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The family businessperson creates. The professional manager manages. Thus it is that Vikram Lal, 55, has sown the seeds of separation between his family and his Rs 919-crore Eicher Group. If he is successful, Lal will have created a unique model for the role of the business family in the family business. By Rajeev Dubey
If professionals won over progeny, it was because Lal believes that the family that founded a business does not automatically have a mandate to continue managing it. To be sure, he isn't ruling out the entry of either his wife, Anita -- who runs a pottery and linen boutique, Good Earth -- or his three children -- Simran, 26, who is already married; Siddhartha, 23, who is working for his engineering degree at Leeds University in England; and Tara, 19, who studies at a college in Delhi -- into the corner-room tomorrow. But he wants them to do it by proving their mettle -- not by flaunting their bloodline. His assigned role for them, and himself, until then: that of strategic investors. Says Lal, who specifically requested BT not to speak to his children about the issues at stake: "I've taken this decision after consulting my family. They are with me in this move.'' For how long? It's a difficult blueprint to follow although Lal is committed to his cause. For, the family owns 80 per cent of the group's holding company, Eicher Goodearth, which, in turn, has a stake of at least 70 per cent in each of its five subsidiaries. With such a holding-structure, there is little that Lal can do to prevent his children from leveraging their ownership rights, should they choose to do so, for managerial involvement tomorrow. Except, that is, to expect them to stand by his beliefs. ''Eventually, organisations change by evolution. Families must supervise -- not manage -- business. Since management requires special attention, it is best left to the people who have the expertise for the job,'' says Lal, a mechanical engineer by training. Impressed by the similar practices of the $66.53-billion Volkswagen -- which was planning to set up a joint venture with Eicher four years ago -- Lal decided to set up, and head, only an eight-member supervisory board to advise his companies on critical organisational issues. He is being choosy about its members, having picked only two so far: S.M. Datta, 61, the non-executive chairman of the Rs 1,162.78-crore Indian Aluminium, and N.C. Singhal, 61, the former vice-chairman of the erstwhile Shipping Credit & Investment Corporation of India. ''Lal stands apart. The foremost reason is his pre-occupation with achieving a clear definition of the roles of owners and managers in a commercial enterprise, and in defining a productive relationship between the two. My constant interaction with him over the last eight months has helped me clarify my own thoughts about governance,'' declares Datta. As for the day-to-day management of Eicher's businesses, it is presently handled by a core team of 12 managers, headed by the new chairman, Bhargava. Admits Arun Bharat Ram, 57, the CEO of the Rs 700-crore SRF: ''It's a trend-setting move. It'll go a long way in redefining how Indian business families operate in future.'' Although Lal's poor health -- he has been a cardiac patient since 1982 -- and his diverse interests, which include cartography, art, and motorcycles -- did play a part in the extraordinary change of guard, the transition was actually a pre-planned one. Its timing proves as much: when Lal left after exactly 25 years at the helm, the group wasn't exactly in the pink of health. Despite a 23 per cent growth in sales, from Rs 747 crore in 1995-96 to Rs 919 crore in 1996-97, the group's collective net profit margins slipped from 5.46 per cent to 5.11 per cent. Its share of the LCVs market has risen marginally from 6.73 per cent to 7.81 per cent, but that of the tractors market has fallen from 11.12 per cent to 10.51 per cent. And it has crashed out of the race to make a small car. Agrees T.L. Palani Kumar, 43, CEO, New Holland Tractors: ''The timing of his move is surprising since, of late, the group has not been performing well.'' Wouldn't Lal, and Eicher, have been better-served had the hand-over been conducted when both the economy and the group were in better shape? After all, a crisis also provides the perfect reason for a delegator to resume his hands-on role. Not to Lal. In his book, a highly competitive environment is just right to test his management hypothesis. It is also the litmus test for his self-restraint. Points out Vinay Rai, 49, the chairman of the Rs 2,584-crore Group Usha: ''It is a calculated risk.'' As preparation, Lal has been busy creating a learning organisation that has embraced innumerable