Boys to men


back to issue

Through the last 50 years, the Indian business family has been publicly reviled and privately admired, just as it has been over the centuries. Family business, as both the source of derision and envy, is not only amply featured in the political rhetoric of the past 50 years, it also receives more than a passing mention in the writings of such historians as Irfan Habib and Tapan Ray Chaudhuri1. The Indian business community has been reviled because of its obvious and ostentatious selfishness; admired for its ability to breed and nurture successful entrepreneurs in each generation.

This article tries to examine a particular driver of success: trends in the growth of scions, mostly young sons in Indian business families, to highlight patterns in their reaching maturity and success. Analysing the role of sons may appear a sexist approach but all the primary and secondary information available has nary a mention of womenfolk in these business families.2 The case studies of foreign business families are different but sources of information available to the author on this was limited.3

At the outset there are two questions that must be asked and clarified. First, is the sample quantitatively significant and are the numbers put forward representative of the Indian milieu? Yes, because even the most exhaustive listing of business families does not cross 75,4 and the primary source of information used in this article has details of 50 business families. The author’s own analysis of perhaps as many other smaller business families is also laced into this sample. The sample, therefore, deals with about 100 individual businessmen which should be adequate under the circumstances.

Second, is the study sufficiently rigorous? Yes and no. There are few scientifically rigorous studies on family businesses.5 Views offered are often based on empirical observation though every effort is made to follow up with numbers from the limited information available. To that extent it is somewhat based on numbers. The foreign samples are smaller and less detailed and should only act as points of reference and comparison for the Indian business family.

This article first tries to establish the proposition that Indian businessmen come into their own only around the age of 40. This is followed by 7 to 14 golden years of rapid expansion. Subsequently, the family business goes into a quiet and dormant phase experiencing only normal growth till the next generation reaches the golden age.

The second part of the article deals with the hypothesis that successful family businesses must depend not only on the ability of their young sons but, more importantly, the timing of their coming of age. Those who come of age in periods of general economic growth do better than those who reach their peak in otherwise recessionary periods.

The third part of this article tries to chart the growth, succession and estate management strategies based on the first proposition. It examines whether fathers and uncles of young sons in such business families should actually plan for this golden age. Do those who are given an independent business fare better than those who remain under their wing? Should fathers retire when their sons turn 40? Does splitting the family business at that point make sense? Are older offsprings the lodestone of this golden age or does it also apply to younger sons? The article concludes that the answers to all the questions is in the affirmative and such strategies are necessary.

A study of the heads of businesses in India, more specifically those managed by family groups, shows that the patriarch of the business usually ascends to his position around the age of 40. Like most things human, this is not an exact number, but a sample of 91 businessmen who are among the richest and most prominent Indian businessmen shows that nearly 80% of them came of age at around 40.

The other 20% came of age at different points of time; Kumar Mangalam Birla had to take over the reins when he was barely 28 years old at the time of his father’s early death while R.P. Goenka played second fiddle till the age of 50 because his father would not let go of the reins. There are others who remained mired in complex family holdings and could not take command in their golden age.

Data on foreign business families are unfortunately but not so readily available. The standard U.S. ‘Who’s Who’ does not have data on seven out of the world’s ten richest working billionaires. The data on U.S. billionaires is more readily available but even here not enough of them are listed. However, a study of some 40 billionaires reveals three clear groups. The first relates to self-made billionaires like Bill Gates, Micheal Dell, Ted Turner, Warren Buffett, and Philip Knight of Nike. They started in their early twenties or even earlier. The second are scions who inherited large fortunes from their parents or grandparents. Examples would include the Mars family, Lester Crown of General Dynamics, Rupert Murdoch, Leonard Lauder, and Robert Haas of Levis. They seem to have come into their own in their late forties rather than in their late thirties or at forty. The third and most predominant set is of billionaires who seem to be on top of their empires even in their seventies, eighties and nineties. It would be interesting to see what the situation is among the Japanese and other East Asian billionaires, but such a study will have to await the future.

What would constitute the golden years of an entrepreneur? A close look at the business empires of some 50 big houses reveals that it is usually less than three major lines of business which contribute the lion’s share of revenue and profits. A closer look at the growth path of these major enterprises within the family business group shows that they were founded or developed by an eminent family member during a seven, and in some cases 14, year cycle starting in their late thirties.

