Family business are the original startups and they remain startups at all points of time as they have to reinvent themselves every few years, says Mr Vineet Agarwal, the third-generation Managing Director of Transport Corporation of India.
Mr Piruz Khambatta, Group Chairman, Rasna Private Ltd, another third-generation leader of the family company, stresses that family businesses need to have the agility of startups, the mindset of an entrepreneur, and the infrastructure of a multinational.
Mr Shiv Siddhant Kaul, Managing Director, Nicco Engineering Services Ltd, also a third-generation head of his family business, said that while bureaucratization is inevitable in family businesses as they professionalize and corporatize, the family must listen to all stakeholders and the leader must not get trapped by flattery of the hanger-ons. “India has a culture of flattery and one is at risk of being deceived,” he said, adding that the best way to not destroy a family business in the third or fourth generation is to remain true to onself.
These family business leaders were speaking at AIMA’s National Leadership Enclave.
Moderating the session on changing family business while sustaining the legacy, Mr Harshavardhan Neotia, Chairman, Ambuja Neotia Holdings Pvt Ltd, said that when businesses transition between generations, they have to deal with the dynamics of different eras and aspirations of a growing family.
Mr Khambatta said that family businesses tend to face pressure to diversify even when there are no siblings with different aspirations. He gave his own example and mentioned that he has learned from his failures in launching a retail app, entering real estate business, and financial services. “I decided to concentrate on what I know, which is to offer mass products,” he said.
Mr Agarwal said that TCI has diversified within logistics and that focus has allowed the company to connect with the investors and for the company stock to attain a 35% CAGR over the past 24 years. However, the managing family separation has been a challenge and now the family has created a constitution which ensures harmony, he said.
On the issue of reconciling legacy with change, Mr Kaul said that each generation has to become the legacy and not just become a part of the legacy. He cited the example of the Tata group as family business rooted in a legacy of culture which is imbibed by employees also.
On the employee resistance to generation change in family business, Mr Agarwal said that getting the old employees to use new technology is a major challenge. However, they need to be treated with respect, as they had contributed to business growth in the early years, he said.
Regarding the trend of entrepreneurs starting businesses for sale and not for longevity, Mr Khambatta said that the startups are actually endups, they only want to cash out. Mr Agarwal said that whether to build to last or to sell is a matter of philosophy. Mr Kaul said that holding or selling a business depends on circumstances and personalities. “Sometimes selling is the smarter move,” he said.
The session was live streamed on AIMA’s social media channels.
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