The Magnificent History Of Indian Family Businesses

This article was first published in Family Business United blog on June 22, 2020;  Co-author: Yashodhara Basuthakur; https://familybusinessunited.com/2020/06/22/the-magnificent-history-of-indian-family-businesses/
 
India has a rich and magnificent history of family businesses. The country’s rich history and culture have molded the edifice and character of family businesses over the years. The joint family system was the backbone of these businesses and provided the required resources and capital for the cohesion and growth of the firms. In the early eighteenth century, India was predominantly an agrarian economy, with a deep-rooted caste-based social system that defined the occupational choices of the communities. Agriculture was the primary source of income and livelihood. The manufacturing industries were few and mostly in textiles, handicrafts. But India was lagging in the development of the economic, political, and commercial infrastructure essential for trade pursuits.
 
The turn of the eighteenth century marked the transition from mercantile capitalism to industrial capitalism. The colonial rule led to the decline of the vibrant Indian merchant community. The Indian businesses faced discrimination in trade, policy and bank loans. During the Industrial Revolution in 1850, India became the supplier of raw materials and a market for the products of the British factories (cotton, iron and steel, chemicals, etc.). Some of the businessmen who emerged during this time were the Birlas, Kasturbhai Lalbhai, Walchands and the Tatas. They constantly criticized economic racism and created bodies of commerce and trade associations to lobby for the Indian companies. They invested in research and development and introduced new product lines. The Indian led business enterprises had expanded in scope and scale across the country by the end of the 1940s when India gained Independence.
 
The Indian family businesses also actively engaged in social causes and philanthropy through generous contributions to charitable trusts and other institutions driven by the cultural and religious traditions of “daan” (giving) as a sense of duty to the community. They played a pivotal role in institutional building by partaking philanthropic activities such as setting up premier educational institutes, research, and cultural centers for the progress of the country.
 
The post-independence period marked with communal unrest was not very conducive for business. Additionally, the new Industrial Policy (1948)[1] of free India was introduced which saw increased participation of the government in economic affairs. The large-scale nationalization and government monopoly of critical industries such as utilities, transportation, iron and steel, heavy industries, armaments, atomic energy, manufacturing curbed the freedom of operations of the private enterprises. The Monopolies and Restrictive Trade Practices Act, 1969, put severe bottlenecks with respect to the quantities and types of goods or services that could be produced by the private sector. The firms now had to obtain licenses or permits to expand or start new businesses. Because of the limited licenses and capacity constraints, firms focused on diversifying into areas wherever they could acquire the required licenses instead of building on their core competencies.
 
Some of the multigenerational business houses focused on restructuring by consolidation and expansion within the new framework by acquiring overseas companies and expatriate houses to enter new industries. Other business houses acquired a significant number of licenses to thwart competition and block other firms from entering the space. Also, there was a new genre of technology-savvy entrepreneurs who were well-educated with degrees from abroad and joined their family business or started new ventures. Some of the legacy business groups even lend their expertise in areas like engineering, iron and steel (Tatas) and shipping (Walchands) to the newly formed government enterprises. However, this period also witnessed some of the older business families already in their third generation going through splits due to waning family ties. The families had not yet adopted professionalization, and the dominant family coalition still controlled the ownership and management.
 
The economic liberalization in 1991 was a landmark decision which opened the economy and introduced several macroeconomic and structural reforms. These reforms brought in a gamut of opportunities and challenges for the family businesses. While the businesses now had to compete with foreign multinationals and new entrepreneurial organizations for capital and resources, but they could now enter sectors which were earlier exclusively reserved for the public sector. The family firms were quick to restructure and respond to environmental changes. Some of the multigenerational businesses were able to weather the turn and came out triumphant in the new economy, while others who couldn’t sustain disappeared from the thriving business scenario. This era also witnessed the dawn of a new set of stand-alone first-generation family firms who harnessed the information-led economy by investing in research and technology.
 
A study on Indian family firms by Bang, Ray and Ramachandran (2017) looks at the listed firms during the period from 1990 – 2015. The study categorizes the firms based on ownership and management into two categories, namely family business group firms (FBGF) and stand-alone family firms (SFF) [2]. According to the study, ninety-one percent of the listed firms are family-firms, which is a key driver of the Indian economy. A synopsis of the findings is tabulated in Table-1.
 
In the year 2015, the top 30 family firms contributed to almost 50 percent of the total revenue of all listed family firms, which translated to 13 percent contribution to the GDP of India. Overall, listed family firms contributed to 26 percent of the GDP (Total Income). Out of the listed family firms, the FBGFs contributed to 21 percent, and the SFFs contributed 5 percent to the nation’s GDP. The family firms contributed to 28 percent of indirect taxes and 18 percent of direct corporate taxes collected by the government exchequer.

