A 19th century English poet may not exactly be relevant inspiration for an essay on the future of business families, but by some quirk of memory, one of Philip James Bailey's more memorable lines has come to the fore. ''It matters not how long we live but how,'' philosophised Bailey.

''It matters not how long we manage, but how''-with due apologies to Bailey-brings us back with adequate clarity to the theme of the chapter. The first images that come to mind are geriatric chairmen presiding over annual general meetings, patriarchs refusing to let go, ensuing father-son duels, and siblings battling for their share of the empire.

The advent of liberalisation has to a large extent ensured that we read less of such sordid stories in the pink papers. The Indian business family has had to take a fresh look at the way it operates. In fact, operate isn't quite the right word because many of them had to stop doing exactly that (stay away from operations) if they have to survive the long haul. That's why Ranbaxy today doesn't have family members in the chairman's and CEO's slots; that's why M.V. Subbiah stepped down as chairman of the Murugappa group; and that's why even a relatively smaller group (growing rapidly, though) like Pantaloon has more external directors on its board than family members (the Biyanis).

Of course such examples are still exceptions, the majority of business families still grudgingly looking at corporate governance norms as a necessary evil and at professionals with exaggerated mistrust. That doesn't, of course, mean that the family should just walk away from business. Fact is that family businesses are still a dominant force globally. In the US, close to a third of Fortune 500 companies are family businesses (with the family wielding substantive influence, even though many of them have large public shareholdings). Once succession systems are in place, point out experts, family business can play a key role in wealth creation.

That, of course, is no easy task. The seemingly-innocuous trick is to have able, eligible people at the top, be they family members or professionals. Ability comes from comprehensive education at reputed institutes. If the family sibling decides to come into the business, he/she should start at the bottom; a stint at a reputed firm before joining the family would be ideal. If you can't do all that, well, then call in the professionals and stay away from the boardroom.

In the nineties, a number of groups that were forces to reckon with in pre-liberalisation India lost their place in the sun, the Wadias, Oswals, a couple of the Birla factions, the Lalbhais and the Mafatlals being prime examples. Indeed, half of the top 10 business houses of 1991 no longer figure in that list. And for the new entrants into the club at the top, maintaining their position in increasingly uncertain times can only get tougher. The message is loud and clear: only high-quality, professional managements will survive. And whether the owners are good enough to manage will not be decided by the owners but by the market.

3G Troubles

Brijmohan Munjal: planning for the 3G bug

What's common to the Thapars, the Goenkas, the Shrirams, the Birlas and the Bhai Mohan Singh group? Well, all never quite made it to the third generation in one piece. Splits in the business once the third generation comes into the picture aren't just an Indian phenomenon. According to a study done by PricewaterhouseCoopers, about 30 per cent of family businesses worldwide survive from the first generation to the next; only 6 per cent make it to the third.

If some Indian families have been able to survive, it's because of the unique practices they adopt. For the Bajajs, who have worked out 15 rules to run their huge family, socialism lives on. Rahul (of Bajaj Auto), Shekhar (Bajaj Electricals) and Neeraj Bajaj (Mukand Steel) belong to the third generation. Rahul Bajaj runs the Rs 3,138-crore Bajaj Auto. His brother Shekhar runs the Rs 350 crore-odd Bajaj Electricals. But, reveals a consultant, both get equal salaries and pocket money!

This form of socialism may work for the Bajajs, but it isn't fool-proof. Sunil Kant Munjal, son of Brijmohan Munjal, who along with his three late brothers had established the Hero group of companies in the late 50s, feels that there are essentially two reasons why a split happens in the third generation. The first is fairly obvious: the number of family members increases substantially. But what is more significant is that the values of the third generation change. The first generation builds the business; the second generation consolidates it; but it is the third that gets to live in wealth.

Munjal and the hr head of Hero Corporate Services, Anupam Bhasin have worked out a six-step module that all 21 members of the third generation have to go through before joining the business. This includes working for a company outside the group.

For the Munjals, the third generation is a crucial point. ''Once a family business crosses the third generation, it generally survives for many generations after that,'' says Munjal. But a split is not always bad. ''Often, after a split, you get two diamonds of great value,'' says Josh Rosenthal, Partner, Hanover Strategies. The three-way split in the Bhai Mohan Singh group between the late Parvinder Singh (Ranbaxy), Analjit Singh (Max India) and Manjit Singh (Montari Industries) proves Rosenthal's argument.

-Swati Prasad

The Market's Favourites

S.A. Narayan, Executive Director & Chief Executive Officer, Kotak Securities, picks out his six favourite family-managed companies. The criteria used include vision, hr policy, the ability to survive tough times, innovation, corporate governance efforts, and success in creating wealth for shareholders and employees. Not surprisingly, there are few surprises:

Reliance: One of the largest private sector companies, the management has evolved the company from a textile company to petrochemical major. The company has also advanced into other infrastructure areas like telecom and implemented a number of projects in projected time and low capital cost.

Gujarat Ambuja Cement: The group has emerged as one of India's cement majors. It pioneered the concept of cutting cost of production and has one of the most efficient cement plants in the world.

Grasim: The company, one of the largest players in Indian cement market and the world leader in the VSF business, has consistently made profits.

Bajaj Auto: The company is one of the largest manufacturers of scooters in the world. After having initial setbacks in motorcycle segment, it is well on its way to bouncing back.

Hero Honda: The company developed the motorcycle market in India. The company has recorded high growth rates in sales and profits and been able to nurture a relationship with Honda motors of Japan.

Dr Reddy's Laboratories: The company has made a transition from bulk drug player to a recognised global pharmaceutical company with presence in formulation and research and development.

-Brian Carvalho