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Managing Transition Across Generations. Kishor Rathi Chairman Sudarshan Chemical Ind. Ltd. Feb. 2009. My Perspective. Succession in our family business How is succession affected in the absence of a clear post-retirement plan? How do we ensure that merit is accepted ahead of seniority?

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Managing transition across generations l.jpg

Managing Transition Across Generations

Kishor Rathi

Chairman

Sudarshan Chemical Ind. Ltd.

Feb. 2009


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My Perspective

  • Succession in our family business

  • How is succession affected in the absence of a clear post-retirement plan?

  • How do we ensure that merit is accepted ahead of seniority?

  • How do we manage the challenges now?


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Introduction to Our Family

  • My grandfather - J. M. Rathi (1900-1976)

    • Silk merchant in Pune since 1920

    • Had six sons

  • Eldest son - L. J. Rathi (1916-2003)

    • Started Sudarshan Silk Mills Ltd. in 1941

  • Third son - Dr. R. J. Rathi (1924-2003)

    • PhD from Ohio State University in Chem. Engg.

    • Late Dr. Rathi and Late Mr. L. J. Rathi started a small pigment mfg. factory in 1952 with Rs. 60,000 capital


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Sudarshan

  • Today, Sudarshan Chemical Ind. Ltd.

    • Is one of the largest pigment mfg. companies in India

    • Sales of over Rs. 4 BN.

  • We have revenues of Rs. 1BN in group cos:

    • RIECO Ind. Ltd.

    • Rathi Lightnin Mixers Ltd.

    • Rathi Vessels Pvt. Ltd.

    • Prescient Color Ltd.


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Family Culture

  • Male participants

  • All are either Chemistry or Chem. Engg graduates from USA, with many having USA MBA also

  • Work from bottom of the organization moving upwards only as per merit

  • Values: Financially conservative, Higher Education, Continuous Learning and Improvement, and Simple living



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Until 1990

  • Dr. R. J. Rathi (1924-2003) was the Chairman and Managing Director

    • Absorbed all brothers, nephews and son (more than 13 members) in different family businesses

    • Kept family together and his leadership was accepted by all family members on merit basis

  • Family business was a:

    • Sibling partnership

    • With many documented policies

    • With formal, conservative, and frugal atmosphere


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First Transition: 1991-2001

SiblingPartnership – 6brothers

Separated

Factions

SiblingPartnership – 4familyheads


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Transition Features

  • For some time:

    • Two Managing Directors and One Chairman

    • Irrespective of Seniority

  • Currently

    • Single Managing Director

    • Heavy Business Restructuring and Professionalization

    • Retirement of Senior Members from Accountable Positions


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Experiences

  • Business conditions changed from 1990 onward, (we are all aware)

  • Some family factions with different aspirations went their own way

  • Businesses required competitive focus and accountability

  • Family became more informal and perhaps less conservative / results focused


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Next Transition 2009 -2015?

SiblingPartnership

5FamilyHeads, 4 Sons

CousinConsortium/SiblingPartnership?



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Our Experience Plan

  • We have had no problems due to:

    • Very good understanding between members in second generation who didn’t break-away

    • Policy of relinquishing duties after age of 65

    • Realism by all in accepting leaders

    • Two MDs were decided much before transition and ratified by family members in advance – It was not a power sharing formula, merit based


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Potential Issues Plan

  • Due to emotional attachment, founders find it difficult to relinquish control

  • Due to lack of post-retirement plan for the retiree, members do not know how to spend time after retirement



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Some basic factors for meritocracy Plan

  • No entry to youngsters without higher education

  • Culture of no special treatment to family members once inside office premises

  • No responsibility based role after 65 … only advisory role


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Meritocracy Externally Plan

  • Today 2 out of 3 divisions, and all shared service departments are headed by non-family members

  • Performance metrics are clear and are discussed openly in monthly meetings

  • Senior level promotions are discussed amongst senior staff and informal buy-in is generated within family as well as non-family members


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Meritocracy Within Family Plan

  • Today the most senior Rathi is NOT the Managing Director

  • Company interest is paramount in choosing business heads, and that is what family has done voluntarily

  • Senior family members have realized long-term needs and have stepped into advisory roles



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Next Transition 2009 -2015? Plan

SiblingPartnership

5FamilyHeads,4Sons

CousinConsortium/SiblingPartnership?


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Current Challenges Plan

  • Sibling partnership perhaps will change into a cousin consortium

  • Age difference between various family members is large although number of members has not increased

  • Business is ever increasingly complex and future challenges involve:

    • Global Branding/Geographic Consolidation

    • Consolidation in the Value Chain

    • Growth

    • Absorption of Young Family Members in meaningful roles


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Steps Taken Plan

  • Acknowledged Need for Tackling Issue

  • Involved external guide

    • IIM Professor who has been associated with family for more than 5 years

  • Address Difficult Questions

    • Head-On

    • Transparently

    • Frequently (i.e. No Procrastination)

    • With Sensitivity to Family Members


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Broad Framework with External Consultant Plan

  • Family Council

  • Owners Council

  • Succession Planning

  • Family Mission & Vision

  • Encouraging Entrepreneurship


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Framework For Succession Plan

BusinessPlan

10years

Individual Family Members

Career Aspirations

Future Org.

Structure

Individual Family Members

And Non Family Members

Skills, Knowledge, Experience

Performance

Leaders Needed


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Framework For Succession (contd.) Plan

Fit Assessment

Succession Plan

Counseling

Training Needs & Education

Career Plan & Job Rotation