strategic leadership - murugappa group
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Strategy Leadership
International Team:Xiang X, Jan E.A.N, Kamil T, Guang LStefania D V, Charlotte L
Murugappa Group Brief
Evolution of Governance (90’s to 2000’s)
Recommendations for Murugappa
Main Changes to Maintain Group Efficiency
Agenda
• Headquartered in Chennai, India.
• More than 32,000 employees globally.
• Strong alliances with huge international companies.
• Business origins dates back to 1900 when Dewan Bahadur
Murugappa Chettiar established a money-lending & banking business.
• Diversification in the area of business a frequently repeated practice,
with products ranging from bicycles to general insurance to fertilizers
etc.
• Leadership models have changed throughout the times but always a
family-run group.
A brief overview
Global Presence
Ownership structure
USD 4.4 BillionConglomerate
28 Businesses in 22 fields
- Governed by the Murugappa
Corporate Board (MCB), headed
by A Vellayan as its Executive
Chairman.
Group Structure
Abrasive, Refractories, Electro minerals and Industrial Ceramics
Tubes, stripe for industrial and automative
Fertilizers, pesticides & specialty nutrients
Sugar, neem producer
High yielding plantation
Financial services
Special Purpose Grinding Machines and tools
Non-life insurance products
Family Tree
4 Generations
(From 1884-Now)
Leadership (The Kartha System)
Mission & Strategy
As it is a group so there can’t be a single mission that runs through
different companies rather a philosophy that the group basis its
business on: it is an extract from: the ancient Indian treatise on
wealth creation and governance, the Arthashastra:
"The fundamental principle of economic activity is that no man
you transact with will lose, then you shall not.“
If one had to define a mission for the group it would basically be to
become a global group providing diverse types of high-quality
products.
The broader business strategy that has been practiced since the
inception of the business is to continue to diversify, capitalizing on
any slight opportunity that may be present in the market.
Values‘Treat people with respect and concern;Provide opportunities to learn, contribute and advance;Recognize and reward initiative, innovativeness and creativity
Values & Beliefs; Rules• Adhere to ethical norms in all dealings with share holders, employees,
customers, financial institutions and government.
• Provide value for money to customers through quality products and services.
• Treat our people with respect and concern,; provide opportunities to learn, contribute and advance; recognize and reward initiate, innovativeness and creativity.
• Maintain an organizational climate conductive to trust, open communication and team spirit& maintain a style of operations befitting our size, but reflecting moderation and humility.
• Manage environment effectively for harnessing opportunities.
• Discharge responsibilities to various sections of society and preserve environment.
• Grow in an Accelerated manner, consistent with values and beliefs by continuous organization renewal.
• In addition to that the basic rule for leadership in the family is the Kartha: Family’s elder, male family leader in charge of guiding and choreographing the course of the family. The Kartha would be the oldest male family member.
Murugappa Group Brief
Evolution of Governance (90’s to 2000’s)
Recommendations for Murugappa
Main Changes to Maintain Group Efficiency
Agenda
Main Financials
Sales Composition PBT Composition
- 2011-2012 EBITDA Growth Achieved: 20%
- 2011-2012 Gross Sales: 22314 Crore India Rupees.
Decision-making Structure
Before 90’s 1990 - 1999
After 2000’s
Family Head (AMM)
Decision MakerSeven Family
Members (CEOs)
Non family members
(CEOs)
Main Business Units
“With governance and mentor from
BOD”
Independent finance, HR, Operation, etc. No information sharing and decision communication.
Evolution from 90’s to 2000’s
1990 - 1999
Limits of decision-making structure
1. No flexible in term of decision making
(slow process in taking decision)
2. Emotion evolved in business decision
3. Family members are focus on individual
business units
4. Limited communication between family
members in term of group business
5. Inadequacy of governance in all business
units
6. Belonging of the family is the condition to
be CEO => not a criteria of performance
7. System of mentor/ the older form the next
CEO => no vision from the outside
8. No share of experience
9. No possible to negotiate the process from
supplier as a group
Murugappa Corporate Board (MCB)Murugappa Corporate Board (MCB)Murugappa Corporate Board (MCB)Murugappa Corporate Board (MCB)
Role of MCBIncrease the exchange ideas, advice and knowledge for their family ownership companies
COO CFOFamily Member
Non Family
CEOConsultant
Non Family
CEOFamily
PresidentNon Family
CEOFamily
PresidentNon Family
CEOFamily
PresidentNon Family
CEOFamily
PresidentNon Family
CEOFamily
PresidentNon Family
CEOFamily
PresidentNon Family
CEOFamily
PresidentNon Family
In 1990, start of liberation process and opening Indian economy, Murugappa family decide to become company as group in formal way.
Governance Structure in 1990
Power path
Career path
PARRY’S Confectionery
MV Arunachaiam
AMM family kartha
Murugappa Corporate Board (MCB)Murugappa Corporate Board (MCB)Murugappa Corporate Board (MCB)Murugappa Corporate Board (MCB)
5 Family member move to MCB from 7 different companies
Director: ReghavanDirector: MastiDirector: Natalies
CEONon Family
PresidentNon Family
CEONon Family
PresidentNon Family
CEONon Family
PresidentNon Family
CEONon Family
PresidentNon Family
CEONon Family
PresidentNon Family
CEONon Family
PresidentNon Family
CEONon Family
PresidentNon Family
VC - Strategy: Algy (Family)
Director - HR: Venhy (Family)
Director – Technology: Murugu (Family)
Director – Marketing: A Vellayan (Family)
Director – Finance: Purtho (Non Family)
Chairman5 Full Time Directors 3 Part Time Directors
Function: External vision from outside
Role of 5 Directors-Functional responsibility for the group-Mentor CEO-Mentor for young family
Non Family CEO: all promoted from within
Governance Structure in 1999
M V Subbiah
PARRY’S Confectionery
(family kartha)
Murugappa Group Brief
Evolution of Governance (90’s to 2000’s)
Recommendations for Murugappa
Main Changes to Maintain Group Efficiency
Agenda
Conflicting risks
• MBC and company CEOs: MBC is powerless in
decisions making process
• Shareholder and MBC: rights and
responsibilities are not clear
• Family female numbers and male members:
opportunity not equal
• Company CEOs: fight for resources
Decision to prevent risks
• Non-family professional manager steps up to Group
CEO after Subbiah retire. Build an independent and
effective board of directors
• Set up shareholder board, separate the rights and
responsibility of shareholder board from those of MBC.
Establish a Shareholders' Communication system to
increase transparency and to maximize shareholder
value
• Kartha only acts as a leader inside family
Murugappa Group Brief
Evolution of Governance (90’s to 2000’s)
Recommendations for Murugappa
Main Changes to Maintain Group Efficiency
Agenda
Developing a Family Constitution
Why is a written constitution necessary?
- To minimize the potential conflict the Group might face
during generation transaction periods;
- To keep the family’s focus on important strategic
issues;
- To help sustain and grow the Group;
Developing a Family Constitution
What should the constitution focus on?-The Group’s values and beliefs
– as developed in 1987 under the leadership of MV– set to reinforce the family’s input and the kartha’s role;– with regards to business process, customers, employees,
stockholders and business ethics;
- The Group’s strategic goals– namely the governing structure in charge of setting strategic goals
- The Group’s ownership and management by family members
– criteria for transition and succession;– rules regarding salary, benefits and dividend allocation;– decision making;– family meetings;
Thank you !