The family-firms built more assets in the manufacturing sector, which has a long-standing impact across all industries. The SFFs were predominantly in the services industry, owned and managed by the founder (or first-generation). The SFFs played a critical role in the rapid development of the services sector and generated large-scale wealth and employment opportunities. During the post-liberalization period, there was increased participation in equity markets by the family firms to meet the financing needs for expansion and growth. Among the listed family firms, the firms incorporated before the 1980s were more likely to create business groups as a response to the macroeconomic conditions. The average age of the listed FBGFs in the sample is 38.44 years, whereas that of SFFs is 28.73 years.
 
The family firms have displayed resilience, character, and adaptability over their long history and played a pivotal role in India’s growth story. However, with the current shifts in the economy and society, there are major challenges that family businesses must surmount. The family firms at the crossroads of succession have to take the decision on either to transition to next-generation or professionalize by inducting non-family managers. The family firms have to adhere to stricter and transparent corporate governance guidelines, better leadership and connect with the community to continue to chart the success story in years to come and ensure the perpetuity of the business and family.

[1](Ministry of Micro, Small & Medium Enterprises, 1948)
Statement of Industrial Policy, 6th April 1948, No. – 1 (3) – 44 (13) / 48, Ministry of Small-Scale Industries, Government of India, New Delhi.
 
[2] (Bang, Ray, & Ramachandran, 2017)
Bang, N. P., Ray, S., & Ramachandran, K. (2017). Family Business The Emerging Landscape 1990 to 2015. Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business.

The Impact of the Coronavirus on Investment Decisions

This article was first published by the Global Association of Risk Professionals, Risk Intelligence, on June 19, 2020; Co-author: Anisha Sircar; https://www.garp.org/#!/risk-intelligence/market/investment-management/a1Z1W000005VYeIUAW

As the world heads toward a global recession, with plunging equity markets and countries facing severe economic downturns, there are uncertainties and strong beliefs that have practically divided the world into the optimists and the pessimists. There are those, for example, who make rash, seemingly opportunistic investment decisions, and those who are more measured in their financial approach. Those who unwittingly indulge in herd behavior, and those who are less prone to such external influences.

What's more, there are those who are extremely cautious, favoring extended lockdowns and total isolation, versus those who have a more “que sera, sera” approach to COVID-19, supporting getting back to normal as early as possible.

It's easy for one group to feel that the other group is being unreasonable. The pandemic's unprecedented impact on our lives, both in the short and the long run, makes people highly susceptible to making decisions they would have otherwise avoided.

In this article, we reflect upon the financial and investment decisions being made by people in the backdrop of the pandemic, and the dichotomy facing risk managers and investors. What are the obstacles standing in the way of investors making rational decisions and avoiding unnecessary risks in a time of crisis?

Bias

When analysts, policymakers, “experts,” and/or news reports offer statements and opinions, it's sometimes assumed that they know what they are talking about. However, people find opinions credible as long as it confirms their own thoughts or anxieties, or as long as they seem like “educated” or even consensus-based guesses. This can involve a range of biases, from herding behavior, to action biases, to confirmation biases.

When COVID-19 hit markets, it resulted in phenomena such as dwindling risk appetite and investor interest and declines in the perceived values of stocks. That led to dramatic drops in stock prices, wiping out any potential investor gains.

Herding behavior is tricky with respect to risk appetite and investing. It drives markets toward excesses during market upturns and nose-dives during downturns. It's why stock indices in India, the U.S. and Europe plunged, especially between mid-February and mid-March this year, and why circuit-breakers were triggered several times in recent months.

In India, the major indices lost 40% in just two months. While it might be natural to get carried away with all the noise and the herd, turbulent times like these call for more reflection, rather than panic selling. Investors in countries like India have been used to more euphoric highs over the last few years, and the losses on investments therefore now seem particularly painful.

Markets in India spiraled almost immediately into a “bull phase” in a fortnight, recovering 20% from the bottom. However, it's important to keep in mind that, by and large, market indices have rebounded and hit new highs after every previous global financial crash. So, despite the noise, this may be the time for anxious decisions to hit pause.

Shortsightedness

In 1995, Shlomo Benartz and Richard Thaler conducted a study titled, “Myopic Loss Aversion and the Equity Premium Puzzle.” The researchers asked: How much will the equilibrium equity premium fall if the evaluation period (of a portfolio) increased? In other words, is checking and re-checking your portfolio beneficial or detrimental to how well it does?

