The GenNext cometh

A hundred and thirteen years ago, two brothers Ardeshir and Pirojsha, laid the foundations for what is today the $2.4-billion Godrej group. Ardeshir gave up law and set up an enterprise to manufacture locks, safes and security equipment. He went on to make toilet soaps from vegetable oil and, along with Pirojsha, launched the group as a flourishing, diversified business house. Cut to the present: Ardeshir and Pirojsha exist not just in spirit, but as the current father-son duo—along with other family members—who are seamlessly continuing to script the Godrej success story.

Today's Ardeshir is better known as Adi, the Chairman of the Godrej group that includes at least 10 companies with interests that extend from appliances and electronics to chemicals and real estate—and, yes, locks and soaps too. And there's a Pirojsha too—the son of Adi, all of 29 years — who is assisting his father at the recently publicly-listed Godrej Properties Ltd (GPL). Fittingly, the Godrej group has its headquarters in a township called Pirojshanagar in the suburb of Vikhroli in Mumbai.

It's now for the fourth generation Pirojsha—along with sisters Tanya and Nisa and cousin Navroze—to take on the enviable legacy built by the past generations. And they're doing just that, with a foundation of quality education and systematic grooming by the senior Godrejs in the business (read all about the NextGen Godrejs on page 54). And the best part: They've arrived (in the business) at a time when opportunities for growth aren't exactly in short supply in a rapidlygrowing and voraciously-consuming economy. "The fourth generation is in close touch with the aspirations of our younger consumers. We have given them the responsibility of revamping the consumer image and they are contributing tremendously to the group," says the Chairman.

Like the Godrej juniors, a rash of NextGen members—and as you will find out many of them are women— is set to take the plunge into the hurly burly of big business. Some, like the Godrejs, have to continue the good work done by their predecessors. And there are plenty of them—read all about them in the pages that follow— that include the NextGen of the Biyanis of the Future Group, all the scions of the different splinters of the Piramal group (Dilip, Ajay and Urvi, wife of the late Ashok Piramal), and the little-known sons of Rajan Raheja. Note: In our listing, we have left out well-known NextGen scions who've been at the helm for some time now,like the sons of Rahul Bajaj, those of the Ruia brothers of the Essar group and those of Nusli Wadia of Bombay Dyeing. Rather, we've chosen to focus only on those who've assumed significant responsibility in the recent past (although their grooming might have begun some time ago).

But it isn't as if entering the family business is a logical progression for all the sons and daughters. More than a few have shown a penchant to leave the oftendiminishing legacy behind and leverage the capital generated to plunge into higher-growth opportunities. Example: M. Thiagarajan, who moved away from the family business of textiles to start up India's first fully business class airline, Paramount Airways. Yet, others are attempting to leverage the family's expertise in traditional businesses to integrate forward into newly openedup options for growth. For instance, Bhairavi Jani's great grandfather set up a clearing and forwarding venture in 1896. Many decades later her father Tushar Jani took that business a step forward by cofounding logistics firm Blue Dart Courier Services (which was sold to DHL). Bhairavi has gone a step further by setting up a warehousing and inventory management operation.

To be sure, most of these NextGen have the responsibility of busting the norm that business families can't prosper beyond the third generation. Whilst it's true that many of yesteryear's families have faded away, a cursory glance at India's top business houses will reveal that most are family-run, with the Tatas, the Ambanis (Mukesh and Anil iindividually) and Kumar Mangalam Birla hogging much space.

Of the top 50 in the 2009 edition of the BT500, some 70 per cent are family-owned. Yet, past glory and number of years—or even centuries—are no guarantee of a business lasting. The flagging fortunes of the century-plus Khatau group and of the splinters of the Walchand Hirachand group—which once figured amongst the top three businesses in India—are just two indicators that there's nothing like everlasting prosperity. Family bickering (leading inevitably to splits), a reluctance to change (and thereby the inability to keep up with competition) and the inability to look for (or trust) non-family talent are some reasons why family businesses go to seed.

One surefire way to ensure that families don't get bogged down by such issues is to draw a line between ownership and management and — importantly — get the NextGen involved in the exercise. A few families had the foresight to flag off this exercise many years ago. More than a decade ago, in 1997, the Burmans initiated a rather rare move among family-held businesses in India. They brought in consultancy McKinsey and Company to help Dabur India make a transition from a family-held management to a professionally-run entity.

By then Dabur had already begun to see the involvement of its fourth generation. A structured plan was put in place that charted out the course where "only some members representing the family would occupy board positions, even as we all would have stakes in the company," explains Amit Burman, one of the fourth-gen and Vice Chairman of Dabur India. "Today, Dabur is completely run by professionals. The family has just four representatives on the board and there is a separate family council that reviews the strategy of Dabur India. We also discuss the various independent business ventures and offer suggestions and help to each other, if required," adds Burman.

The role of the family council is to look into the broader business strategy and vision of Dabur India. It also meets to offer guidance on personal ventures of family members (like King's XI, the IPL team, in which another fourth-gen Burman, Mohit, has made an investment; an investment in Aviva is also outside of Dabur) and for the family to help and guide each other.

Similarly, southern infrastructure giant, the GMR group, has sought to separate the family from the business, and has laid down principles to build the enterprise as a strong professionallyrun conglomerate. Family members can enter the business but they will be considered on merit and paid on a par with professionals employed. However, the economic benefits coming out of their shareholding are separate.

The family has agreed to follow corporate governance practices and professionalise operations so that the family members can move from running operations to strategic planning. Chairman G.M.Rao's two sons, G.B.S Raju and Kiran Kumar Grandhi, joined the business in 1996, when they were just 22 and 21 respectively. Today, Raju is 35, and Chairman, Corporate and International Business, and Grandhi, 34, Chairman, Airports. They rub shoulders with professional top brass such as P.M. Kumar, Executive Director, Group Corporate Development and K. Balasubramanian on the GMR Holding Board.

Families are also realising that it's no more feasible to just plonk their offspring on their companies' boards once they get their driving licences. A degree from a prestigious university, stints outside the company, and then starting at the bottom of the ladder make for the ideal initiation path for the young blood. Good example: Nandan Piramal, the youngest son of Urvi Piramal of the Ashok Piramal group. After passing out from the University of London, Piramal did stints at a law firm and at a broadcasting major before joining one of the family's business.

You'd never guess what he's doing now . Yet, even the best universities and the best mentoring won't ensure that the NextGen can be successful in ensuring continuity. What if the children are not interested in the business? "The sustainability of a business without the family also has to be discussed (by the family)," says Vishesh Chandiok, National Managing Partner of Grant Thornton in India (which has a division working for family-managed businesses).

A sign of things to come: Anirudh Patni, son of one of the founders of Patni Computer Systems, Narendra Patni, recently resigned because of differences with the management— not uncommon, except that the management is headed by a CEO who is a professional! Yet, if the NextGen has the passion for and focus on the business, they are in the right place. They may be wet behind the ears, and will have their shortcomings. But as Adi Godrej puts it, in the context of his children: "The shortcomings, if any, will be honed with experience and practice."