The Hindu Business Line : ‘Clear succession, post-retirement plans aid transition’

‘You should plan beforehand, experiment with roles for generation next, meet a retirement deadline,
add value to your role as a coach and have confidence in the younger generation.’

G. Naga Sridhar

The management of transition has always been significant in family businesses in view of the likely changes in the economic environment, the need for diversification in the business and the changing priorities of new generations in a family.

How does one achieve a smooth and profitable change-over of management from one generation to another while ensuring business continuity and protecting the image of the business house as a single entity?

This formed the crux of a panel discussion on ‘managing transition’ at the Second Asian Invitational Conference on Family Business held at the Indian School of Business, Hyderabad, recently.

SUCCESSION PLAN

A succession plan and a clear post-retirement policy play a vital role in ensuring hassle-free succession in family businesses, said K. L. Rathi, Executive Chairman, Sudarshan Chemical Industries.

Observing that managing transition across the generations is vital, Rathi said the strategy put in place by his grandfather, J. M. Rathi (1900-1976), to keep the family together had delivered results.

“We have taken a conscious decision that only male participants will run the business. All of them would necessarily be educated in Chemistry-related disciplines to give them a proper understanding of our business,” Rathi said.

The family elders would also ensure that youngsters were given operational roles on the basis of their merit and aptitude. “Every sibling will have to work his way up the ladder. There is no scope for any bad-blood or bias in this,” Rathi said.

The Rathi family has also ‘documented’ guidelines on sibling partnerships and ‘cousin consortiums’.

An equally important area is post-retirement plans to ensure that senior members do not block the progress of youngsters. “Though this is a debatable issue in many family-led business houses in India, we have had no problems thanks to a policy by which we relinquish duties on attaining the age of 65,” Rathi said.

KNOCK-OUT PUNCH

B. K. Jawahar, Chairman, Usha Martin Ltd, is of the opinion that a ‘five point knock-out punch’ should be adopted for a calm yet effective transition from one generation to the next in a family business. “You should plan beforehand, experiment with roles for generation next, set and a meet a personal retirement deadline, evolve and add value to your role as a coach, mentor and social visionary and have confidence in the younger generation,” he said.

Narayanamurthy of Infosys had successfully demonstrated an effective transition plan though the company could not be called a family-run business, he said.

NO GENDER BIAS

Sangita Reddy, Managing Director, Apollo Hospitals, Hyderabad, said gender had no role in the succession plan of the Apollo Hospitals Group. “We did not face transition blues as ours is a relatively new organisation compared to others. We have just started looking into the issue of transition,” she said.

Making it clear that gender did not influence her father’s (Pratap Reddy) plans on transition, Reddy said: “We, the four daughters in the family, have been given roles which are suited to us. As experience shows, I don’t think my father ever regretted giving responsibility to us,” she said.

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