Surviving in India's family-owned company

The Good Indian Employees Guide to Surviving a Lala Company

Author: Rajiv Gupta

Publisher: Harper Business

Pages: 217

Price: Rs 399

The “family business” is not peculiar to India — or for that matter even Asia. They exist across the world. Most companies start off because of the ideas and the drive of a single entrepreneur. In technology companies, it is typically a couple or more partners who set up and build the business but in general the majority of the firms in other sectors trace their origins to the entrepreneurial drive and ambitions of a single man or woman.

In developed countries, the company set up by the founder goes for a public listing once it attains a certain size. And though the founder may still call the shots and exercise enormous influence during his lifetime, the board eventually starts running the company through a professional chief executive officer (CEO) and a management team of professionals. If the company remains small, the entrepreneur may choose to keep it private.

By the second generation, no matter whether the family of the founder holds enough shares or not, it is relatively rare to see scions actually running operations. If they have a lot of shares or disproportionate voting rights, they still have very significant influence on the composition of the board and even the tenure of the CEO, but they rarely are involved in the day-to-day running of the company. Medium-sized and smaller companies around the world may, of course, follow a different trajectory with the second and third generation running the company as long as they are reasonably competent.

Where India and many other countries in South East Asia differ is in the operational role that the second and third generations of a firm insist on maintaining  — and their outsize influence on running the company irrespective of whether it is a publicly listed company or a private one. Though hard numbers are difficult to come by, some people estimate that over 80 per cent of Indian companies qualify as “family run” companies even if they happen to be publicly listed and the promoter family has long ceased to be the biggest shareholder in the firm. They are also unique by virtue of their organisational culture and how much the quirks and foibles of the scion currently in charge influence all decisions, big and small.

In this context, Rajeev Gupta’s book The Good Indian Employee’s Guide to Surviving at a Lala Company can be taken as a quick and funny read, full of sharp and witty observations. But that would be doing it injustice. It is actually a close examination of the organisational culture that any employee in the firm needs to deal with, and about the pitfalls he or she needs to avoid in order to survive in the company.

The “Lala” in the title comes because of the slang used in north India to differentiate the culture of such companies from their “professionally-run” multinational peers. The “Lala” comes from the honorific by which the north Indian founders were often known. Many of them set up their businesses post-independence and were entrepreneurs of exceptional drive and acumen, capable of dealing with political and bureaucratic pressures as well as cut-throat rivals. They often started with nothing or very little because of the problems of the Partition during independence, and then built up empires by dint of sheer hard work. The second generation dislikes the title of Lala but the company is still dubbed a Lala firm behind its back. While a Lala company is largely a north Indian term, no doubt its counterparts in the east, south and west have their own colloquial equivalents.

To be sure, professional multinationals in India and abroad also derive their work culture from the CEO or executive chairman currently running it but they are unlikely to be in charge permanently and anyway they also follow some well-laid down rules and processes and systems that the Lala company often disregards.

Mr Gupta’s observations about the companies, the behaviour of the second and third generation is sharp as well as humorous. He describes the cast of non-family characters — from old loyalists who grew with “Bauji” to the younger sycophants and the professional managers who land up in the company from time to time — exceptionally well. He captures the insecurities as well as the machinations of the older, less qualified employees who owe their position and survival to their ability to agree with their employer at all times and manipulate him against any new professional senior manager. He also describes some of the tensions that develop when there are more than one scion jostling for prominence.

Though he names no names, some of the cases he describes in detail can be recognised by anyone who has been following the Indian corporate world for some time. The book is a fun read but its value lies in its insights about the typical cast of characters found in the Lala firm. It will definitely help anyone who joins a Lala company and needs to deal with the current CEO and other family members on a daily basis.