Soriano: India’s 117-Year-Old Conglomerate: A Model Family Business

Soriano: India’s 117-Year-Old Conglomerate: A Model Family Business

By: PROF. ENRIQUE M. SORIANO THE Godrej Group is a public company and a conglomerate based in Mumbai, Maharashtra, India. It was founded by two brothers: Ardeshir Godrej and Pirojsha Godrej in 1897. The story behind the success began when Ardeshir came about his creation and selling of locks as a response to the alarming citywide crime rates. He also made vegetable oil-based soaps, which was a hit at that time. Pirojsha helped in developing the business into an enterprise that carried an extensive line of industries. Today, the Godrej Group spans several industries that include chemical and commodities, agriculture, precision engineering, fast moving consumer goods (FMCG), services and real estate. It markets furniture, security, home appliances, and agricultural care products and its expansion extends to three consumer sectors: personal wash products, haircare and household products in Asia, Latin America and Africa. The family-run conglomerate handles its operations through two holding companies, namely Godrej Industries Limited, and Godrej & Boyce Mfg. Co. Limited. Other subsidiary and affiliate companies are Godrej Consumer Products Limited (GCPL), Godrej Sara Lee, Godrej Hershey Foods & Beverages Limited, Godrej Infotech Limited, Godrej Properties, Godrej Agrovet, Godrej Hi Care (pest management services), and Godrej Global Solutions (ITES). The third generation as change agent The amazing transformation of Godrej Group from manufacturing locks and soaps to different industries during the time of liberalization to the current globalization is the result of the ingenuity and innovativeness of its present chairman, Adi Godrej, who hails from the third generation of the family business (following the second generation, which was led by Pirojsha’s grandsons Naval, Sohrab, and Burjor). Adi...
Soriano: Singapore’s Richest Siblings

Soriano: Singapore’s Richest Siblings

By: PROF. ENRIQUE M. SORIANO Rated amongst the best cities to live But first, let me briefly describe Singapore. Because of my coaching work (real estate and family business) in the Asean region, I have used Singapore as my hub for most family business sessions. Singapore is one of the world’s major commercial hubs, the fourth-largest financial center and one of the top two busiest container ports in the world, at least for the past ten years. Its globalized and diversified economy depends heavily on trade, especially manufacturing, which accounted for around 30 percent of Singapore’s GDP in 2013. Singapore places high in international rankings with regard to standard of living, education, healthcare, and economic competitiveness and it has one of the highest per capita income and one of the longest overall life expectancy in the world. The country is also one of nine countries in the world with top AAA rating from all credit rating agencies. The Philippines is several notches below, with a fairly credible BBB rating.   Robert and Philip Ng: when siblings unite Brothers Robert and Philip Ng are sons of real estate tycoon Ng Teng Fong and inherited their father’s real estate empire and continued to bring it to greater heights. Robert Ng is not only a property tycoon, but also a trained lawyer while Philip has a degree in city planning, as well as civil and geotechnical engineering. The Ng family today builds one in six houses in Singapore. They are known as the HDB (Housing Development Board) of condominiums. There are different routes to success, and although their wealth might not be...
Soriano: The Dangers Of Not Initiating Succession Planning Early

Soriano: The Dangers Of Not Initiating Succession Planning Early

By: PROF. ENRIQUE M. SORIANO ACCOUNTING for more than 96 percent of enterprises in the Asean, SMEs that are made up mostly of small family business firms are a significant engine of growth in the region. Although perceived as small, their combined contribution to the economy has a great impact. It is also a fact that most family businesses have a very short life span beyond their founder’s stage and that some 95 percent of family businesses do not survive the third generation of ownership. In the Philippines, most businesses are small and family-owned. Challenges for SMEs in the Philippines include a lack of research and development, inadequate access to technology, and financing. This article will focus on intellectual capital management as well as the lack of or inadequate knowledge perspective prevailing in small family businesses. In today’s Information Age economy, knowledge–-not natural resources, machinery, or financial capital–has become the most important factor in business activity. Intellectual capital is a result of empirical research Without being too academic, intellectual capital or IC is the combined value of its people (human capital), the value inherent in its relationships (relational capital), and everything that is left when the people go home (structural capital), of which intellectual property is but one sub-component. The term became widely used in academia in an attempt to account for the value of intangible assets on company’s balance sheets. A second branch that has survived in academia and was largely adopted in large corporations was focused on the recycling of knowledge via knowledge management. According to Karl-Erik Sveiby in his article “Intellectual Capital and Knowledge Management”, a...
Soriano: Compensating Family Members The Right Way (Part 2)

