A cornerstone of the growth and development of the Group across India and abroad is Alexander George Muthoot, Director, The Muthoot Group. He heads the marketing, operations and international expansion of the Group.
Under his dynamic leadership and keen vision, the Group has enhanced its brand visibility through innovative marketing strategies, expanded its branch network, and implemented various IT initiatives that have benefited both customers and employees.
An MBA graduate from Thunderbird University, Arizona (USA) and an advanced diploma in business administration from Florida International University (USA), he is the youngest son of Mr. M. G. George Muthoot, Chairman, The Muthoot Group. Part of the next generation of the promoter-family management, he recounts his experience and learnings from a family business management executive education course at the Indian School of Business, Hyderabad.
The four-day course on family businesses in Hyderabad first took an overview of the subject before getting into the details one by one. So, first, there was the full format of cases studies on family businesses, then discussing the actual businesses, the issues entailed and finally, a deliberation between the participants on what solutions can be reached.
One of the biggest takeaways of the event was the session on looking at the case studies of other family businesses. It opens up a host of possibilities to apply into one’s own ventures for better results. For example, there is the issue of preserving family values in relation to succession, especially in large family businesses, when the next generation comes on board with different aspirations and expectations.
One, how can we preserve the business while giving scope for innovation? Two, as the business expands, how do we professionalize the sustenance of family businesses? Both sides must be looked into. The generation which has built up the business should be able to take sustenance hand in hand with the aspirations of the younger generation.
We had detailed discussions in our board meetings on what we learned there, especially with regard to the constitution of the family, formalizing that, on the way forward, the next generation, building trust and professionalizing the business.
There is a family office which coordinates with the entire family to bring them together. In reality, it is about preserving family businesses on the rock-solid foundation of the values they believe in.
The cases studies comprised only Indian family businesses from different sectors like real estate, manufacturing and so on, for the sake of diversity. Professor Kavil Ramachandran was the main speaker and he had organized guest speakers from various family businesses.
The director of a business venture came up and spoke about the challenges they faced, how they resolved them without damaging the business holding and moved forward. In the case study of the GMR Group, it was pointed out how they took seven years to build up a family Constitution, but today that aspect has grown deep and is enduring. Some global cases studies were also looked at; in one case, the family holding was large with over 150 members. It was a German pharmaceutical company.
There are some 16 family members in the Muthoot businesses. There were group discussions where people from different fields discussed real-life situations. Following the discussions, a consensus would be arrived at on what would be the best solutions.
The other thing was about professionalizing family businesses. At some stage, when the family business is growing, we need to ensure professionalism by bringing in people with that kind of domain expertise. They should be given the power and authority to take decisions. The crux of the issue then becomes delegation of responsibilities rather than holding on. It is important to give freedom and authority but it must come with responsibility.
Then there was the issue of succession planning and how the older generation should be kept in the business. They should not feel unwanted – as if they have been retired. That brought the discussion to the emeritus’ role.
Role of family
The role of women in family businesses was also taken up; on how they play an important role in keeping the family together. In the case of The Muthoot Group, there is no laid down policy as such on the role of women members. For example, my mother wanted to work and she holds a position in the education sector. Anybody who has the inclination to work and make a contribution can do so. There is no restriction on that in our company policy. It is an individual choice.
But over and above that, the women who stay at home also have a job on hand – the job of the Chief Emotional Officer. It is all about how the women play the crucial role of keeping the family together. We looked at examples and the importance of communicating with the women at home on what’s happening in the family business, even if they are not actively participating in the day-to-day running of the business. They should have a perfect understanding of the goings on.
Each family has its own concerns and aspirations in this regard. It’s best to debate them in a healthy way and arrive at a consensus. It works differently for every family. The Family Constitution is in essence discussed and formalized after coming to a consensus. There is no legal implication in the Family Constitution. It is a gentleman’s agreement, I would say, arrived at after consulting all concerned. We can call it a Memorandum of Understanding (MoU). The legal aspect comes in for the financial side, like the formation of a Trust.
We have more or less formalized our Family Constitution. We needed to give it time, have several discussions and deliberations at various levels. We needed to sleep over it and not be hasty about it.
The course was very useful and definitely gave us value for money. A small group of the younger generation of family business in The Muthoot Group attended this course together at ISB.