A Family That Deleted the `Ctrl' Button
How loosening reins of control has helped consumer products
major Dabur build a unique relationship with an `outsider' management and
emerge as a professionally-run company in the truest sense of the word over the
past two decades
Amit Burman knows that, for a pilot, the toughest thing is to
cede control.
The fifth generation of the family that is the promoter of
consumer products major Dabur has private pilot licence.
It was in June 1996 that Burman decided to fly solo, when he
launched fruit juice brand Real under Dabur Foods. The idea was to do something
on his own, outside the family stable but without cutting the umbilical cord.
With Dabur Foods being a wholly-owned subsidiary of Dabur, the young Burman got
what he wanted -complete control. “I didn't report to the CEO but to the
directors who were family members,“ recalls Burman, who is vicechairman of
Dabur India.
In a decade, Dabur Foods crossed `250 crore in revenue, the
brand cornered over half of the market for juices and talks of a demerger of
the foods business and a stock market listing gained momentum.
In 2007, Burman's flight hit an air pocket. Dabur, which was a
family-run business till 1998, decided to merge the food business with the
parent company.Consequently, Burman stepped down as CEO, ceded control of the
Real brand and was appointed vice-chairman of Dabur.The pilot was out of
cockpit.
“It was very difficult to move out,“ recounts Burman, who is now
chairman of Lite Bite Foods, which runs a chain of casual dining and quick
service restaurants like Punjab Grill, Zambar and Asia Seven. “The pilot must get
the timing right,“ says Burman.
TEETHING
TROUBLE
For Dabur, though, the timing to professionalise the family
business way back in 1998 was bang on, some initial teething troubles
notwithstanding. In early 2002, its first professional CEO quit, reportedly
over differences with family members.
It was also during the same period--fiscal 2002--that Dabur
reported a dip in profit after tax (PAT) as virtually stagnant sales of `1,200
crore.
Outsiders felt the audacious gambit of bringing in professionals
had backfired.The Burmans, though, persisted. “There were hiccups initially,“
recalls Anand C Burman, chairman, Dabur India. The family , however, went for a
course correction and things have been smooth since then. Dabur, he lets on,
was among the first families in India to separate ownership from management.
Though it was a difficult decision, rapid growth over past two decades under a
professional management validates it, he adds.
From `1,200 crore turnover in 2001-02 to `7,680 crore five years
later, Dabur has reaped rich dividends by the transformation. “It is very
important to know when to bite the bullet and take a back seat,“ says the
chairman.
The family's role, by now, had changed from hands-on
intervention to being confined to ideation. “Today, we provide strategic
direction and long-term vision to the company,“ says chairman Burman. While the
family does give suggestions to the professional team, the final decision on
implementation rests with the management. “Our relationship with the professional
management has also evolved.“
Sunil Duggal, who joined Dabur in 1995 as a general manager,
vouches for success of the experiment, but only after overcoming initial
jitters. The new team, all outsiders, didn't measure up to expectations of the promoters,
performance dipped during initial years and triggered intense introspection in
the family. “The period between 1999 and 2002 was perhaps the most turbulent in
the company's history,“ says Duggal, who took over as CEO in April 2002. After
resignation of the first professional chief executive, the family took control
for over six months or so. Then it was up to Duggal to bring the situation back
to normal. What helped the new CEO the most in winning the trust of the family
was his familiarity with the culture of the company .
Duggal shares an anecdote. One fine Sunday morning, when he was
getting his house painted, he got a call from GC Burman, former chairman of
Dabur, who died in 2001, asking him to meet him immediately . “Come in your
pyjamas,“ was what he said when Duggal told him that he will take some time to
change.
Once Duggal reached office, a bigger surprise awaited him as he
was asked to take over as CEO.
CARVING
OUT A NICHE
It's harder, reckons Duggal, for an outsider to come into a
family-run company .For one, the outsider's understanding of the family is low.
For another, promoters' confidence in the CEO's capabilities is low. And
cultural issues crop up during the initial phases of transition.
Experts reckon that the willingness of the family to embrace
change and yet keep the family at the core is what stands out in the Dabur
transition. Rajiv Agarwal, associate professor of family business and strategy
at SP Jain Institute of Management and Research, explains that they accepted
that despite having qualified family members at senior positions, they needed
to induct professionals to grow. That the family worked together to carve out a
structure, which defined each member's role and yet created an environment that
respected all the members' aspirations, is admirable, he adds.
PD Narang, group director of corporate affairs at Dabur India,
maintains that the family showed a lot of maturity. “They continue to maintain
that delicate balance between being strategically involved and not interfering
with running the business,“ says Narang, who joined Dabur in 1983 as a
management consultant.
Duggal, for his part, points to another important ingredient for
a successful transition to a professional-run company. While promoters need to
have a big heart and courage to yield power, the professionals coming from
outside too need to be sensitive to the cultural norms of the company. “It's a
two-way process. Both need to be accommodative and sensitive.“
Rajiv Singh
Aug 22 2017 : The Economic Times (Mumbai)
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