Family managed businesses are the ‘unsung heroes’ of the Indian economy: Adi Godrej

Adi Godrej, Chairman, Godrej Group

More than 95% firms in India, Latin America are family run enterprises

Mumbai, February 9



Often able to take a longer term, more strategic approach, family managed businesses are the ‘unsung heroes’ of the Indian economy, according to Adi Godrej, Chairman, Godrej Group.

Many of India’s largest companies are nurtured by a small group of promoters and family members, who are highly ambitious and entrepreneurial, and are delivering profits even in an uncertain economic environment.

Trust factor

“Trust can be a source of significant competitive advantage to a family business,” said Godrej. He was speaking at the launch of the Thomas Schmidheiny Centre for Family Enterprise at The Indian School of Business (ISB), Hyderabad. Godrej is also the Chairman of the ISB Board.

In India, family businesses tend to range from the small mom-and-pop grocery stores to large conglomerates. Godrej said that more than 95 per cent of registered companies in India and Latin America are family run enterprises.

“Family businesses, both small and large, tend to be quick to react to threats as well as opportunities. While trust lowers transaction costs, corruption, and bureaucracy,” Godrej said “trust could also be a source of significant competitive advantage to a family business.” The Chairman of the Godrej Group continued that an “essential element for the long-term success of family managed businesses, as with other forms of business, is a strong system of corporate governance. “Good corporate governance must include the framework of strong performance orientation.”

He added that corporate governance was also imperative in several aspects of business, such as human resource management and strategic planning.

Heir apparent

Most family managements have aggressive growth plans, and are agile in their decision making. As their growth has skyrocketed, many have stepped outside their zones to acquire companies in new industries and geographies.

In its vision 2020, the Godrej Group has said that it aims at a 10-fold growth in top line in 10 years. Adi Godrej has also confirmed that the Group would continue to explore opportunities in the overseas markets.

Right talent

A recent PwC Family Business survey had noted that family businesses tend to believe that attracting the right talent and retaining it would be a challenge that would need to be faced in the medium term.

Efficient succession planning, mentoring and developing the next generation of successors and leaders was also crucial to the success of family businesses.

Confirming it, Vipul Singh, VP and Head of HR and Communications at ADP India, a HR process outsourcing firm said, succession planning is as important as managing finances of a business.

For a family run business, it is an equally important factor. It is a way of ensuring business continuity, since it helps in managing risks and also planning for the future with a long- term perspective in mind.

He added that in the dynamically changing environment, “leaders, even if they are automatic successors, need to be groomed to take up the leadership positions to sustain and grow successful business.”

New ISB centre

The inauguration of the new centre at the ISB coincided with the Fifth Asian Invitational Conference on Family Business being held at the ISB.

The new centre is an expansion over the Thomas Schmidheiny Chair for Family Business, which was established in 2006.

Over the years, the Chair has contributed significantly to the growing body of research on various aspects of family business, such as governance, leadership, professionalisation, role of women in family businesses and entrepreneurship. The new centre has been established with the objective of creating sustainable family enterprises and institutions, strengthening the custodianship role of business families and other stakeholders.

The Centre is to focus on wealth management, philanthropy, developing mentors for family businesses, managing family business boards, and research on global family enterprises.

Published on February 09, 2015

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