‘Break the mould before it’s too late’ What Indian Business groups need to change?

‘Break the mould before it’s too late’ What Indian Business groups need to change?

The industrial landscape of India is characterized by diversified business groups. The Indian economy has undergone a radical shift both structurally and operationally since the economic reforms were introduced by the Government of India in 1991 and where could this be more evident than the Indian business houses. But sadly enough, numerous companies still exist where members of family have been employed since several generations. The question which stems up here is that how ideological is it for a company which boasts of being the emblem of ethics and professionalism to keep its top management manned by only a particular religion and worse family members? Is it just a coincidence or is it a foretaste of the corporate hierarchy of most of the Indian family run business houses. Off late this phenomenon has become quite common especially in family owned companies wherein vital positions on the board are held by family members or members of the same community.

The work environment and business attitude at these corporate houses is in serious need of an overhaul. The business groups which were tolerant earlier regarding the efficiency and effectiveness should adopt tougher down to business measures. They need to comprehend that it can be very difficult to remain profitable for a company while having a charitable attitude toward business. Seeds of accountability and professionalism need to be cultivated and the work environment should be more proactive.

Another common issue doing rounds among the echelons of the family run groups is of gerontocracy and succession planning. It’s not acceptable for a director, howsoever experienced he is, to hang on to a crucial position till his death. Companies cannot afford to keep its young Turks, hungry for promotion and recognition, waiting in queue just because the senior management is not willing to vacate the position. India Inc. has a long way to go for putting in place its succession planning which greatly influences the market valuations of the companies. In some cases this has even led to intra family disputes.

Many a times, one can be an audience to the strife between pride and economics. The lamenting question here is how prudent is it to hung on to sick, unprofitable units just to protect the company ideals? Will it be sensible to divest or harvest the ailing unit by putting stakeholders’ interest before inflated egos?

The answer indubitably is YES. Profits, the main motive behind any business, should never be sacrificed for clinging on to the much fabled traditions/ ideals of the company at least when there is no long term harm to the company’s bottom-line.

In his research paper “Family Business Groups in India: A Resource-Based View of the Emerging Trends”, S. Manikutty[1] acknowledges that the shortcomings of business groups are owed to the following reasons “…lower salaries as compared to MNC's, perceived lack of scope for initiatives, a culture that was seen as autocratic, sycophantic, emphasizing personal loyalties rather than professionals, lack of scope for application of professional management tools and techniques…”

Unfortunately several business groups have been unable to break the mould in which they were cast decades ago by their founders. Induction of fresh talent is still resisted at crucial positions. The risk taking ability, unfortunately, is becoming stinted. Its time they look more charily at their resource mix to decide on the course of the portfolio change rather than merely going by the hoary, often anachronistic company traditions

---

[1] S. Manikutty is a professor at the Indian Institute of Management, Ahmadabad, India.