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Are
business family splits actually better for the groups? – Financial
Express: November 29, 2004 Laxmi Mittal
wouldn’t have happened if he had accepted a pliant role Alan
Cohen, a Harvard doctorate, who wrote his thesis on the Indian family
business in the mid-60s, came to an interesting conclusion. He said
splits in the family in India lead to growth of the business, as it has
to expand to accommodate new individuals and interests. He was right
insofar as most of the families he studied started a new business to
accommodate the recalcitrant person. In an age when starting a new
business required a licence, capital and a network of relationships to
procure and market goods, the family took care of splits by providing
the resource base and encouraging splinter grou-ps to grow. The fact
that most Indian businesses then were mainly in commodities, which
required skills different from those required in managing FMCG, durables
or services, helped. The closed economy curtailed competition and
inefficiencies of start-ups got covered. For
Indians, being philosophical, any split (which implies a rift) is bad,
inauspicious and the result of bad karma. Conflict is abhorred unless it
is enjoined by dharma. As no dharma will prescribe conflict for personal
gain, splits produce enormous guilt. Cut
to the last 75 years of the business and family scene, and splits seem
inevitable. History, however, is often replete with contrary trends.
While it declares that ‘united we stand and divided we fall,’ it
also applauds ‘Ekla chalo re.’ In
Gujarati, there is a saying which says money, land and wife (or woman?)
are the source of conflicts. It seems individuals who have split create
wealth even when they walked out with very little. However, even in rich
families the sense of right and righteousness leads them to fight for
their share and against perceived injustice. Rahul Bajaj went his way
and set up a prosperous empire, and his brother Shishir went his way and
also ran a profitable business. However, their fight for money cannot be
understood rationally. The
Ambani saga is still unfolding and the common man wonders why they
can’t buy peace even if they let go of a few hundred crore when they
have thousands to share! If there was a dominant individual who is far
ahead of the rest, that is exactly how it would have happened. Peace
would have been bought. The lesser the gap in the abilities of the
individuals, the greater the animus and intensity. The Singhs of Ranbaxy
and the Nambiars of BPL illustrate this. There
are some distinct patterns visible here even in splits. One is
separating potential contenders. Kasturbhai Lalb-hai placed his two sons
in the textiles and chemical businesses. There may be cross-holdings,
but the chances of a split were minimised at least in the first
generation. Another pattern is represented by the Murugappa group in
Chennai, where a number of brothers and cousins look after different
companies under a patriarch. Wherever
there is an integrated business, a split in the family can be
disastrous, as the business cannot be divided. The Kamanis and the
Sarabhais exemplify how badly a split can affect the business. For those
who argue the downfall of these families cannot be ascribed to family
dissensions alone, one could only say that while there is some truth in
it, the division did affect the business significantly. Having
said that, one must concede Laxmi Mittal would not have happened if he
had accepted a pliant role in the family business. Aditya Birla would
not have grown had he stuck on to the family groove. When there is an
aggressive, entrepreneurial and visionary individual, a split is an
organic way of providing freedom and space to such an individual to
grow. Is
a split the only way growth can be achieved? Not necessarily. The Ruias
of Essar, the Zee group, the Waltons of Walmart and, till recently, the
Ambanis, are examples where businesses have grown without the families
splitting. Families
and businesses are very similar to cells. They need to split to remain
healthy. Splits are not necessarily dysfunctional. They are inevitable
at some time, whether achieved peacefully or otherwise. They are sad,
but are they not better than living in perpetual conflict? The writer is senior consultant with global HR firm Shilputsi |
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