Their research found that more frequent checkers show considerably lower portfolio performance over time. “In a sense,” they concluded, “5.1% is the price of excessive vigilance.” Long-term profits can be found where there is courage to move away from the crowd — and think long-term.

On the other hand, there are those who did bottom hunting when the markets crashed and are now raking in the moola.

In essence, investors who hit the pause button (the que sera, sera group) felt that those who were rebalancing their portfolios were being myopic; on the other hand, those who were actively trying to buy and sell thought that the other group was simply being “stupid.”

However, in the end, every investment decision needs to incorporate the risk appetites and the risk-taking capability of people. Someone may have a higher risk appetite – but if the capability to absorb a huge loss is low, then wait-and-watch is perhaps a better approach than investing in uncertain times.

Overconfidence

Psychologist Daniel Crosby believes that uncertainty often leads to two kinds of behaviors —compensatory over-confidence or worst-case scenario thinking, neither of which results in smart financial choices.

While the volatility in markets during the pandemic may be partly attributed to panic, investor overreaction (which led to excessive trade volume) was certainly another cause. This is reflected in how markets have periodically surged because of overconfidence about the worst of the virus having passed.

Shortly after these surges, indices are found plunging back down again. The phenomenon is also reflected in how “experts” have been making a variety of assertions in the recent weeks, guaranteeing that investors will be spared the pain that others may be experiencing.

Overconfident people, write researchers Mao Zhang and Yi-Ming Wang, “may perceive themselves more favorably than others perceive them, or they may perceive themselves more favorably than they perceive others. (…) It is common for most people to rank themselves as better than the median.” Moreover, they note that it's also “common” for men to trade more excessively than women, and for individual investors to show more confidence than institutional investors.

This plays a significant role in market volatilities, because overconfident investors are usually quick to buy on margin ahead of a stock market crash. In the run-up to the Great Depression, the “Roaring Twenties” saw a lot of overconfidence, and several investors used large margin positions to leverage their beliefs. But this caused an asset bubble, and when the depression hit, they lost everything they owned. Indeed, they even owed large sums of money, ultimately leading to banks having to declare bankruptcy — and everybody losing.

The takeaway? Avoid overconfidence: think long and hard before buying on margin in uncertain times if you don't have the appetite to stomach a huge loss.

Faulty Forecasts

“Experts” have made an array of predictions, ranging from global economic agencies projecting India's potential economic recovery to analysts saying the global economy will bounce back in the next financial year. These forecasts assume that central banks will cooperate and offer a way out, and that currently spooked investors will react to the rescue and re-enter the market. But as we have seen in the past, people can just as easily do the exact opposite, crisis or not.

In a pandemic, the seemingly opposite behaviors of people get amplified. Everything starts to seem black and white to people, but markets and behaviors actually remain grey and complex, interacting with each other in intricate ways.

Parting Thoughts

Turbulence and downturns have causes relating to behavioral and psychological factors that are difficult to control and explain. But what's certain is that not allowing investment decisions to be fueled by emotions and biases is a wise course of action. Now more than ever, people need to get back to the basics: minimize costs, be COVID-19-cautious, and resist the urge to time markets — and the virus.

The Malaxmi Group- An Empowered Team in Action amidst a Global Pandemic

This caselet was first published by STEP on May 14, 2020; Co-Author: Pramodita Sharma, University of Vermont, USA; https://www.stepresearch.org/the-malaxmi-group-an-empowered-team-in-action-amidst-a-global-pandemic/

Headquartered in Hyderabad, a city of 6.8 million and a major technology centre of India, the Malaxmi Group is diversified Group that comprised of several small and medium enterprises (SMEs) in infrastructure, agriculture, irrigation and water management, and construction, with operations spread across India. Since its inception in 2006, founder Harish Chandra Prasad, a mechanical engineer and computer scientist, aspired to build a professional organization and hired his team very carefully to ensure a good fit with his vision of a focus on quality products and services, and values of building a sustainable business on strong ethical foundations. Rapid growth followed. By the end of 2019, the Group’s revenues exceeded $10 million with 300 plus employees. However, there was some catching up to do in terms of internal systems and strengthening relationships internally as well as externally.

Corona Virus in India

By first week of May, India had lost over 1,700 citizens to the virus and another 53,000 had tested positive. The country’s mortality rate of 1.0 per million population and proportion (4.2%) of positive amongst those tested were much lower than in many other countries. Nevertheless, in an attempt to contain the spread of this infectious virus in a populous nation of 1.3 billion with poor health infrastructure, on March 24th the Indian government imposed a complete lock down of the country without giving even one day notice. SMEs feared the devastating effect of the lockdown on them and the economy. Even Malaxmi Group had to stop all works spread across 16 project locations, severely affecting their operations.