The list is endless. Dhirubhai Ambani created Reliance as a brand when he was 40, as did Manu Chhabria embark on his spree of acquisitions; Aditya Birla made Grasim and Hindalco his centrepiece. A generation earlier, K.K. Birla shaped his fortunes around fertiliser; Sudarshan Birla made his most profitable forays into cement and chemicals; Nusli Wadia took his firm into chemicals and foods. This was equally true a generation earlier when J.R.D. Tata built up Telco. Similarly, the Wadias, or even Jamshed Tata, consolidated their main enterprise during these years. They had all been in business for a decade or more earlier but the inspiration to grow suddenly, spectacularly and successfully seems to be the product of their forties.

Of course, there are many exceptions. R.P. Goenka, A.C. Muthiah, and T.P.G. Nambiar all bloomed late but are among the most eminent businessmen of the day. But strangely there are few examples of the likes of Ghanshyam Das Birla who began to bloom in his twenties and early thirties. There are, in fact, no such examples available from among the current crop of industrialists, although there is a similar set of self-made millionaires of Indian origin emerging among software companies in the U.S. Even as India makes a concerted push in the technology driven fields of pharmaceuticals, services and software, we have not seen the emergence of a Dell, Gates or any of the big hitters that are listed in magazines like Forbes. The reasons for the lack of such entrepreneurs is outside the scope of this article.

There are examples of others who hung around through the best years of their lives with the family firm merely as super managers. Perhaps the most prominent example is that of Ratan Tata, who at 62 is desperately fighting time to put a stamp on his reign, first through the unsuccessful attempt to build an airline and now with Telco’s foray into the passenger car market. R.P. Goenka, when in his prime, attempted to begin his march by acquiring Balmer Lawrie, but had to back off under pressure both from his father and the government. He hung around as a super manager until his fifties before embarking on a short career as one of India’s brightest raiders. There is an apocryphal story which RPG recounts to his intimates that he needed another 10 years to create India’s first multinational.

The timing of a new thrust can be very important. Even while R.P. Goenka managed to ride the upswing in the Indian economy during the 1980s when Indian autarchy was being dismantled, his sons, Sanjeev and Harsh, seem to have hit a particularly bad patch in the markets. By all accounts Harsh Goenka who is based in Mumbai had begun to emerge as a new generation player. But the downturn in the markets hit his ambitions hard and he will now have to wait till the next upswing to make a mark in industry. His younger brother Sanjeev has more time but with no upswing on the horizon he can only hope that the wait will not be too long. There are others like the Lloyds group, the new Thapar scions, or the young Jindal children who continue to wait in the wings with ideas but no means to put them into practice, even as their companies tighten belts and cut investment plans to tide over the recession.

But the toughest story is still that of Ratan Tata who had to wait for almost 15 years before he got a chance, only to have it cut out under him by the recession. When the markets finally come around, as they usually do, he may just be too late to roll up his sleeves and make the aircraft fly and the cars move on overdrive. Another group which must now come to terms with changing generations and a bad market is Ranbaxy. Bhai Mohan Singh took his time in handing over the reins. The brothers fought among themselves and with their father through the best years. The late Parvinder Singh led Ranbaxy into direct confrontation with the global pharmaceutical giants and came out better. Time, more than money and ideas, was the greatest constraint.

The picture that seems to emerge is that Indian businessmen are deemed to be mature and experienced enough to be given a free hand only after they turn 40. There is a ‘biological’ reason for this. In the Indian context, the father of the businessman, who is more often than not also the head of the business, becomes interested in turning over the reins of the business to his sons in order to have an orderly succession only in his early to mid-60s. Before this he is probably too caught up in the business to give his sons independent charge. Also, he would have by then achieved social prestige, and failing health could be a factor that forces him to slow down.

In all this there is a major difference between Indian family business groups and those in the West. In the West, family controlled businesses are dominated by the family at the board of directors level and not at the working manager level. Therefore, the father can retire gradually since his general management duties are lighter to begin with and the time put into the business is entirely voluntary. He can continue to retain the title of chairman of the board because although the duties involve some work they are not onerous or tension filled as in general management.

In India, family members are hands on and usually function as the full-time chief executive of the business. The head consequently puts in more time than his western counterpart in general management duties. Since shareholdings in India are split up between family factions and a large number of companies are under their control, he also spends a large part of his time in consensus building among family members. This could be in the form of taking part in a large number of family social events and also spending time being entertained and entertaining them. Among his general management duties, the family member seeks to keep control over finance and consequently spends a large amount of time scrutinising expenditure, income and investment.

Indian family businesses rarely split voluntarily since splitting is anathema to family solidarity. Also, there are fewer self-made entrepreneurs in India. Those in the big league are usually not first generation businessmen. Therefore, the young businessman has to bide his time for much longer than his western first generation counterpart before being given a free hand. It takes years before family members let him pursue his ideas of what the business should do to maintain growth over the next generation, because his father had done this adequately for about 20 years before. Even more alarmingly, the eldest son is usually losing time even as estate matters and spheres of control are sorted out with his siblings and relatives. But he has to wait for less time than his western non-first generation family business counterpart since elder Indian businessmen have a shorter life expectancy and retire earlier than most western business family heads.

