A Gender Bender for India Inc

A new book tries to unravel legacy issues in largely conservative, family-run businesses, but falters

In the mid-1980s, the conservative and staid Indian business milieu was shaken up by a “breaking” story, front-paged by the Business Standard : a prominent Birla family member was carving up his business empire into three parts for his three daughters.

This incident was epochal for Indian businesses: one, because Indian family businesses abhorred sharing such details in public and, two, because this gentleman was breaking with tradition by not handing over his business to his nephews or other male members of the family. Also, from the standpoint of management practice, he was indulging in advance succession planning (well before it became a buzz-word in corporate boardrooms), and retiring to a life of active social service and politics.

Many business families since then have seen daughters take on the reins of family business, run it efficiently, add value as a custodian and leave a visibly richer company.

In fact, it is interesting to note that Marwari business families, considered deeply conservative and devoutly patriarchal, were first among all Indian business communities to allow women to run businesses. For example, the family constitution of a southern business family, with scions educated at universities overseas, still prohibit women from joining the family business. The example of Balrampur Chini Mills, an on-off stock market darling, is illustrative.

When Kamal Saraogi decided it was not possible for him to stay and work in remote Balrampur, Uttar Pradesh, his wife Meenakshi Saraogi — an educated housewife dedicated to running the household, rearing children and playing wife and hostess till then — decided to relocate herself to Balrampur and take over the running of the family-owned sugar company.

She had no prior experience but was able to transform the company — she expanded it by acquiring other sugar mills and adding other lines of business (such as cogeneration, production of ethyl alcohol and ethanol). Starting from a single mill sugar company, Balrampur Chini today has 11 factories with about 70,000 tonne per day crushing capacity. Succession planning is an integral part of a family business anywhere in the world.

Complex affair
In India, the family structure, given its overarching patriarchal framework, invests the process with an additional complexity. Negotiating this consumes enormous energy, requiring a combination of tact and politesse. One would have expected a book on Indian family business so late in the day to navigate through these choppy waters and provide some insight with the help of case studies and real-life examples. Instead, the book is an addition to the overcrowded shelf of jejune handbooks, masquerading as serious DIY guides to managing family business issues.

For example, on articulating values, the authors recommend: “Despite India favouring an oral tradition for transmitting family values across the generations, we recommend that family business people write these things down because it provides a focus for agreement and helps avoid confusion.”

Really? Sample some of the other colourless and sententious pieces of advice offered as “mantras”.

On professionalising family businesses: “The decision to professionalise should be clearly explained to everyone in the organisation. It should not be enforced or implemented in a top-down fashion — rather it should gradually become part of the work culture of the organisation.”

On succession planning: “Consideration of succession candidates from within the family can raise difficult issues. Before the process starts, however, it is important for the family to reflect upon its values, vision and goals, using these as a guide for decision-making.” To be fair, there are examples in the book, and some of them are indeed interesting.

But most of these do not illustrate or buttress any hypotheses or help in building up a credible and sustainable theoretical base for the practice of managing family businesses. Some of the examples do not even go any distance. For example, while fatuously expounding on how education “is a key factor in the evolutionary process underway in India’s family business sector…”, the authors argue that Aditya Mittal’s Wharton degree and stint with Credit Suisse helped him earn his stripes as a successful chief financial officer of Mittal Arcelor; such a generalisation doesn’t give him any credit as an individual, nor does it do any justice to father, Laxmi Niwas Mittal, who imparted the business knowledge.

A lot of talk

It is evident from the book’s tenor that the authors have sacrificed research in favour of tedious rhetoric. Nothing else explains why the book lacks relevant illustrations from Corporate India; a good example is “primogeniture”, or the unwritten ancient law under which the oldest sibling inherits the kingdom or the family business.

There are a profusion of contemporary examples where the family has foresaken the time-tested primogeniture formula and selected the younger sibling over the older one to run the family business. And, then there are the famous examples of the younger brother refusing to fade gently into the night.

It is mystifying what exactly the second author brings to the book, apart from some fresh, India-based examples relating to middle-sized companies, especially from southern India. His reputation as a Vedic scholar builds up expectations, but the surfeit of banal homilies soon shatters them.

The typical Indian business family — like many other business families around the world — is not usually like a pot on the boil, or a soap opera confection of intrigue and drama.

But they do have their interesting moments, which are inflection points in the history of that organisation. Mapping those would provide greater value to Indian family business students.

Book Review in The Hindu Businessline

COP21 Battle: from Paris to Nairobi

December 13 will bring curtains down on climate change talks at Paris, but the sharp ideological divides between rich countries and developing nations will continue to play out at World Trade Organisation’s 10th Ministerial Conference in Nairobi, beginning on December 15

Even as the Paris climate talks, or COP21, is likely to yield an agreement, albeit a weak one, governments are readying themselves to continue the battle in Nairobi, where they will converge again from 15-18 December for the World Trade Organisation’s (WTO) 10th Ministerial Conference (MC10). And, though the faces around the table will change, the positions adopted by various countries at Paris will only harden.

Take the stand that Western countries — led by the U.S. and Europe — are trying to force fit into all talks: that India and China deserve to be in a separate category since both have outgrown the “developing country” tag. This is being duly repeated by Western media and their think tanks. This implicitly requires India and China to make larger sacrifices than the rest of the developing countries.

In climate change negotiations, a “High Ambition Coalition” (comprising 100 countries, including the U.S.) has pitched for an “ambitious” deal that would require the world to limit global warming to below 1.5 degrees, against the earlier target of 2 degrees. This strategy achieves four things simultaneously.

One, it takes attention away from the pollution that industrialised countries continue to inflict upon the world. Two, it detracts from the package industrialised countries had promised to deliver but reneged — $100 billion of funding for developing and poor countries to help improve energy technologies. Three, it wins over island nations (which can be used in other negotiating forums), who have been complaining about rising water levels due to global warming. Four, it turns the needle of blame towards India and China, both of whom will obviously oppose the increased commitment expectations.

It is quite likely that the developed world lobby will try to replicate some of these strategies at MC10 talks as well.

For example, well ahead of the meeting, the U.S. has begun making noises (with some support from the U.S.-based think tanks and media) that India and China should not be included in the group of “developing countries”, especially when designing support for poor farmers. This, effectively, takes out the strongest proponents of the Doha Round of the WTO. Without these two, most other developing countries will find it difficult to resist pressure from the developed world lobby.

The conclusions are fairly predictable if the West is able to have its way. The U.S. will manage to achieve its goal of burying the Doha Development Agenda (DDA). In this endeavour, it has some help from WTO Director-General Roberto Azavedo, who has suggested on a deadline to finalise DDA and sees MC10 as the last opportunity to do so. This proposition was rejected by developing countries, including India. One reason for seeking to bury DDA is that the U.S. and other developed countries have already managed to swing Trade Facilitation Agreement (TFA). Uniquely, TFA was not part of original DDA but was shoe-horned into the Bali agreement of the WTO by the rich countries as a trade-off. Today, with TFA out of their way, the developed countries would want to bury the DDA.

It will also help torpedo WTO members’ plans to finalise a permanent solution for public food grains stockholding programme or a special safeguard mechanism (which allows developing countries to protect farmers from cheap imports or sharp price drops).

In fact, the U.S. has concurrently started pushing WTO for a deal on “new issues” — environment, labour, e-commerce, global value chains, investment, competition policy and transparency in government procurement — which will replace the development agenda.

As trade ministers congregate in the Kenyan capital next week, expect to see a reprisal of the Paris viewpoints.

Courtesy: Gateway House