Wealth Man­age­ment

A smooth gen­er­a­tional tran­si­tion is not just de­sir­able, it is a man­date by the Se­cu­ri­ties and Ex­change Board of In­dia.

MillionaireAsia India - - Contents - By Pra­teek Pant

– Pass­ing on the cor­po­rate reins from one gen­er­a­tion to the other is now a reg­u­lated process.

Suc­ces­sion plan­ning among cor­po­rates in In­dia is a pas­sion­ate de­bate to­day, thanks to sev­eral in­ter­re­lated de­vel­op­ments in re­cent times. The reg­u­la­tory com­pul­sion by the Se­cu­ri­ties and Ex­change Board of In­dia (Reg­u­la­tion 17(4)) re­quires Indian cor­po­rates to for­mally dis­cuss suc­ces­sion plans at the board level. Thus, bring­ing about trans­parency and cre­at­ing an ac­tion­able plan, which will even­tu­ally boost in­vestor sen­ti­ment.

Among fam­ily owned busi­nesses, though many heirs have had rea­son­able tran­si­tions, there do ex­ist a few leg­endary sur­names who had their share of ten­ta­tive mo­ments. While be­ing part of a suc­cess­ful fam­ily business is hugely ad­van­ta­geous for its nan­cial prow­ess and man­age­ment ex­po­sure, the change man­age­ment can be equally de­mand­ing. An iconic founder (and a par­ent) can refuse to change the ways of do­ing business or to un­der­take a di­versi cation. Heirs, on the other hand, may shud­der at the idea of suc­ceed­ing in­cred­i­bly suc­cess­ful par­ents.

How­ever, sur­veys by man­age­ment con­sul­tan­cies con­tinue to high­light suc­ces­sion plan­ning across Indian cor­po­rates as a weak point or low pri­or­ity, even as few in­ci­dents of suc­ces­sion plan­ning go­ing astray val­i­date the fact that the en­tire process needs to be bet­ter planned and im­ple­mented well. There are no cast-iron ways in suc­ces­sion plan­ning or how se­niors could in­duct their next gen­er­a­tion into the business once they come of age. Some com­mon prac­tices in which prom­i­nent fam­i­lies have ini­ti­ated Gen-X into the business are high­lighted be­low:

Global ed­u­ca­tion: a key in­gre­di­ent

More of­ten than not, most of the Gen-X gets a per­ti­nent school­ing at a top in­ter­na­tional univer­sity. This pe­riod of hy­giene- equip­ping is also con­sid­ered an op­por­tu­nity for them to be­come fa­mil­iar with world-wide trends and de­vel­op­ments in their re­spec­tive sec­tors, as well as man­age­ment mod­els in gen­eral. Global ed­u­ca­tion (es­sen­tially an MBA de­gree) comes as a pre­cur­sor to a manda­tory three-to-ve year ex­pe­ri­ence out­side the group. Parth Jin­dal, Man­ag­ing Direc­tor of JSW Ce­ment and Nis­aba Go­drej, Ex­ec­u­tive Chair­man of Go­drej

Con­sumer Prod­ucts were both grad­u­ates of the pres­ti­gious Har­vard Business School.

In fact, for many global schools, fam­ily business man­age­ment has emerged as an im­por­tant dis­ci­pline since next gen­er­a­tion fam­ily mem­bers may need spe­cialised skills to take over the reins and cre­ate a more pro­fes­sional work en­vi­ron­ment.

Im­por­tance of ‘Out­side’ ex­pe­ri­ence

CEO of Hero FinCorp, Ab­hi­manyu Mun­jal’s stint at in­ter­na­tional banks has in­deed left a deep im­pres­sion on his think­ing and man­age­ment style. Many CEOs who have spent at least threeto-five years out­side the group ac­knowl­edge that ʻout­side work ex­pe­ri­ence’ has given them tremen­dous ex­po­sure, a well- rounded per­spec­tive and the much-needed con­fi­dence. How­ever, if not rel­e­vant, a six month stint in an ‘out­side en­ter­prise’ would pass off with­out much ben­e­fit, whereas a mere six months in one’s own or­gan­i­sa­tion could make all the dif­fer­ence.

