STEPPING BACK

HOW FAMILY BUSINESSES BRING IN PROFESSIONAL CEOS TO MANAGE THEIR EMPIRES AND OUTLAST THE FOUNDER

- VIDYA S.

IT'S LIKE AN arranged marriage-a professional CEO coming in to run a family-owned business, laughs Abhijit Roy. The MD & CEO of Berger Paints India would know. A longtime Berger man, but a non-family member, he's been at the helm of affairs at the Dhingra brothers-owned paint company for a decade now. "You initially trust and expect that the other person also trusts you. But only after a period of time do you get entrenched in your feelings that I can trust this person more," Roy says.

It is essentially a succession plan where the promoter sits on the board, has a say in capital allocation, holds majority shares and earns an income through dividends, but leaves the day-to-day operations to a CEO. The professional CEO in a family-owned business has been around in India for quite a few years.

Liberalisation in 1991 ushered in aggressive MNCs into the country, and woke up Indian businesses to how the economy was toughening up the level of business acumen and technical expertise required to compete were going up in all sectors of the economy-from paints to pharmaceuticals and marketing to finance. A professional CEO to handle day-to-day operations was their best bet, especially if the next generation was not particularly interested, or the business was growing faster than the family could produce qualified members, or there were simply too many family members, as was the case with Dabur India.