There is a fresh chapter unfolding at the Murugappa Group which has set a leadership transition in motion while seeking to ensure family unity.
This has been triggered by the retirement of M.M. Murugappan, whose understated demeanour often masked the weight of his role as the chairman of a ₹38,000 crore agri, engineering to financial services conglomerate.
Instead of a new group leader or chairman, the group has now redistributed responsibilities among different family members and the group corporate advisory board structure done away with. What is packed into this new group lattice is a role with the responsibility of business performance, and involving all the gen-next leaders. To ensure better delivery, there is a rich dose of leadership grooming thrown in as well.
Many in the industry read this as an attempt to accommodate the interests of all family members and giving them a voice in driving the future of the group.
To start with, instead of the Corporate Advisory Board for the group, which has been an advisory body led by the group chairman, there will be leaders directly involved with specific companies of the group. As for the current members of the group advisory board, Murugappan is to take up a direct role in some of the engineering business-related group companies, apart from getting himself involved in philanthropic work. The other two members from the group on the advisory board get involved in different group companies. V. Ravichandran, lead director (fertilizer and sugar) on the advisory board steps down as vice chairman of Coromandel International and will continue as chairman of EID Parry. Ramesh K. B. Menon, the other leader from the group on the advisory board, and the director-HR and lead director (diversified business group), has now been made director in Coromandel International.
Explaining the structure and the context to Fortune India, A. Vellayan, the former chairman of the Murugappa group and a family veteran, says, “Today we have challenges that are out of the ordinary with a lot of uncertainty in the market. While in some areas like agri there is good monsoon and good offtake, in many of the other industries we do not know how the rest of the year is going to pan out. What we thought was, we have in Murugappan and myself recently retired people who have knowledge of particular industries and who can add value in guiding and handholding the teams to the next stage.”
Referring to his and Murugappan’s strengths, he says, “Murugappan is more on the engineering side and I on the agro side. We will not be playing a day-to-day role a broad-based one on what to do, what to avoid, and how to go about it.” Then, there is mentoring also. As Vellayan puts it, “We can use the time to develop both the professionals and the family youngsters.”
The corporate board, which was more of an advisory structure, he says, “may have been disbanded, but in effect both Murugappan and I are from there. Now, we will be playing a more direct role with the companies.”
He agrees with the general view that the restructuring is also meant to help ensure family unity, while also get everyone involved. “In the current environment [with market uncertainties] this is more important,” he says.
As Fortune India gathered, the move has deeper implications than the announcements to the stock exchanges by three group companies made it look like. To the outside world, it all began on November 11 when the Indian bourses were informed by three Murugappa Group companies that in keeping with its tradition of the group leader retiring at 65, group chairman M. M. Murugappan was superannuating and that additional directors were being appointed on their boards. The three companies are Coromandel International, Cholamandalam Investment and Finance Company and Tube Investments of India.
While the note to the bourses said Murugappan intends to devote his time to philanthropic activity, what it did not explain was who would replace him. Some argue that with many young members within the group, getting an ideal replacement for the soft spoken Murugappan may be a challenge. He, like Vellayan, is known to shun the spotlight, but both are well regarded within family business circles.
As Vellayan explains, Murugappan’s direct involvement now will be in leading group companies like Carborundum Universal, an industrial consumables company and Chola MS, a general insurance company. Vellayan is to lead Coromandel International with young family leaders Arun Alagappan, Arun Vellayan and Narayanan Vellayan in different roles.
One striking feature which is being seen as one of the reasons for opting for a new group structure is the age gap which exists within the group. After all, the gen-next family members are in their 40s and 50s, which means handing over the group’s mantle to any of them would give them control for at least the next 15 years which apparently may not be a comfortable arrangement for all. (See table on young leaders.)
While Vellayan sees the new structure as the need of the hour, some others like to look at it as an attempt to make the group more nimble footed with a more agile structure.
Those who have looked at family-led businesses see a lot in these developments. Kavil Ramachandran, clinical professor, entrepreneurship and the executive director of the Thomas Schmidheiny Centre for Family Enterprise at the Indian school of Business (ISB), says while the new structure seems to be one where there is a component of each of the next generation leaders getting involved, there is also an element of mentoring. However, he feels, what needs to be watched is what form and fashion the integration of these different businesses will take since these are all huge businesses.
Vellayan, of course, allays any such concerns and says there are still strong linkages through some common functions like HR. Ramachandran also feels “this may be a mechanism to see who among the next generation emerges as the most capable and to prove themselves before stepping into a group leadership role.” And this may well be an important outcome to watch out for.