TVS Group's Gopal Srinivasan says that family businesses depend on their values and their people for long-term success
Founder, chairman and MD of TVS Capital Funds. He belongs to the Chennai-based TVS family that owns the TVS group of companies
• 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.
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?
I have actually loved being part of this family at every point in time for two simple reasons: I love the values! Our family differentiates itself dramatically because we are the only family that has said that there are businesses we simply will not do because our values don’t permit it! The second is that TVS is a magic word — the respect that goes with it! It is an amazing family to be born in!
What can a career CEO learn from a well-run family business?
There are three things that come to my mind. The first is alignment to society; all family businesses that have been hugely successful built very strong linkages into society. During the freedom struggle, you will find, every business family had given a senior member to Gandhiji. You see, Jamnalal Bajaj, the Birlas, my own aunt [Dr. T.S. Soundaram, who co-founded Gandhigram in 1947] — they were all with Gandhiji. I feel the connection with society is the most important thing because you are doing things you know are about the social values of the time. Second, family businesses take very good judgement on long-term outcomes. The third area where family businesses have done well is in the area of value alignment!
The last is a much talked about but little understood idea. I want Gopal to bring it to life through a very personal narrative. And he tells me this fascinating story. Gopal and his brother Venu started a retail grocery business way back in 1988; an idea ahead of its time by a decade. The brothers raised money from the public. Thanks to the TVS name, they got the money they needed. The business failed. One day, their mother (who had no involvement in their business) called them aside and chided the brothers. “I don’t know; but I am hearing that you have done something very wrong! You shouldn’t have done that!” So, what did Venu and Gopal do?
“We had a very successful listed company. We took the equity of the company and essentially exchanged it for the equity that the public had taken in this company, giving them liquid, valuable stock!”
No law, no regulator, no fear of a class-action suit. Just a disapproving mother. Shrimati Prema Srinivasan, the matriarch of the family, was all of 54 at that time. She was educated only up to a year of college before she got married. But she taught the two brothers a lesson that even the Harvard Business School does not teach.
It is time for me to leave. Gopal asks me to share his lunch sent lovingly from home. It is the kind of vegetarian fare that you would get in any South Indian, middle-class family, except that it was cooked in a kitchen that has nourished three generations that have together built a $12 billion enterprise. And that excludes the value of minority holdings of the group.
Subroto Bagchi is co-founder & gardener, MindTree and a best-selling author. His brief: Every fortnight, exchange tales of the road with successful entrepreneurs