Crisis Management at the Malaxmi Group

Malaxmi had invested in a strong team of professionals. They felt that their Group can emerge stronger in the post-covid era, if they utilise the lockdown time to revisit every assumption of the current business practices, set strong systems and processes for the future and pivot the organisation to meet the uncertainties of the future. While providing thought leadership and holding weekly meetings with the top management team, the founder empowered his CEO, Pavan Kumar Bang, to spearhead the exercise. Few proactive measures pre-lockdown and actions post lockdown include:

Vigilance and AgilityWhen stories of the Corona virus epidemic in Wuhan, China reached India in January 2020, Pavan and his team followed it closely as some of their spare part vendors were based in this region. Immediate efforts were made to look for alternative suppliers within India. By the time the borders were closed, and international travel restricted, an alternate supply chain had been established.

Work from Home ProtocolsAnticipating the work from home advisory, Malaxmi decided to implement work from home one week before the Government directives. This helped the team to be equipped with laptops, internet connections and other hardware. When many others were still absorbing the shock of the new work from home reality, a 9:00 am to 7:00 pm ‘work from home’ routine has already been established for the Group and they hit the lockdown running.

Aligning Team Members and StrategyEmployees were encouraged to make a list of routine work-related activities and at least three new activities that were not a part of their routine responsibilities that each of them would take up during the lockdown period. Teams of employees were assigned specific tasks with an overarching aim to rigorously assess, ideate, innovate and consequently update the current systems and processes to help the Group beat the competition and stay ahead in the game. In addition, taking steps to build long-term trust-based relationships with key internal and external stakeholders was stressed upon. Some of the initiatives taken by the Group to achieve these include:

Process Evaluation and improvements:

• A comprehensive list of drawings, do’s and don’ts, mistakes committed and their root cause analysis, and good practices followed at project sites and all projects worked on was prepared, along with pictures. They were catalogued and stored with a semi-automated retrieval system for future reference and learning.
• Every assumption and convention of the businesses was questioned. WHY-WHAT-HOW matrices were prepared for several products and processes.
• Project proposal templates were revamped and standardized for potential customers.
• Financial statements were analysed closely to identify areas of improvement. Long overdue credits and debits were either written-off or cleared. 

Automation and Software upgradation:

• Realising that there will be uncertainty in availability of skilled workers, technologies to semi-automate several activities in construction and project execution such as plastering, tile laying and painting were identified and evaluated. Ten percent of the capital budget for the next year was allocated for procuring such tools and equipment.
• Enterprise Resource Planning software that had been bought 5-6 months earlier, but the implementation was patchy due to lack of time, training and commitment, was now being implemented meticulously.

Vendor relationships:

• Regular calls were made to all vendors, adjusting payment schedules to support those who were in dire need and delayed payments for the better endowed after discussing with them.
• Vendors were requested to conduct e-training for technical team members on issues like site level quality assessment of products, correct installation methods and do’s and don’ts while handling their respective products.
• Pictorial do’s and don’ts manuals were prepared for working with vendors and customers.

Employee training and skill enhancements:

• Senior and skilled technicians were encouraged to make videos on improving quality, increasing speed of execution and standard operating procedures for future training purposes.
• It was decided to reskill and employ existing team members in other departments. Internal job postings were done, interviews conducted, and transfers done. For example, new Quality assurance and Safety department were created with internal transfers and additional training.
• Online training programs were identified for each employee to help them be better prepared for future challenges.
• Employees were encouraged to challenge underlying assumptions and practices embedded in the Group to identify more efficient, environment friendly and sustainable solutions.

Family Governance:

• On his part, Harish started to adapt to working in a paperless virtual environment.
• He undertook peer discussions and consultations with family business experts and lawyers during this period to understand the best ways to govern the family business, steps to be taken for longevity of the enterprise and plan for succession of ownership and wealth transfer.
• He actively started to engage in treasury management and functioning of the family office too.

Key Insights

• Thoughtful visionary leaders can form organizational systems and structures to bring calm and efficiency in the storm of a global pandemic.
• Empowered teams with clear guidance and accountability can find multi-dimensional opportunities to strengthen organizational processes, systems and relationships, in a crisis.
• Paradoxically an obligatory moment of pause is an opportunity for intense activity on important yet ignored projects in the everyday rush of a growing family enterprise.

