Winds of Change

Family Run Businesses Still Dominate Corporate India, but Many are Now Opting to Let Professionals Run the Show 
 

- C. H. Unnikrishnan

THE SUCCESSION issue at drug maker Cipla had turned crucial recently. The 79-year-old chairman and managing director Y.K. Hamied, among the most respected generic drug industry veterans in India, could foresee what was in store for his family-run business. His nephew Kamil Hamied — an ardent football fan — was not really interested in running the company. His niece, Samina Vaziralli, was too inexperienced to take on the reins of the company and Hamied has no children.

After a successful run of 78 long years, Cipla decided to restructure its management by appointing a professional CEO and a team of non-family managers in senior positions in 2013. With the decision, Hamied, the family doyen, stepped down as managing director and let the professional team led by outsider Shubhanu Saxena run the company’s globally spread business. Although Saxena left the company in August and Vaziralli was made executive vice chairperson, the company remained under professional management, led by its new CEO, Umang Vohra, who was not a member of the family, either.

Cipla was just one of the many family-run companies that dominate the business scenario in India, to embrace the desirable shift to professional management because of a situational compulsion. But the trend is catching on. Promoter driven companies in India are in general in a state of flux and the transformation is turning into a trend.

Those that stumbled

Many yesteryear champions like the Birlas (excluding the A.V. Birla branch), Nandas of Escorts, the Sarabhais and the Singhs of Ranbaxy, lost out either because of the division of the original empires and/ or the next generation’s inability to take the business forward. But, many other great old family businesses, such as the Tatas, the Ambanis, the Mahindras and the Bajajs adopted professional management strategies much earlier and have grown in leaps and bounds.