Book Excerpt: The SIS story of generational change

Nine out of ten first generation entrepreneurs don’t let go of their companies. It’s obvious why. The company is their idea, a risk that they chose to take and then went on to build upon against all odds. To be fair, it should be theirs as long as they want. It’s just that time never stops for anyone. It’s best to be prepared, otherwise the very business they painstakingly made goes to pieces.

Indian corporate history is replete with examples of family businesses that broke after the first or second generation. The doom is especially stark once the business makes the transition from the second to third generation. The biggest of corporate names, right from Reliance Industries to branches of the Birla family and famous names like Mafatlal, Kirloskar, Modi and Singhania, have split bad blood in public. The impact nearly always is on the business, the very business that their first generation had built brick by brick. Those who have seen ‘Succession’, the popular TV series on a business family, would appreciate the various factors and interests that come into play when a family patriarch decides on his successors.

That’s why a lot of focus in recent years has been on the importance of succession planning, ensuring the interests of the promoter family don’t take priority over the interest of the company. More and more entrepreneurs are beginning to realize the importance of having a sound plan on leadership transition once they take a step back. Family constitutions have become a handy tool to set the guidelines and principles.

But that is succession in the conventional sense. What RK had in mind, and what he executed, was different. He was just fifty-two years old when he did so. Rarely do first generation entrepreneurs move away from their company at that age. By going against the trend and giving up control of his company, RK was forging a new path. The arrangement that he eventually decided upon was one of the most unique ones seen in an Indian company. Again, he didn’t go by any rule book. Instead, he made a decision based on what SIS required at that moment. While this one decision set up SIS for the heights it would reach in the next twenty-five years, at that time, SIS was going through a bit of a crisis.

With RK wearing many hats within and outside the organisation — in the larger industry — the management bandwidth at the company was spread thin. This was also the time when SIS was expanding in the East and in the North. This needed constant supply of cash, which wasn’t there. What further complicated the situation was the loss of some marquee clients, including some of the Tata group companies and the contract from ITDC. There was a need to recoup these setbacks. It didn’t help that G4S was growing as a rival. The aspirational MNC brand was setting new standards in the industry and clients were ready to shell out the money for the company. Its leadership was decisive and sharp and it grew aggressively. On the other hand, SIS was stagnating, unable to break out from a revenue range of Rs 18-20 crore.

Thus, there were multiple parts to RK’s succession plan. It was not just about a leadership change, but a move to transform the whole organisation itself.

RK professionalised the management — including the top leadership — something that first time promoters hesitate to do. This was now a must for the business and its survival. Second, he timed the succession within the family perfectly. Again, many promoters keep it late. Often, the succession is forced through a legal route, or is not built on values. But RK got it correct.

There are two names that he brought to make this arrangement work: Uday Singh and Rituraj Sinha. One, a hardened corporate professional. The other, a youngster brimming with ideas. Few gave this a chance.

— Excerpted with permission from the publisher