Sources: http://malaxmi.in/  | http://chiraharit.com/ | First authors’ interview with the CEO

Pandemic Prescription: Resolve, Resources and Resetting of Beliefs

This article was first published in GARP Risk Intelligence on April 17, 2020. Co-author: V.P. Jyotsna

https://www.garp.org/#!/risk-intelligence/operational/people/a1Z1W000005C9jjUAC

What India’s Xennials, and their history, bring to the battles ahead

A recent GARP Risk Intelligence article, A View from South Asia: This Time Is Different, looked back from the pandemic crisis to how India’s Xennial generation experienced the evolution in technology, economy, business, sports, movies and fashion, and bore witness to terrorism, war and politics over four to five decades. In this article, we would like to consider the difference that this generation can make in the fight against COVID-19 and the need to reset some of our beliefs.

The Dichotomy: The Xennials bridged the gap between the Baby Boom-Gen X and Generation Y and Z cohorts, and from analog to the tech-savvy Millennials. We grew up believing that the Industrial Revolution was the greatest thing to have happened to society; and that globalization, free trade and free movement of goods, services and people was the present and the future. Now, increasingly, there is evidence that that’s what might damage the planet irrevocably, with severe consequences for the human species.

The work done by previous generations and taken forward by ours has helped unravel the puzzle of genes: The Human Genome Project and artificial intelligence have made tremendous progress in understanding human biology. Yet, this pandemic has brought the world to its knees. And it is hitting home the message that a microscopic protein sac containing one strand of RNA can destroy a whole species – that nothing that we thought mattered all this while really matters.

Changes in lifestyles, income levels and awareness introduced us to a sea change in cultures and values as to varying health conditions that we were not prepared for. Luckily (or unluckily) for us, advancements in the use of technology in healthcare research, pharma and genetics helped us cope to some extent in maintaining the physical health. And we continued to ignore the warnings.

Unbalancing Nature: A November 2019 National Geographic article was prophetic in describing how deforestation was causing bats to have “no other option than to fly elsewhere in search of food, carrying with them a deadly disease.” The article warned: “Whether such diseases stay confined to forest fringes or if they gain their own foothold in people, unleashing a potential pandemic, depends on their transmission.”

Within a couple of months of that publication, the world was gripped by the novel coronavirus. The steps required to contain the virus, like lockdowns and social distancing, are testing our mental and spiritual health, and we, as a conscious species, need to adapt quickly to a new order. So maybe the Xennials, who are in the prime of their productive lives, can now take charge and put to good use all the technology and administrative abilities developed, all the ways to approach data analysis and the math that we have learned, and we may yet be able to come out triumphant. But certainly, by then, we would have lost a lot.

This period should be used to develop the moral and ethical compass to keep pace with the progress of humankind. To do away with the arrogance that we can improve on nature. To evolve as a conscious species. And to reset the definitions of heroism.

Heroism: We are fond of role models and heroes. The image and words of a Spanish biological researcher on WhatsApp stuck with us: “You give footballers one million euros a month and biological researchers 1,800 euros. You are looking for a treatment now. Go to Cristiano Ronaldo or Messi and they will find you a cure”. Have we not created an imbalance in the way we idolize some and neglect the others?

Another WhatsApp forward doing the rounds showed doctors in white coats and referred to them as “Gods.” What immediately came to our minds were assaults and acts of violence against doctors that are not only on the rise, but also a significant challenge for healthcare providers. When we were younger, Indians grew up being told that there were two noble professions: teaching and treating people. In their late 30s and 40s, none of our doctor friends want their kids to be doctors. There is no work-life balance, burnout is very high, payoff is not commensurate with the stresses and challenges, and the satisfaction of serving people is at times difficult with corporatization of healthcare to a great extent.

Yet, with a pandemic now threatening to impact every person on the planet, we must pause to think if we chose our heroes wisely, and did we hold them accountable? When we complained that the facilities provided at our public hospitals was not up to standards, did we stop to think how that happened? Did we hold our politicians and public servants responsible?

If nothing else, let this pandemic teach us to choose our heroes wisely. Like wars and terrorism taught us to regard “army (wo)men” as heroes. People have started to realize that the army keeps our borders safe. We sleep peacefully because they stay awake for us in harsh climates and conditions.

While the stars of entertainment had been ruling our minds and lives all these years, we forgot who really deserves our respect and attention. It is time we recognize the people working behind stethoscopes, microscopes and hazmat suits as real, sustainable heroes, and not go back to abusing them once the storm of this pandemic subsides. And not just doctors, but every single nurse, ancillary healthcare worker, public officials who monitored the epidemic, philanthropists, and anyone who did anything to keep the system running to battle this unseen monster.

