Familybusinesses dominate the economic landscape in nations around the world andIndia is no exception. Many of India’s largest and most celebrated companies arenurtured by a small group of promoters and family members. Family orPromoter-driven businesses have made, and will continue to make, a hugecontribution towards the growth of the Indian economy.
Bydefinition, a Promoter-driven organization is one in which the majority of thestake is held by the person who has established the company and at least onerepresentative of the family is involved in the management or administration ofthe business. They typically started small with what worked best for theirconcern, gradually clawed their way up in the market stakes, and learned alongthe way. Foryears, companies in India have been transitioning from family ownership to becomingmore professionally run operations. The need to transition emerged frommultiple factors, such as increased scale and complexity in operations, fiercercompetition, changes in the business environment, technology, and governmentregulations. However, it is not surprising to see that many of theseorganizations experience mixed success in driving transformation programs. Thiscase highlights how Talbros, a traditional promoter-driven organization is transformingfrom their traditional business style to adopt the latest management practicesto sustain in this competitive business world amidst the Multi-national Companies.
TalbrosAutomotive Components Ltd., the flagship manufacturing company of the TalbrosGroup was established in the year 1956 to manufacture Automotive and IndustrialGaskets in collaboration with Coopers Payen of UK. The business is broadlydivided around three joint venture companies Nippon Leakless Corporation forgaskets, Magneti Marelli for chassis, and Talbros Marugo Rubber for rubbercomponents while their technology partners are Sanwa Packaging and InterfaceSolutions.Theircustomers include some of the largest OEMs like Ashok Leyland, Bajaj Auto,General Motors, Hero Honda, John Deere, Mahindra and Mahindra, Maruti Suzuki,Tata Motors, and international corporates like Carraro, DANA, KMP Brand, Maxi Force,and GKN Driveline.
ThePresident of the organization had recently moved on and the Joint ManagingDirector had to take over the reins of the company. He set the company on arapid growth path with the aim to grow business significantly by the end of thefinancial year – a significant leap over the last few years. However, themanagement frequently found them tied up in the day-to-day operational aspectsof the organization, and their focus deviated from the strategic matters.Withthe advent of newer and more effective technologies, emission norms – BS 6, andthe introduction of GST, Talbros felt the need to improve their productdevelopment capability and focus on innovation to capture greater businessopportunities.
The organization started looking forward to increasingproduction capacity, improving processes to increase yield, looking atlocalization of raw materials, reducing costs through waste management and diversifyinghorizontally in other segments such as two-wheelers and passenger cars.Themanagement had been running the organization by managing everything tactical aswell as strategy related. Most of the time, it was involved in handlingemergencies, leaving little time for them to strategize.
The promoter of theorganization wanted the top management to focus on strategy and clearlydemarcated roles, accountabilities and decision-making authority at all levels.Forthe envisaged growth trajectory, the company needed stronger systems and clearerdistinction of roles and responsibilities and level of decision-making. Asingle team was managing research and development and Sales, which alsoincluded activities related to supply chain and logistics. Plants acted as anindividual entities rather than a part of a larger organization. Theprocurement, research and development and accounting were done separately forthe plants. Theorganization had people working with them for a long period and they hadstarted complaining about the systems and infrastructure issues. There was aneed for better systems and improved capacity and manufacturing processes,along with streamlined internal processes and policies across plants.
The promoterwanted to do a benchmarking of the salary that they pay to know where theystand as per the market. He also wanted to change the culture from loyaltybased to performance based.Thebequest structure was proving to be ineffectual in supporting the changingdynamics of organizational needs. Talent management policies and processes requireda revamp in a bid to streamline the processes and professionalize theorganization. In this context our association with the client began initiallyfor organization restructuring, implementation of performance management systemand compensation benchmarking.