Companies have to keep changing, so do families

Written by Saikat Neogi | interview AJAY S SHRIRAM & VIKRAM S SHRIRAM | Updated: Nov 1 2009, 05:00am hrs
After the split of DCM empire in 1990, Ajay, Vikram and Ajit Shriram have steered DCM Shriram Consolidated Ltd or DSCL to make it a Rs 3,500 -crore empire with a diversified business portfolio ranging from agri-products to rural retail and power. Ajay S Shriram, chairman & senior MD and Vikram S Shriram, vice-chairman & MD spell out the companys growth strategy and succession plan in an interview with FEs Saikat Neogi. Excerpts:

What is the business outlook after the worst fears about economic downturn are behind us

Ajay Shriram: We are in five different kind of businessseeds, sugar, fertilisers, rural retail and window solutions. In todays market it is very important to see how we can combine our products and services in terms of technical know how, and knowledge. For example, we are a one-stop department store in rural India where one can get agricultural products, FMCG products, and white goods. This year we have made up our mind to consolidate this business.

Vikram Shriram: Our focus has been on rural India because of the governments thrust and also because agriculture income is going up. Down the road, rural India is a good market place and our entry in this market was driven by our strong focus on the agriculture sector. So, the focus in each of the businesses is not necessarily to be number one in capacity, but in cost of production. In fact, we are one of the lowest cost producers because of scale and backward integration.

Why are you planning to hive off your rural retail business

AS: Yes, we are hiving off Hariyali Kisaan Bazaar, which has around 300 stores, as a separate company. We havent still got to the execution stage and are waiting for the right time to do it. If we get value add like improving our supply chain, logistics etc, then it would be a business decision taken in a professional manner.

VS: In the long run we are looking at getting money from outside. Now, whether it comes from a domestic source, or a foreign source, is immaterial. We are open to both and it depends on what they bring to the table.

What does professionalism mean to you in a family-run business

AS: I think a professional company whether family-owned or not is one that can compete in a competitive market. How the company does it depends upon the family strategy. Hiring a professional CEO is a family decision. The family is the larger shareholder and it is in its interest to ensure that the company performs the best.

VS: Ultimately, professionalism is a state of the mind. Its not your bloodline. Just because you happen to have a particular gene in you does not disqualify you from being a professional. Why should you come with that mindset Its is more an issue of leadership, competence and of course a culture in the business that must encourage what is the best for the business. Let us define what is the best for the company. Are we doing it And are we doing it in a long term, consistent and sustainable manner Whether genetic material happen to come from some family background or happen to come from professional background is incidental.

How much do you delegate to your professional managers

AS: Our company is a professionallyrun, family company. The delegation is pretty high and we dont get involved in operational decisions.

VS: Our operations are completely delegated. The only areas we get involved in revolve around exhorting people to develop more robust processes and systems. We work with people to develop a stronger system in HR audit, corporate governance and related areas. Our interface with our business other than operations, strategy and people developmentbasically processes, systems, and strategy is simply minimal

You have been also working on formulating a family constitution. What is it about and what prompted you to do it

AS: Every year we go for a retreat and few questions invariably come up: Are we inheritors or entrepreneurs What can we do in todays world that will satisfy future generations too Can we try to have some guidelines, some directions, and some thinking pattern in a cohesively agreed format for them to follow Today, the younger generations exposure is different and their expectations are also different as they are getting educated abroad and their worldview is different. The idea is to preserve the unity of the family, because if the family unity suffers, the company suffers too.

VS: Can we think of some mechanics whereby we can think of laying down the rules of the games, which you would expect future generations to follow If we have it, we are all gainers. We have started the initial discussion on it. When you run a company, there may not be a manual but there is a company culture, a way of doing things, dos and dont, and a value system. There are so many things that get institutionalised in a corporate context. The point is to do the same in a family context. What we are trying to do is to evolve a set of principles, guidelines, or goals so that we get certain things articulated on paper that we all agree to. It must be dynamic. If its fossilised, it will make us a fossil. It should be open to change. Companies have to keep changing, so do families.

Are you also working on a succession plan If yes, what is it

AS: Succession planning for us is a way of discussing and debating about our future. Its not cast in stone. When the Shrirams split in 1990s, it was the most dignified, self-contained and respectful splits. Today, our children are aged 9 and upwards. What is the family responsibility towards them How do we provide them space and family support in whatever they want to do There may be a set of issues when they come into business. So, we are looking at all those issues in an inclusive and community-oriented manner.

VS: When we do succession planning, we look at it differently. What are the family demographics going to be 10 or 15 years from now What will be the likely aspirations of this bunch of people Its not succession planning. Its like visualising what things would look like in the near future. Its not about a member of the family taking the charge and running the business.