The Godrej Saga - An Interview with Adi Godrej

Godrej is one of the few business houses that has managed to cross the 100 years mark. Mr. Adi Godrej, Chairman, talks about his family and its business in an exclusive interview.

What makes you feel good about being a family business?

You feel good being part of a legacy that has lasted through generations - we have survived for more than 105 years.

There is a possibility to blend the best of both the worlds - work and family, through strong management and good family governance. You have the motivation to work as an owner, which gives one a feeling of control over one's destiny.

What issues do you face as a family run group?

Although, small problems arise from time to time, thankfully our strong sense of cohesiveness, decision-making by consensus and a stewardship approach towards ownership have helped in averting most crisis situations.

What practices do you follow to ensure free and timely communication amongst the family members?

We have organized a family council which meets twice every year. Every Thursday, all working family members gather for lunch to discuss matters of general nature, business issues and new ideas. This practice was started by my grandfather fifty years back. We also have a bulletin board and discussion group on the web where we post all important information instantly.

How do you decide on critical matters?

We decide by consensus. Many people think that consensus-based decision-making takes longer time. Our experience suggests otherwise. It is not that we avoid confrontation. There is a lot of debate before any decision is taken. The advantage of being a family is that you can visualize the nature of questions that may arise, so you come well prepared. This saves time and creates ownership in the entire family.

What areas do you consider as having a potential for conflicts?

We have immense respect and trust for one another. Constant and open communication has helped us so far. Issues don't accumulate with us. We sort them out as and when they arise. We have been proactive and have already taken steps like organizing the family council. At this juncture, I don't foresee any issue which may have the effect of disturbing our balance.

How do you handle issues like power, compensation and ownership?

As far as management rights are concerned, till now it has come naturally to us. The group has twenty odd companies in its portfolio. Barring two, all other companies have come into existence on the initiative of our generation, i.e., the third generation. The person who takes the initiative generally gets the management responsibility. Since we have many companies in the group, one advantage is that we don't divide responsibility on functional lines. It helps us in avoiding the possibility of conflicts on daily basis. In most of our companies, non-family managers hold the CEO or COO level positions. Ownership is equally divided between me, my brother Nadir, my cousins Jamshyd, Rishad and Jamshyd's sister Smita. In our family, women get equal share. The planning for ownership succession in future haven't yet taken place. Many of the group companies not going public has helped us in handling control issues in a better manner. Most of our personal income is in the form of dividends. Remuneration tends to be equal, but is also dictated by statutory requirements. In any case, we are conservative in payment of remuneration to family managers.

What roles do you see for the youngsters in future?

We don't apply pressure on youngsters to join the family business. In my generation too, one family member didn't participate in our business. He still enjoys equal ownership. Every person is free to pursue a career of his/her own choice without having any fear about loss of ownership interest. We have valued education for many generations. The youngsters are expected to be professionally qualified and competent. They are required to work their way up. However, if someone shows the competence, one can be put on a fast-track.

What roles does the future generation play?

My daughters Tanya and Nisaba have joined in the business. My niece Freyan had a brief stint with one of the group concerns, but is now pursuing a vocation of her choice. My daughter Nisaba doesn't work exclusively for me. She also participates in executive meetings of Godrej Boyce and Godrej Appliances, companies which are managed by Jamshyd.

Do you have a formal succession plan in place?

We have formal succession plans not only for family managers but also for all senior non-family managers to take care of any eventuality.

CHALLENGES

• Changing the attitude towards risk-taking
• Winning market leadership in some of the key products
• Developing more focused family governance structures and tools to absorb the challenges posed by quantum increase in the number of future successors (from in the present generation to in the next generation)
• Manufacturing oriented mindset - not being consumer oriented (a fallout of protected regime)

BEST PRACTICES - FAMILY

• Regular Thursday lunch meeting.
• Family council meetings - twice every year.
• Proper education of all family members.
• Divide supervision by companies, not by functions.
• Strategic decision-making by consensus.

BEST PRACTICES - BUSINESS
• Reverse mentoring of seniors by youngsters,
• 360 degree appraisal of all including myself. I am appraised anonymously by my brothers, my children and my direct reportees.
• Chairman's tea to brainstorm with young managers: a weekly discussion with 10-12 managers on every and any subject.
• Celebrations for achievements to make success self-feeding.
• To evolve out-of-the-box thinking, various group businesses have formed two eight-member teams called the red team and the blue team, made up of young employees. Their mandate is to make recommendations for future growth prospects and strategies.
• Another initiative is the young executive's board (YEB). It has eleven youngsters on board. They behave like any senior board, and give suggestions on strategy, human resource policies, corporate governance and so on.
• Meanwhile a team of five business heads has been instituted, which has to come up with a group wide strategic plan this year. It is this team's recommendations-which businesses to exit, which new ones to enter, and growth horizons-that will decide what the Godrej group will be in five years.
• To ensure that all these initiatives evolve into more than just colourful exercises, Godrej has linked its variable remuneration to economic value added (EVA) and employees receive pay that's linked to their contribution to the business' EVA in the last year.
• Godrej is consciously adopting approaches to counter any sense of complacency that might creep in the system by regularly starting new initiatives, by setting stretch goals and at times using paranoia as the tool.

BEYOND SUCCESS

By some estimates, something like a quarter of all the dividend income of the Godrej group is donated to one cause or the other.

Philosophic outlook towards life, philanthropy and deeply embedded values -have all helped in keeping the house united.

LESSONS

Many people argue that the primary reason for the long life of houses like Godrej has been the small size of the family. This argument is valid to a large extent. This leads us to another conclusion that having a big family is a source of trouble. All families having a large number of family members active in business have a lesson in it - put appropriate governance mechanism in place or perish. Houses like Godrej teach us the art of blending aggression with philanthropy and spirituality. A balanced approach towards life helps us in dealing with the negative energy resulting from ego wars, jealousy and lust for power.