Bharat Forge’s Baba Kalyani had the op­tion to build a ca­reer in the U.S. – like many of his friends who never re­turned. He, how­ever, was rm on build­ing the fam­ily business and in­ducted as a gen­eral man­ager, where he lever­aged learn­ings from his global ed­u­ca­tion to im­prove the pro­duc­tiv­ity and out­put at Bharat Forge.

Early men­tor­ing works won­ders

For some, the fam­ily business pro­vides a highly com­pet­i­tive learn­ing space, shap­ing their think­ing and ac­tions. When Uday Ko­tak joined the fam­ily’s com­modi­ties business af­ter his for­eign ed­u­ca­tion, many of his fam­ily mem­bers were al­ready there. “It was a clas­sic case of cap­i­tal­ism at work and so­cial­ism at home,” he quoted about the men­tor­ing he re­ceived.

The TVS Group’s young, climb up the lad­der gain­ing pro­fes­sion­ally from a very ju­nior level. Lak­shmi Venu, daugh­ter of TVS Mo­tor chair­man and man­ag­ing direc­tor Venu Srini­vasan, joined the rm as a man­age­ment trainee and now serves as Joint Man­ag­ing Direc­tor of Sun­daramClay­ton Lim­ited (SCL).

In­deed, an early start un­der the fam­ily or non-

fam­ily men­tor­ship has undis­puted mer­its in­clud­ing a clear growth map.

In­duc­tion: Dif­fer­ent strokes for dif­fer­ent cour­ses

In­duct­ing the next gen­er­a­tion is a key process for its fu­tur­is­tic signi cance but there are no set ways to do it; it could be as unique as the ways of the fam­ily business it­self. The in­duc­tion of Dr. Pratap Reddy’s daugh­ters into Apollo was more of a bap­tism by re as they were ini­ti­ated far too early to trans­late their fa­ther’s dreams into re­al­ity. Each one as­sumed a key re­spon­si­bil­ity in the func­tion­ing of the large hos­pi­tal, or to give pre­sen­ta­tions to in­vestors as Se­nior Reddy strived to con­nect the miss­ing links. In the process, the fam­ily mem­bers not only built their ca­reers but their busi­nesses as well.

The “Greeneld”ap­proach

If the Reddy sis­ters sailed on the set course, many in the Gen-X have gone to cre­ate a niche for them­selves in emerg­ing ar­eas. Even though there are ad­van­tages of a legacy, iden­tity

pride as­so­ci­ated with the fam­ily business, sev­eral heirs have charted a path of their own. Some have even taken a more chal­leng­ing route to in­cu­bate new busi­nesses. For in­stance, Uday Ko­tak’s early men­tor­ing fos­tered his en­trepreneur­ship skills that made him grow his business suc­cess­fully into one of the largest pri­vate banks in the coun­try.

Such an al­ter­nate ap­proach gives the young and as­pir­ing from es­tab­lished fam­i­lies an ex­cel­lent op­por­tu­nity of true blue en­trepreneur­ship and an abil­ity to ab­sorb business com­plex­i­ties with­out pos­ing any risk to fam­ily ag­ships.

For many global schools, fam­ily business man­age­ment has emerged as an im­por­tant dis­ci­pline since next gen­er­a­tion fam­ily mem­bers may need spe­cialised skills to take over the reins

Baba Kalyani with his son Amit Kalyani

Bri­j­mo­han Lall Mun­jal (L) and Rahul Mun­jal (R)

Lak­shmi Venu

Venu Srini­vasan

Uday Ko­tak

San­gita Reddy Suneeta Reddy

Preetha Reddy Shobana Kami­neni

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