The two strategic directions that Indian family business groups need to take are clear. The longer the golden years, the better the family group is likely to do. The first direction is that Indian businessmen must shorten the maturing process and hothouse their sons so that they can hit their productive phase at perhaps 35 instead of 40. To do this would require them to invest more in education, such as in MBAs, so as to shorten the learning process. They also need to plan out their assignments and careers carefully so that they acquire adequate maturity and general management exposure by the time they are at the right age.

Second, they need to carve out spheres of control and resolve estate issues earlier and voluntarily. It means that they must also be prepared to invest, grow, and hothouse a set of ‘family-like’ professional managers who will continue with general management duties of the existing businesses even as the new generation begins to take the business into new directions.

The second direction that emerges is that businessmen must plan to extend their golden years beyond the seven years that is usual and beyond the 14 that seems to be the outer limit. Observing Indian business, there seems to be two constraints to this. The first is that the family business group must not run out of money to fund expansion. If one assumes that growth of market capitalisation of the group increases more than the 21% national decennial compounded average growth rate, the family has to double its investment in the business every four years or the gestation period of any medium or large project. At the end of the second cycle of such growth, that is in eight years, the family group has to find four times the funds it began with just to retain the same percentage of control.

In the third cycle, family fund-raising efforts cannot keep pace with the needs of an expanding business. The successful businessman is now faced with the choice of retaining control but halting the high rate of growth or leveraging his success but gambling with his family’s control over a set of successful businesses. Family members usually choose the former strategy because they argue that it makes no sense to create a very large successful business over which they cannot retain control. The patriarch comes under pressure and often buckles under, giving up dreams of an empire. A clear strategic need is for the businessman to generate funds from within the family, but this approach has its limitations.

A second way out is to be able to distribute business shareholding so widely that even a diluted holding can help retain control. Here, image building and close coordination with institutional investors like the Indian development banks and foreign institutional investors would be very helpful. Image building permits business families to keep less than 30% of the stock with them by placing the rest with the financial institutions and keeping more than the usual 20% stock with the general public without endangering their control over the company.

Finally, we may be entering a situation where buyouts and acquisitions become more prevalent. Businessmen must stop being sentimental and be ready to cash out. This would require a major emotional change in letting go and reconciling themselves to becoming major investors rather than industrial managers.

The Indian businessman remains hands on in too many areas for too long. By the time he is 40 the businessman has built up a team of loyal managers within the business and these form his management team. During the seven golden years they are stretched too thin for his comfort. These managers by then often constitute as little as 10% of the top managerial cadre and begin to have spans of control which are too large.

The businessman begins to feel insecure within his own business as the organisational culture changes. New managers are hurriedly elevated or recruited in droves as the business expands. They are recruited on the basis of professional qualifications and exposure, and are not sufficiently acculturated to the particular businessman’s way of thinking. Also, as the company and its reputation grows, it tends to attract the better qualified and more able talent. These new managers and their superior abilities often make the old hands insecure and they unconsciously begin to work at styming further expansion and consequent dilution of their own control.

The loyal managers also begin to change. Most of them grew into the intimate circle and are in their late forties when the businessman’s golden age begins. Seven years later they begin to develop a pre-retirement outlook and tend to become status quoist. This also leads to a tapering off in the growth of the business.

But, as the business grows, the businessman and his team are supposed to become visionaries and oracles of the future. They must specialise in policy and strategy rather than procedural, administrative and general management matters. The ability to professionalise management is therefore critical in extending these golden years.

Family businesses need to recognise the biological time clock ticking among their members and realise that their organisations, as currently constituted, display low tolerance for change and stress. They must develop strategies that create management structures which can absorb rapid expansion over a relatively short time after initial years of gradual growth. The other imperative is to be able to settle spheres of control, sources of finance and possibly estate issues between siblings and cousins of that generation in order to give them a fair shot and perhaps even prolong such a golden period of success.


1. Irfan Habib and Tapan Ray Chaudhuri, Cambridge Economic History of India, Cambridge University Press, 1982.

2. India’s Business Families, Special Issue, Business Today, January 1998. Also, Sudipt Dutta, Family Business in India, Response Books, 1997, for a larger set of readings.

3. ‘The 200 Richest Working Billionaires’, Forbes, 7 July 1998.

4. See Business Today, op cit.; also Dutta, op cit.

5. See bibliography, Business Today, ibid.