management concepts to improve its people-practices and manufacturing-processes. But Eicher has failed to link them to its business strategy. In essence, it has not read the customer as well as it has understood its other stakeholder: the manager. Admits Bhargava: ''We may have been a little slow, but we are not ignorant of customer needs. We will soon see Eicher in a proactive role.'' That is Eicher's shortcoming. And if Lal has to rectify it by getting personally involved whenever a strategic shift is needed, his ultimate objective will not be fulfilled. So far, he has created a group of competent managers who can run his business today. But they may require some time to learn to lead tomorrow. Says Anil Sachdev, 43, Managing Director, Eicher Consultancy: ''From the day I joined Eicher, it was apparent that this group was willing to give a free hand to its professional managers.'' For that, Lal went through a carefully-crafted algorithm: create a roadmap for the departure and the transition. Pick the people to succeed him. Ensure that the vision, by and large, survives his managerial involvement. And, of course, resolve the conflicts that such a radical step would entail from the moment he took over the business from his father in 1972. Forcing out the family THE CONFLICT. Although I am taking a progressive step to create an efficient organisation, I may not be right in placing my faith in professional managers. I may end up creating an organisational culture that may not accommodate them. Besides, my family may not accept a marginal role in their own business THE RESOLUTION. The role of the family in business has to go through a growth curve: from entrepreneurship, through professional management, to strategic investment. A start-up may be driven by an entrepreneur's zeal but, as it grows, and its functions become complex, the task of management is best left to the professional manager. Eventually, the owner has to step back, becoming a strategic investor. That is the evolution that Lal had in mind. So, his efforts to gradually withdraw from business were kicked off soon after Lal took over as CEO. The first thing that he did was to ask his two relatives in the group to find jobs elsewhere. That move stemmed from Lal's innate belief that owners have to always maintain a single line of communication with their managers; too many members of the family obfuscate vision. Agrees Daniel Gauchat, 54, chairman, Amrop International, an executive search firm: ''The family's vision should be conveyed by one person unambiguously.'' Lal's was a radical step for a family corporation. But his commandment extends to Eicher's 6,000 people too: an employee's spouse or relative cannot work in the same organisation. In fact, the first wave of professionalisation wafted through Eicher in 1975, when the organisational structure was revamped to accommodate half a dozen professional managers -- including Bhargava. All of them were hired young, and every one of them was hand-picked by Lal himself, who was particularly keen on getting managers who had served a stint in professional organisations. Perhaps the move to distance the family from business was catalysed by Lal's two-year stint in Germany. He moved there in 1981 soon after Eicher Tractors acquired its collaborator, Eicher GmbH. While Lal was keen on stabilising the beleaguered tractor-company's operations, Bhargava was put in charge of Eicher's India operations. Recalls Bhargava: ''During his stay in Germany, Lal systematically kept distancing himself from operations.'' More importantly, he gave his trusted lieutenant a free hand. But the arrangement had to be discontinued when the German firm's bankers scuttled the takeover, forcing Lal to hand over the company to its dealers in Germany. Even after the return to India in 1984, he maintained his new stance, preferring not to renew his hands-on involvement. ''I decided not to disturb the arrangement, which had run so well for two years,'' explains Lal, whose experience had only reinforced his faith in a system of professional management. |
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Kings abdicate to perpetuate their dynasties.
Leaders abdicate to perpetuate their kingdoms. Thus it is in the case of the patriarch who
rose above paradox to withdraw as the head of the very business group he built from
scratch without anointing his blood as heir. When the 55-year-old Vikram Lal hung up his
pinstripes in December, 1997, he handed over the chairmanship of the Rs 919-crore Eicher
Group (Eicher) -- whose six companies manufacture light commercial vehicles (LCVs),
tractors, motorcycles, and automobile components -- not to any of his children, but to his
trusted lieutenant, the 54-year-old Subodh Bhargava. 