We Can: For the first time in history, an infectious disease, smallpox, was declared eradicated in 1980. Rinderpest was eradicated in 2001. Polio is near eradication. The Xennials have grown up believing that wars against deadly diseases can be won. They can with a never-give-up attitude, each of us doing the best that we can do in the circumstances, by not being a “covidiot,” and extending complete support to those on the frontlines.

Family businesses: Time to stand up

This article was first published in Business Standard on March 31, 2020. Co-author: Nandil Bhatia; https://www.business-standard.com/article/opinion/family-businesses-time-to-stand-up-120033101878_1.html

Taking care of people and communities in times of crisis can offer a brand or company many long-term benefits

The likely impact of the spread of coronavirus in a densely populated country like India has sent the country into an unprecedented state of lockdown. The economy was in the doldrums even before the virus struck. As things stand, the financial markets have been hit hard: The BSE Sensex has fallen close to 38 per cent from its peak of 41,952 points on January 14 to 26,055 points on March 24 eroding billions of dollars in investor wealth. Most "casual” workers, who form a third of India’s workforce, are forced to sit at home with no income. Domestic demand of most products and services, except essential items, has crashed. Self-employed people, who comprise half of India’s workforce, suddenly find their shops shut. Many of these small business owners will find it difficult to tide over the next few months when the demand will likely pick up.

It is in such times that business leaders must come to the forefront and lead the fight against the anticipated social and economic challenges. Business families in the country have always contributed and willingly given back to the society -- through their companies or in their personal capacity, long before the provisions related to the mandatory CSR spending under the Companies Act, 2013, came into force.

Some of India’s most prominent business houses have already announced relief plans. Tata Sons and Tata Trusts have committed Rs1,500 crore; Anand Mahindra, chairman of Mahindra Group, recently announced he would explore how his firm could turn some of Mahindra’s factories into facilities where ventilators could be manufactured to help take care of critically ill Covid-19 patients. Mahindra also offered to turn some of the resorts under the Mahindra Holidays brand into quarantine facilities in case the country falls short of space, given its inadequate public health system. Anil Agarwal of the Vedanta Group has set up a Rs 100 crore fund to assist communities and individuals most severely affected by the coronavirus-led slowdown and promised not to fire any temporary staff going forward. Agarwal also mentioned that there would be individual one-time insurance for Vedanta employees in case they or their family members get infected.

India's largest bicycle maker Hero Cycles has set up a Rs 100 crore contingency fund to tackle the virus. The group has said it was reaching out to different state governments to offer all possible help.

Reliance Industries has set up medical facilities dedicated to supporting the government in the treatment and isolation of Covid-19 patients. Continuation of pay for temporary workers, sanctioning meals for daily-wage laborers affected by the stoppage of work and ensuring support in providing essentials (such as grocery and hygiene products) through its retail chains are some of the other actions undertaken by the business house to mitigate the disruption faced by people. Many other business houses have also announced monetary contributions or offered help in other ways.

In the early days of the pandemic the Godrej Group and other FMCG players like Hindustan Unilever and Patanjali had said they were reducing the prices of soaps and hygiene products. They are also ramping up production of such items to fulfil the growing demand for such items.

However, for a country of the size of India which is facing a threat that most likely expose the weaknesses of its public health care systems, measures by a handful is not going to be enough. The government has also attempted to motivate the private sector to help out in this situation of despair. The recent order from the Ministry of Corporate Affairs allowing companies to attribute funds utilised to combat coronavirus as part of the mandatory CSR spending under the Companies Act 2013.

Beyond CSR, research has shown that taking care of people and communities in times of crisis can give a brand/company long-term benefits like employee loyalty, improved relationships with value-chain stakeholders such as suppliers.

Given the scale of impact this pandemic is going to have on India and globally, it is essential to acknowledge that all hands on deck is the need of the hour. Family firms are one of the major stakeholders in the Indian economy and their actions could make the ride less painful for many.

A View from South Asia: This Time Is Different

This article was first published in the GARP, Risk Intelligence on March 27, 2020; The author would like to thank Priyansh Hetamsaria for his inputs. The views expressed are personal.

https://www.garp.org/#!/risk-intelligence/operational/people/a1Z1W000005C1cAUAS

India’s pivotal ‘Xennial’ generation has lived through a lot, but nothing like the pandemic.

Countries around the world are struggling to keep up with the pandemic coronavirus. Global stock markets are on a downward spiral due to fears of recession, massive drops in demand, disruptions in supply chains and job losses amidst the rush towards virtual lockdowns. While companies have been asking employees to work from home, there are many sectors where such work arrangements are not possible – banking, tourism, retail shopping, agriculture, transportation and many more. The alternative could be to close the business.

