A very interesting article on the infrastructure development in India and also how to manage family business's. Some quotes:
The Quarterly: Has the government been effective in addressing these problems?
G. M. Rao: The government has initiated several positive changes, and private players are also more and more interested in participating in infrastructure development. However, we need increased momentum to maintain these high growth rates. For example, the demand for housing, cold storage, and power outstrips supply—even considering planned capacity additions.
There are also problems with disbursing funds and implementing these improvement projects. The government is spending a lot of money to improve roads, but, ultimately, a lot of that is not reaching the people, and this has been happening for the past 60 years. Unless you change this, that allocated money is not going to do much good.
Implementation is also a problem. The government is not organized for this kind of growth or for speedy implementation of projects. It has to strengthen the whole system. For example, the National Highways Authority [of India] has one system for the whole country, but it should be regionalized into four sectors: south, north, east, and west. They could each call for their own tenders and monitor their own projects, while reporting to Delhi. Under the current system, we have so far only completed about 10 percent of the planned national road improvements—for instance, widening roadways from two lanes to four.
The Quarterly: What can the government do to improve the rural economy?
G. M. Rao: The government should encourage manufacturers to set up their factories in the villages. I read recently that a big multinational mobile-phone maker designs its phones here in India but manufactures them in China. This company makes millions of pieces a year, and about 2,000 people have jobs there. Why can’t we have the manufacturing as well? One reason is the Labour Act.1 We cannot expand the manufacturing industry without the right to hire and fire. We have the capability to manufacture, but we have to change our labor policy.
We also need to expand microfinancing further into rural areas. So many people in villages fall into the debt trap. Their family land is subdivided among brothers into plots too small to cultivate effectively. Then they go to the moneylenders to get by. When they can’t make payments, the moneylenders take away their land. Families that were once respected landowners are now laborers, and they migrate to the cities.
The Quarterly: Can you tell us what you’ve done to ensure GMR’s health as a family-owned business?
G. M. Rao: When I was a director at Vysya Bank, one of my tasks was to talk to people with nonperforming assets who were about to default. I saw a lot of family businesses in trouble. I remember one well-respected family with two brothers. The younger would never sit down before the older one did, as a mark of true respect. Three years later the same brothers were fighting in the streets with knives. Once family members start fighting, their energy is diverted. They are no longer focused on the business, but on the fight. That was a big lesson for me.
Later, I went to a conference on family businesses and heard M. V. Subbaiah, of the Murugappa Group,5 speak. That was a real eye-opener for me. I started attending international family business summits, and I brought in top experts to look at my business. Then I called a meeting of my family and, very reluctantly, all eight members came. We had a lot of differences, and everyone was allowed to talk freely. We all started talking very animatedly, emotionally—arguing and what not. It took time to get everyone to reach consensus. I put it all on video so that the next generation gets to see how we executed it.
In the end we agreed to a family constitution model that outlines succession, conflict resolution, our values, and our mission. It says what qualifications are needed to enter the business, as well as our media and political policy. It even talks about what happens in case of a divorce. All these things needed to be addressed in detail to protect and delink the business from the family.
Today 65 percent of the top companies on the National Stock Exchange [of India] are family-owned businesses. We need to think about their governance. These companies are becoming so big that if the family gets estranged, it could impact the national business environment.