Monday, August 28, 2017

FAMILY BUSINESS SPECIAL..... A Family That Deleted the `Ctrl' Button

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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