In industries such as airlines, tourism, hospitality and restaurants, retailing, entertainment including theme parks like Universal Studios and Disney, luxury goods, fashion and autos – business has nosedived. Billions of dollars of investor wealth have evaporated. The cost to the global economy could be $2.7 trillion, equivalent to the entire GDP of the U.K., and that is just one early estimate. As of now, there is no end or bottom in sight.

The outbreak started in Wuhan, China, in the late 2019 and turned into an epidemic when the COVID-19 virus spread across China. On March 11, the World Health Organization declared it a pandemic. The number of cases worldwide has climbed into hundreds of thousands, touching virtually every country, and can be tracked online. Even the most developed countries are struggling to fight the disease with existing medical facilities.

These are clearly unprecedented times. As I write this article from India, in the city of Hyderabad, we are in virtual lockdown, working from home, and scared. Interstate borders have been closed, all public and private transportation facilities have been suspended, all commercial establishments shall remain closed except those in essential services like medicines and groceries. Even government officials and bank employees are working on rotation with minimal staff.

As of March 25, the lockdown is nationwide.

I belong to the Xennial generation, a cohort born between 1977 and 1985 that doesn’t quite fit in the Generation X or Millennial category. We did not go to war. We did not struggle for independence. We have seen many things in our 40 or so years. But nothing like this.

War and terrorism: Xennials like me have been locked up at home during the curfew imposed when Indira Gandhi was assassinated, and the Bombay bombings of 1993. We were glued to our televisions watching the Mumbai attacks in 2008, the September 11, 2001 attacks on the World Trade Center, and the Paris attacks of November 2015. We have lived through the Kargil war, the Gulf War, the killing of Osama bin Laden and the Uri surgical strikes. We have seen the Berlin Wall come down and the cold war end, the dissolution of the Soviet Union, the formation of the European Union and Brexit.

Technology: We are the generation that saw storage evolve from 1.44mb floppy disks to CDs to DVDs to Blu-rays to Pen Drives to Cloud; televisions make their way into our households and now into our palms; telephones evolve from bulky devices to sleek iPhones, even with facial recognition. We who sat in anticipation for the weekly popular music programs Binanca geet mala on radio, and the Chitrahar on the government broadcast channel Doordarshan, were in awe at the Sony Walkman. I owned a Sony Discman with pride before it became outdated by iPods. And now, iTunes and gaana.com rule.

Economy and reforms: Reform by stealth in India – by way of telecommunications, information technology and biotechnology – began when this generation was coming into the world. Dr. Manmohan Singh unleashed full-fledged economic reforms in 1991, seen on our television sets, without us completely realizing the impact when we were between the ages of 6 and 14. But there was palpable excitement in our middle-class business family. We saw the dot-com bubble burst, the birth of National Stock Exchange of India, the Harshad Mehta and Ketan Parekh scams, the subprime crisis and demonetization.

Business: We followed the rags-to-riches story of Dhirubhai Ambani of Reliance Industries being taken forward by his son Mukesh Ambani, and the riches-to-rags decline of his younger son Anil Ambani. We saw the rise – and recent downfall – of Yes Bank. We felt pride at the Golden Peacock award for corporate governance that Satyam Computer Services won in 2008, and the shock of the collapse of governance just a few months later. And there was the rise of Apple, Facebook and Amazon.

Sports: We grew up watching sporting heroes Sachin Tendulkar, the greatest cricketer of all time; the tennis great Roger Federer; and Cristiano Ronaldo in football. The cricket 20 overs format and the Indian Premier League were born and gained prominence during our youth.

Movies and fashion: The rise of the Khans, the superstar acting trio of Shahrukh, Amir and Salman; the movies Dilwale dulhaniya le jayenge, Qayamat se Qayamat tak and Maine pyaar kiya, which broke all box office records, tugged at our heartstrings, and the trio captured our hearts. Sushmita Sen and Aishwarya Rai took India and Indian beauty to the global stage by winning the Miss Universe and Miss World crowns in the same year (1994), and became successes as Bollywood actresses.

Yes, we have seen a lot. But not this. COVID-19 has left us with a feeling of helplessness. What does tomorrow hold? For how long will we need to maintain social distance from family, friends and colleagues? Until when will our supplies last? How do we entertain our young kids? And for how long? Will we have a job tomorrow? That person who came to deliver the newspaper, did he infect the newspaper? I just coughed – have I contracted the virus?

There are many questions. No answers. All we can do is try and stay safe and have hope.

