A generational change is under way in the Indian family businesses. The generation that leveraged the opportunities post the 1991 economic reforms is giving way to a new one that took the reins of business groups in the last 10 years or so. Coincidentally or otherwise, this started to happen around the time that Narendra Modi first became the Prime Minister in 2014. The latest move has just happened in the Godrej family.
The older generation that stepped down or moved away from daily operations include leaders like the late Rahul Bajaj, Adi and Jamshyd Godrej, Mukesh Ambani at Reliance Industries Ltd., Harsh and Sanjiv Goenka at the erstwhile RPG Group, Dhruv Sawhney at Triveni Engineering, Venu Srinivasan of the TVS Group and Kumar Mangalam Birla at the Aditya Birla Group.
Even though in some families, power and responsibilities had moved to the new inheritors a few years back, it is only now that many of these changes are being formalised like we have just seen in the Godrej Group. While the earlier generation’s age ranged from 70 to 80 years, the generation that is taking charge today are largely in their 30s. This coincides with the country’s demography, where 67.8% of the population is now in the 15-64 age group.
Changing Dynamics
While the earlier generation fought hard for a level-playing field with scores of multinationals that came into the country after 1991, the current generation of business leaders cock-a-snook at foreign companies. In the 1990s, if the Indian family businesses worked hard to survive in the domestic market, today, many of them are taking global markets by storm. If the erstwhile generation depended on a set of professionals, who had been with the group for a long while, today, business groups under the young generation depend on highly paid professional leaders. In addition, the young leaders themselves have acquired the best of higher education that is available globally.
While lobbying and outreach to the government were done in the past through industry associations like the Confederation of Indian Industry and FICCI, today, many of the young leaders are prominent in more professional groups like the All-India Management Association and global groups like the Young Presidents Organization. Again, while the earlier generation focused on traditional sectors like manufacturing, today, the younger generation is focusing on services and sunrise industries like renewable energy, electric vehicles, e-commerce and quick commerce. Finally, in the past, while Indian businesses largely backed the Congress party, today, many of them are strong supporters of the Bharatiya Janata Party.
It will be this young generation and the next that will take Indian businesses towards the goal of Viskit Bharat by 2047. A February 2024 report by McKinsey and Company says that this national goal will see 600 million jobs being created, incomes rising and per capita income rising to $12,000 with GDP growing to $19 trillion. The report adds that one in every five companies will double their turnover.
Challenges Of Change
But this transition is not without its difficulties. For example, in many business groups the earlier generation is unwilling to hand over charge to the new generation even after formal division. This has led to inter-generational conflicts. Further, in the past, governance issues had been swept under the carpet with the board of directors largely being known faces.
Today, with the government putting pressure on family groups to take the bar higher, changes in board composition have triggered some conflicts. Adoption of technology on a companywide basis has led to challenges for the older generation. Finally, as we have seen in the Godrej Group now, the old adage that business families may not last in its original form beyond three generations is becoming true. The 127-year-old Godrej Group, which divided itself recently through a planned and largely amicable division is in its fourth generation.
Looking Ahead
With a new generation in charge, we are likely to see a few notable trends. First, planned family partitions as opposed to conflict ones will happen at a faster rate instead of unplanned splits. Second, younger generation of women are increasingly going to be at the helm of business groups like we have seen in Reliance Industries. Third, while we have largely seen these inter-generational changes at the big business groups, family-led MSMEs which are at the core of the Indian economy will also be impacted. This will also help the medium-sized business groups, which are typically today in the Rs 200-300 crore bracket to scale to the next level in sizes. Finally, we will also see many of the young generation move out from the comforts of their traditional family businesses to strike out on their own.
George Skaria is a New Delhi-based journalist and co-author of the recent book, Beyond Three Generations: The Definitive Guide to Building Enduring Indian Family Businesses.
The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
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