TVS Group's Gopal Srinivasan says that family businesses depend on their values and their people for long-term success
Gopal Srinivasan
PROFILE:
Founder, chairman and MD of TVS Capital Funds. He belongs to the Chennai-based TVS family that owns the TVS group of companies
HIS INSIGHTS:
• The best multi-generation family businesses strive for very meritocratic management because it is in their best interest to sustain their wealth
• You want to leave it [the legacy] a little bit better than where you got it! It is a very tough job because a lot of discomfort and insecurity for the family members comes from having to live up to that
• All family businesses that have been hugely successful built very strong linkages into society
Gopal Srinivasan is a cross-over. Professional managers think he is one of them and family-owned businesses believe, he is the family. I have always been intrigued with the dichotomy between family-owned and professionally run businesses. So, when I met Gopal at the wedding of his niece Lakshmi, to Narayana Murthy’s son Rohan, I asked him to visit Zen Garden. The conversation took some unexpected turns as can only be expected from Gopal.
“The best family-owned businesses are very professionally managed. I think the idea of family is about ownership and not management. The best multi-generation family businesses strive for very meritocratic management because it is in their best interest to sustain their wealth. There are only two things that family businesses have; their values — it is their First Wealth. Second, in some sense, well-run family businesses worry about their people because people are the means to sustain wealth. And the outcome of these two is really your business performance and long-term success.
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Is it really that simple? Can people argue with the owner? Isn’t that a touchstone of meritocracy?
I think of a very competitive India which is scaling up dramatically, which is what it is today, versus 1980 or 1970 when the market was so protected; it was a very imperfect market where access to business itself was restricted. So, I would rather look at the India of today and the India of 10 years down the road and see what are the behaviours of today that are likely to grow. In larger companies, I definitely see that family businesses will tend to drive meritocratic management. I think the successors of, let’s say, the Essar family or the TVS family or the Murugappa family, will strive to do that.
The second thing is that the family stakeholders today are very systematic in larger companies. The size of the business plays a big role. I think we are going to find that good family-owners make key members of the management team part of their family. Today if we look at our goals, our people are closely involved in decision making, they are not related to us by blood, they are not of the same ethnicity or same community and in some cases, maybe not even from India! And they have been incorporated into this core group of 10, 12, 15 people who are bonded very strongly. In good families, especially the successful ones, professionals embed into that group. TVS Motors was built by Venu and you will find that he is working very, very closely with a group of five to six people who are not related to him. Take my own case. I started a venture capital business and now I am in the process of raising a second fund, largely influenced by two or three non-family members who are part of my board, who have a lot of momentum in the way we think.
The best way to think about a multi-generational family business is as a flow across time. Someone asked me, what would your forefathers have thought of your decisions in terms of the values they created? In some sense, this defines the family business; it is the whole idea of ‘flow’. Flow from the past, the present and inheritance of the legacy you are passing to the future! So, in many ways, good families have this strong sense of what I call institutional loyalty versus individual loyalty. It is loyalty to what TVS stands for; the reputation we have; the way it opens doors: You want to leave it a little bit better than where you got it! It is a very tough job because a lot of discomfort and insecurity for the family members comes from having to live up to that reputation! I have struggled with it often and there were times when my insecurity has been excessive!
Was there ever a time when you wished you weren’t born into a family-owned business?
(This story appears in the 04 November, 2011 issue of Forbes India. To visit our Archives, click here.)