Explained: How to be in the 'top league' of business education in India

This article was first published in Business Standard on December 12, 2019; https://www.business-standard.com/article/education/explained-how-to-be-in-the-top-league-of-business-education-in-india-119120301339_1.html

Rigour versus relevance is a debate that the B-schools need to engage in

Industrial revolution and rise of large corporations necessitated shareholders to employ agents who worked towards maximization of shareholders’ wealth. Business Schools globally played an important role in imparting education to students that would make them ready to manage and eventually lead these corporations. Technical knowledge was much valued and management education naturally was skewed towards imparting them.

The advancements in technology has made it easy for people to obtain hard skills as and when required. Similarly, many of the jobs now performed by MBA graduates will get performed by machines in the future. Some of the top global leaders have openly expressed that management education needs to undergo changes to bridge the gap between what is required in the real life versus what is taught in B-schools.

Speaking on education, at the World Economic Forum (2018), Jack Ma, the founder of Alibaba, emphasised on the need to move away from knowledge-based teaching to teaching the softer skills like “values, believing, independent thinking, teamwork, care for others...”. Similarly, Nitin Nohria, the dean of the Harvard Business School, admitted, “anyone can teach you how to read a P&L or value a derivative; those kinds of things have become commoditized. The bigger challenge is to teach America’s future business leaders how to be curious, humane, and moral; how to think outside the box about problems like funding the research for a new blockbuster drug. And how to be strong enough to stand up to Wall Street when it demands the opposite”.

In India too, the India skills report 2019 stated that only 36% of the MBA students in the country were employable. Further, hundreds of B-Schools across India are shutting down every year due to lack of offers from recruiters. While a few top schools like the ISB and IIMs are continuously re-evaluating the curriculum, marking themselves with the market demands and innovating teaching pedagogy, the trends are clearly shifting globally, and all B-Schools need to recalibrate their efforts to remain relevant.

Nassim Nicholas Taleb famously said, “In academia, there is no difference between academia & the real world. In the real world, there is”. How does a B-school bridge this difference? For one, Engage with stakeholders to add real time value to the community. Curriculum and faculty should be geared towards integrating theoretical knowledge to practice. Maximizing shareholders’ perspective is now passé with companies aspiring to move towards a more wholistic measure of performance like the Triple Bottom Line approach that looks at people and community (social responsibility), planet (environmental sustainability) and profit (the bottom line). B-Schools need to accordingly reset curriculum, faculty and mindset.

Research is an important component of all business schools. And rightly so. However, rigor versus relevance is a debate that the B-Schools need to engage in. Warren Bennis, a professor of management at the University of Southern California says that “Business schools have forgotten that they are a professional school.” Not all good researchers are good teachers and not all good teachers are good researchers. Add to this a component of practical experience and industry engagement. A healthy balance is required in a fast-changing world.

Letter versus Spirit- Ethics class doesn’t make one ethical. Knowing risk management tools didn’t prevent a Lehman brothers from collapsing. But knowing the consequences of not acting ethically or knowing what is at stake if a wholistic assessment of risk is not done, will act as a deterrent for people to take shortcuts. The school must understand, communicate and practice the basic values that it stands for and inculcate it in its students too. Strong personal and organizational values aid people to keep pace with changing times with integrity and in an ethical manner.

In order to be globally relevant, B-Schools in India must truly globalize. Efforts to attract sizeable proportion of international students, impart international experience, design globally relevant curriculum, promote cultural diversity and bring global faculty need to be made. Companies and marketplaces are global in nature after all.

Hard versus Soft Skills- Traditionally, management education has paid emphasis on hard skills and quite neglected soft skills. With technology getting more and more adept at providing on-the-go technical knowledge and soft skills proving to be vital to succeed, increased focus on enhancing skills like negotiation, human behaviour, leadership and structured thinking are needed. It is also important to allow students time to think and reflect so that it becomes a habit and incidences of breakdown and mental health issues can be avoided in the future.

Entrepreneurial- The schools themselves need to have entrepreneurial traits of curiosity and innovation. Executive education, new courses, flexible programs, online programs and specialized programs need to be launched to keep pace with market requirements.

In recent times, failure of many global giants due to flawed risk assessment, governance lapses, and judgement errors have raised questions about the effectiveness of the management education as the leaders of many of these corporations were educated at the top B-Schools in the world. Elite institutions in the US like Harvard, Stanford and MIT have reported a drop in the number of applications in the recent years. The Indian B-Schools can learn from these experiences and take proactive measures to be top of the league. Yet, let’s not ape the West. The West is looking to Us. Let’s tell them what we stand for. The East is the biggest market for global companies. Let’s make leaders in India, for the world. The leaders who understand these markets better than those educated in the US or Europe.

Views expressed are personal.