Thursday, March 28, 2013

A Question in Time... of Time!

In This well Entrenched analysis, B&E’s Angshuman Paul goes Inside The Legacy Organization of Emami and breaks down Various Issues The Group is Addressing... most to do with Succession Planning and Strategic Orientation.

When you visit the Kolkata Head Office of Emami Group at EM Bypass, you get an immediate feel of a penchant for tradition. Exactly 15 large statues (or statuettes, if you may) of the elephant God Ganesha jump out to catch your attention in the lobby of Emami’s corporate office. It’s obvious that they’ve been placed in that order to make a very definitive point to the critical visitor – and a point that reaffirms the essence of this organization, the family way of doing business. It’s quite obvious that this penchant is as prevalent in the management philosophy of the corporation, from the structure, to leadership, to the way span and scope of control has been built, and obviously, to how succession planning has been laid out in this well and truly Indian corporation.

Entrepreneurship Professor John Davies at Harvard Business School wrote in one of his papers that “in family businesses (companies whose ownership is controlled by a single family)... the lack of effective governance is a major cause of organizational problems.” Strangely, however much the world of self-fulfilling analysts and business correspondents like I might wish to the contrary, Emami seems to be an anti-thesis to John Davies’ argument, the outlier, or the exception that remains as a symbol of positive performance for statistical distributions. Emami has remained committed through decades to governance benchmarks that have promoted and encouraged transparency, open communication and almost a matrix approach to behavioural management.

At the same time, unlike their rival company Dabur, which has been particularly keen on trying out almost each and every new jargon in the stream of professional management, Emami has stuck steadfast to the belief that the family-way to run a business, is the right way. Uniquely, theirs is a closely knit group despite the business currently being run by the children of the two founders – R. S. Agarwal and R. S. Goenka – who are in fact unrelated by blood, though they have an identical first name of Radhe Shyam, and apparently even schooled together.

From the early 1970s, when Emami started manufacturing cosmetic products from just one small factory in Kolkata and distributed products through hand pulled rickshaws, today, when Emami is in a position to create products that can be game changers in the Indian FMCG world, the growth has been superlative – some opportunistic, some opportune. For example, when Fair & Handsome was launched, the first year generated Rs.270 million, and resultantly created a market of men’s fairness creams worth Rs.2 billion. Today, the Emami brand occupies a turnover of around Rs.1 billion, purely driven by a well timed opportune exploitation of the Indian male’s cosmetic sentiments. At the same time, Navratna and Boroplus are the undisputed front runners for the company at an annual turnover of Rs.3 billion each. Today, the company has factories in Kolkata, Abhoypur, Amingaon, Panthnagar, Baddi, Dongri, Silvassa & Vapi. From undertaking exercises in brand extensions, the company has now set up an R&D division, which spends about Rs.400 million on research into FMCG products. It is now increasing presence by at least 10,000 stores per year. If that’s how family-businesses are run, then perhaps the anti-thesis to Davis’s theorem is truer in India than the truism purported in his original conjecture.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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