Where Process Trumps Product

As more and more Indian business families adopt a constitution, it is becoming clear that for the document to be effective, the manner of drafting it has to be given due importance.

- N Madhavan

It took the Burmans 18 long months, including a couple of family off-sites in Kathmandu, Nepal, to discuss and finalise the family constitution they were drafting. This was sometime in 1997-98. Dabur Ltd, the company the family owned and managed, had already made a name for itself in the fast-moving consumer goods (FMCG) space with their Ayurveda-based products, and the family’s fifth generation was involved in the business. “We realised that for Dabur to grow rapidly there was a need to professionalise the management, and to attract the best managerial talent it was important to keep the top slot vacant,” says Amit Burman, vice chairman, Dabur. What’s more, “the family had also grown in size and the complexities in managing it were rising.”

Consulting major McKinsey & Company was roped in to advise them. Soon after, family members gave up their day-to-day operational roles and professionals were brought in. Also, a family council was set up and all the male members of the family, above the age of 25, numbering over 10, were made part of it. Today, almost two decades since the family members signed on the dotted line (of the constitution document), the business has grown exponentially and the family remains united.

Indian business families have increasingly been embracing the family constitution. The Hyderabad-based GMR family is another early mover in this space, and their family constitution is even considered a gold standard. Others like Emami, Dr Reddy’s and Murugappa Group too have put constitutions in place.

Some call it a family constitution, others a family charter or just a shareholders’ agreement. “Whatever the nomenclature, the document serves as a mechanism to enforce family governance,” says Kavil Ramachandran, executive director, Thomas Schmidheiny Centre for Family Enterprise.