond the realms of just leadership and management succession. They are also increasingly seeking professional help to make a smooth transition.

However, the road ahead may not be very easy. In his recently-launched book, The 10 commandments for family business, Ramachandran has devoted a whole section on "why succession is challenging". Here are a few: One, in a traditionally male-dominated society like India, where working for a family business is considered both a birthright and responsibility, every male member naturally stakes claim to working in the business at a senior leadership position and wishes to become the leader with the accompanying benefits of power, image and position.

Two, what if the daughter is more competent than the son? Three, what if the next generation lacks interest in the family business? Four, is the eldest the wisest and most capable? And five, what if the leader always feels he is not old enough to retire?

Surely, wisdom lies in addressing these, and more such, challenges. That more and more families are taking interest in succession planning, means there is hope. 

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