Soriano: Compensating Family Members The Right Way (Part 2)

By: PROF. ENRIQUE M. SORIANO   COMPENSATING family members is a perennial source of emotion and, if left unresolved, poses a future conflict amongst siblings and cousins. Family businesses are constantly trying to balance the bottom line with paying its family members fairly. That balancing act can become more difficult if a compensation strategy is not clearly defined. Family harmony adds additional emotions to the already passionate topic of compensation. According to an article published by Findley Davies, a human resource consulting firm, as family businesses grow, so too does the compensation and rewards structure to engage your most valued assets–your people. In the start-up stage, there are few employees, very little structure, and most, if not all, team members are part of the family. As the company grows, the need for business structure and processes surfaces. In this stage, young family members start occupying positions. This is where the start of the conflict happens. Some common examples that tend to compromise and disrupt the organization are the following: Equal compensation for all family members regardless of qualifications Overlapping and undefined roles and responsibilities Family members overstepping on their functions and encroaching on other roles assigned to non-family members Newly-hired family members don’t know how and when to start as reporting structure to a superior are unclear as well. The key is to work on a compensation plan. In my article last week, I highlighted the need to prepare an accurate job description for every family member entering the family business. Today I will continue with the following plan of action: Identify what your compensation philosophy is. Industry standards...
Soriano: Compensating Family Members The Right Way

Soriano: Compensating Family Members The Right Way

By:  PROF. ENRIQUE M. SORIANO   THE past two months, I have been inundated with emails from readers requesting (some actually “pleading”) for an article on the subject related to compensation. I deliberately ignored these requests, as I have my own topic calendar until I figured in three (out of seven) family interventions this month and took me aback, as all issues zeroed in on compensation! So on my flight back to Manila, I decided to informally poll the email requests and expectedly, 70 percent of the emails came from the Gen 2 and Gen 3 family members. This made me decide to write this article pronto. Thank you my dear readers for the “push”. Gen 2 and Gen 3 concerns We typically refer to these two generations as the sibling and cousin generation phase. This a phase in the development cycle of a family business where family members have extended members in spouses, in-laws and cousins, nieces and nephews. I consider this phase a very complex one and often referred to as the multi-generational stage. When not guided appropriately, it can result in unnecessary conflict. Is money the root? They say, “money is the root of all problems”, but this can be prevented if individuals are clear with what is fair and just. This is true in family businesses. Families involved in business tend to avoid talking about money matters. It is a very sensitive topic and creates so much discomfort to all parties. However, “sweeping this issue under the rug” only adds up to the confusion and dissatisfaction. I often receive requests for guidance involving sibling and...
Soriano: Creating A Family Employment Policy: A Must! (Part 2)

Soriano: Creating A Family Employment Policy: A Must! (Part 2)

By: PROF. ENRIQUE M. SORIANO ACCORDING to an article published by the KBH Group, a full-service chartered accounting firm based in Canada, the best way to manage these expectations—and the ensuing family drama—is to create thoughtfully-written family employment policies. Having these policies in place lets all of the relatives know exactly how the company handles the employment of family members. In my last column, I explained the first pre-employment condition and highlighted an important rule: the requirements for being accepted into a job post at entry level. Are the expectations of family members clear, as far as attainment of certain degrees or certifications before they join the company? If so, this should be spelled out in the employment policies, along with a timeframe required for completing the education or training. How about investment of the family business on training for special or technical skills? At the Ateneo Center for Continuing Education (CCE), short and diploma courses on practically everything about business are offered all year round and I must admit, part of my mentoring model is to encourage family members to enroll and further reinforce their business and management skills. So far, it’s worth every peso invested by family businesses! In today’s column I will complete the governance aspect related to family employment policies, namely: Shared vision and mission, participatory leadership and values for teamwork A family business is strong when all who participate in its development shares a common vision and mission. In the succeeding generations, shared objectives and course of action should be kept in line. Even if changes are needed in the business in terms of...