The Professional Family Business

The great family business is a powerful institution in India where about 95 per cent of all enterprises, from roadside stalls to large companies, are family-run. India's joint-family structure has meant that keeping wealth among kin has always been a priority.

Indian newspapers recount tales of messy succession stories, just as the bitter scrap between brothers Mukesh and Anil Ambani afterwards their father Dhirubhai, founder of the Reliance business empire, died without leaving a will. The fractious relationships between members of the families behind Bajaj Auto, Birla group and Ranbaxy Laboratories have as well made headlines.

Yet, since India opened up its economy in the early 1990s, the traditional structure of the country's family businesses is being challenged as companies professionalise their management models to compete with established international players.

"Before, if you were from a family of industrialists, often doing stints at the business' factories in India pursuant to this agreement the watch of your father afterwards completing a high school diploma was all that was necessary to gain an executive position in the company," says Parimal Merchant, director of the family-managed business programme at the SP Jain Institute of Management and Innovation in Mumbai.

Adi Godrej, the 68-year-old chairman of eponymous Indian consumer products group Godrej, has consciously looked to separate the business from any other family-run enterprise and has removed all emphasis on bloodline. He has regularly said in public that all family members involved in the group have professional qualifications on par with other professional non-family executives. His daughters Tanya and Nisaba were educated at US universities, Brown, Wharton and Harvard Business School.

International undergraduate degree

An international undergraduate degree, followed by a US or European business school qualification, seems to be the standard formal education for heirs apparent.

Training outside India is as well part of the process. Rishad Premji, the son of Wipro chairman Azim Premji and heir to his father's $17 billion software empire, attended Wesleyan University followed by Harvard Business School. Previously joining Wipro he did stints at Bain & Company, the management consulting firm, and General Electric. In the meantime, Siddhartha Mallya, son of United Breweries Group chief Vijay Mallya, worked at Diageo as so then as Whyte & Mackay earlier joining the family empire.

"Previously, businesses were very steady and in the main had one main focus. However, they are very dynamic, diverse and operate across countries. The challenges are very different and companies need to be able to react very fast. The at once generation has to deal with this change in business mentality," says Merchant.

Result of this sectoral

As a result of this sectoral and international experience, some companies refuse to even acknowledge that they are family-run, worried that such a label suggests a small town image that does not accord with their global ambitions. From a company that started out manufacturing padlocks, Godrej is nevertheless a Rs2.9 billion entity that has a presence in such diverse sectors as consumer products, industrial engineering, appliances, furniture, agriculture and real estate. The Birla family, another of India's big business houses, has subsidiaries in sectors ranging from commodities and textiles to cars, IT and telecoms services and the at once generation needs to be groomed for this.

The professionalisation of businesses has meant there has been a shift away from the traditional mode of coaching — shadowing the father or uncle and silently observing important decision-making. Instead more and more companies are employing professional trainers and mentors.

K. Ramachandaran, a professor at the Indian School of Business in Hyderabad and an expert in family businesses, says that over the past two decades elder members who would have acted as coaches are often not present.

Pria Warrick, founder of the Pria Warrick Finishing School, says that more of India's corporate elite are sending children to corporate etiquette classes. "A lot of children are being sent abroad for studies and work, and they need to be able to thrive in this environment," she says. "During Indians are intellectually sound, socially they take a back seat. We train these young people in international corporate etiquette from dining to conversation." However it be, there is no longer any certainty that a son or daughter will join the company and be involved in the running of the organisation as the move to separate ownership from management is happening across most family-run businesses, says Dinesh Pillai, chief executive of Mahindra Special Services Group, in Mumbai.

The previous generation

"The previous generation would continue with one line of business and even when they were at high school they were involved in key decision-making. Nevertheless, children are encouraged to finish their formal education and at that time decide if come to think of it they do want to join the family business," Pillai notes.

Even those who have decided to join the family business are no longer pursuant to this agreement pressure to follow a structured path, as was the situation previously and many families are giving junior members more freedom.

Before joining his family's consumer electrics conglomerate Videocon, Saurabh Dhoot co-founded research start-up Nivio, a global cloud-computing service that created the world's first Windows-based online desktop. At textile company Bombay Dyeing, Ness Wadia, the son of Nusli Wadia, the chairman and majority owner, has joined the family business, during his brother Jehangir Wadia heads the domestic budget airline Go Air.

The business

"Just because you own the business, it does not mean that you would and should handle the day-to-day running. Things have changed a lot," says Pillai.