Lessons from the Past 53: Culture, Values and Family Business
About ten years ago, V Subbiah, the presiding head of a well-respected business family in south India, which has been in business for the last 150 years, spoke to the media. He had worked out a transition from 'family managed' to 'professionally managed' administration for all the companies in the group. 
The family representative sat on the governing board that oversees policy and performance and ensures alignment to the group's vision, mission, and goals.
The operating boards, composed of professionals, manage the day to day and year to year operations of the companies. 
In this interview, he made a significant point. That family-run companies create and nurture an organisational culture for many decades because they provide an environment of continuity. This is far more difficult in purely professionally managed companies, where culture could, and does, change with every change of the chief executive officer (CEO).
The founders and successors of the Murugappa group have always been known for their simple living. They have lived, worked and acted like 'ordinary people'. This percolated to all the employees in all the companies.
Simplicity, lack of ostentation, eye for detail, yearning for perfection- these were hallmarks of the Murugappa group. The family cast a shadow across the organisation, and companies within the group grew up with this DNA. This was reflected in the selection, the training, the promotion and the total governance in the companies in the group. 
Jamshedji Nusserwanji Tata (JNT), founder of the Tata Group and one among the five largest conglomerates in India, always looked at how he could serve the country, through his business activity. He wanted the country to be self-sufficient -- and the Tata conglomerate became a pioneer in textiles, power, steel, automobiles, and software. He embarked on these giant projects at a time when few had the courage and such far sighted vision. 
He also kept looking beyond "pure business", and helped to set up the Indian Institute of Science for basic scientific research; Tata Institute of Social Sciences, and other institutions, to improve the intellectual capital of the country. These pioneering forays have now grown into world-renowned institutions in over a hundred years. The culture of the Tata group continues to bear the JNT stamp. 
Most of the profits of the Tata companies accruing to Tata Sons go to charities funded by various Tata Trusts. You feel this undercurrent of service in every Tata company even now. And the Tatas themselves are not counted among the richest fifty people in the country!
It is the same with Cadbury in the UK. The company was started in an area which was in great need of employment. For four generations, the Cadbury company kept growing -- and became an international brand synonymous with chocolate. They provided much of the employment in the area and was the focal point of community life in the district. 
Sir Adrian Cadbury of the Cadbury family became the high priest of corporate governance in the UK and headed the committee set up by the government of Great Britain. 
Then there was a successful bid for Cadbury by Kraft- and the culture evaporated on the altar of 'cost cutting' and 'shareholder interests'. The pioneer factory was relocated to Eastern Europe, the old district became desolate and unemployment became rife. 
No one describes such a situation as vividly as Howard Schultz, in his book ONWARD, where he describes the startup of Starbucks by him to later become a $10 billion company. But Starbucks lost its soul somewhere along the way when professional managers followed Wall Street and what they wanted rather than following the customers and what the customers wanted. 
Mr Schultz went back to the company after a break of seven years (2000 to 2007) and again assumed the mantle of CEO/entrepreneur owner. It is a touching story of how finally Starbucks reignited its soul and went on to even greater heights. Mr Schultz brought back the culture of Starbucks. 
There is something about most entrepreneurs or families and cultures that cannot be fully described!
And then, I look at the news at present, where the names of the entrepreneur and his wife, who started BharatPe, are eliminated even before the company went into professional management.
And at YOYO, where the founder was removed from the board of directors soon after they got started. 
And at Elisabeth Holmes, who was touted as the unusual young female billionaire in the startup world and was soon found to have cheated the public with the technology which she had offered.
And at great successes like Flipkart, where the company was sold at its peak in performance and the founders moved on to do other things. 
And where there is no question of looking at a family and many (or even a few) generations to carry the torch forward.
(Walter Vieira is a Fellow of the Institute of Management Consultants of India (FIMC). He was a corporate executive for 14 years and pioneered marketing consulting in India in 1975. As a consultant, he has worked across the globe in four continents. He was the first Asian elected Chairman of ICMCI, the world apex body of 45 countries. He is the author of 16 books; a business columnist; visiting professor on marketing in the US, Europe and Asia. His latest books are "5 Gs of family Business" with Dr Mita Dixit and "Marketing in a Digital/ Data World" with Brian Almeida. He now spends most of the time in NGO work.)
Free Helpline
Legal Credit