The Godrej family saga: Business succession should be led by a common vision

Discords within the Godrej family came to the forefront in the 2010s, primarily revolving around a combination of succession-related issues and differing strategic visions among some family members on the future portfolio and direction of the family business group’s businesses. 

Despite Adi Godrej’s longstanding and remarkable tenure as the group’s patriarch and leader, the absence of a designated successor appears to have led to uncertainty and contention among family members over the future leadership of the family and its complex portfolio of diversified businesses. Moreover, the failure of the current and next-gen leadership of the Godrej family to agree on a unified strategic vision and set of priorities for the business group’s direction is said to have led to disagreements over key business decisions, fuelling tension within the family.

Many observers bemoan the division of businesses built over a century by this iconic business family, a rare exemplar of enduring familial success in India, as it splits its business portfolio into two, each charting its distinct course. In the realm of business, few entities embody tradition, resilience and complexity as profoundly as multi-generation family enterprises. These enterprises often serve as pillars of economic stability, passing down values, expertise and wealth through successive generations, and emerge as an integral part of a nation’s history and heritage.

However, it is important to recognize that the possibility of a carve-up of businesses is intrinsic to enterprises that are exposed to the vagaries of uncertain, intricate and often inexplicable familial relationships that can either fortify or fracture both families and their businesses. Moreover, the topic merits nuanced consideration, as splits in family businesses per se should not be viewed negatively. They can bring about both positive and negative consequences for all stakeholders.

At the heart of multigenerational family rifts often lie fundamental tensions between tradition and innovation, legacy and progress. The continuity of any family-owned business group lies in the owning family’s ability to develop a unified family vision that strikes a delicate balance between preserving the values and ethos of the past while embracing imperatives of the future. 

While family splits can be disruptive and challenging, they are sometimes not only unavoidable, but also welcomed, the reasons for which could range from differing visions and conflicts of interest to the need for a clear transition from one generation to the next. Therefore, every business family should proactively prepare for potential splits in the future, rather than staying oblivious of the possibility or trying to avoid them altogether. By proactively preparing for splits, business families can not only mitigate the adverse impact on their businesses and ensure their continued success, but also avoid splits.

One classic example of proactive preparation for family splits is that of the Merck family, owners of the pharmaceutical giant Merck & Co. In the early 20th century, the family foresaw potential conflicts among descendants and took proactive measures to prevent family disputes from affecting the business. They established a complex ownership structure that separated ownership of the pharmaceutical company from operating control of the business. 

This allowed all family members to retain ownership stakes in the business, while professional managers were appointed to run it for the most part, with only a select few professionally competent family members part of the management. Multi-tier governance mechanisms both within the family and business were put in place, so that the family could play an effective stewardship role. This proactive approach helped prevent family disputes from disrupting the operations of the company and ensured its continued success over many generations.

A multigenerational business family can be seen as a complex social unit that requires meticulous attention to crafting its vision and strategy as much as it needs the same exercise for its enterprises. Succession planning emerges as a pivotal component of this endeavour. In multigenerational family business groups, this process transcends mere transfers of ownership and control; it encompasses nurturing talent, cultivating leadership, fostering a unified family vision and delineating strategic priorities to ensure seamless power transitions across generations within the family and its businesses. 

Transparency and open communication play a paramount role in addressing succession-related challenges within these families. Regular and clear communication within the family, using both formal and informal channels, helps understand and align the aspirations of individual family members with the family’s collective vision for its businesses. Unfortunately, this aspect remains neglected across large parts of India’s family business landscape, impeding the revitalization and growth of many enterprises. 

The division within the Godrej Group of family businesses serves as a poignant reminder of the necessity to periodically revisit and revise the family’s vision, values, strategies and policies. Consensus-building through continuous communication is essential for navigating generational transitions. It plays an important role in preserving and growing the wealth, legacy and identity not only of the family, but also of the businesses under its stewardship.