STRATEGIC LEADERSHIP

CASE ANALYSIS
The Murugappa Group
Cemturies –Old Business Heritage and Tradition
Submitted to:
Prof: Sunil Maheshwari

Submitted by:
Mohit Kotwal-PGDM(E)-024
 STRATEGIC LEADESHIP Prof: Sunil Maheshwari

Abstract:

The Murugappa Group, headquartered in Chennai (Madras), India has grown from humble
beginnings to become a very important conglomerate.

The company was started by Dewan Bhadur in Burma in the early 1910s. Today it boasts revenues
of US$ 850 million and employs 23,500 people in its 25 business units. The company is presently
undergoing a major change, as it makes the transition from operating to governing the business. The
change was necessitated the forces of globalisation brought in by liberalisation post 1990 and
formally Murugappa Corporate Board (MCB) was constituted .

5 re-organisation goals for Murugappa Group:

 To be more of a group rather than a collection of separate entities.

 To be most flexible in the makeup of the portfolio of business.
 To have left emotional attachment by individuals to their business.
 To shift away family-led units to non-family-led units.
 Mentor non-family Managing Directors/CEOs for the long term review.

In 1999 ownership and operational management of companies was separated. CEO leadership of the
seven individual companies switch from family members two professional non-family managers. The
newly constituted 9 number MCB had 5 family members, a non-family CFO and 3 independent
directors. The chairman of the restructured MCB was Subbiah.

Subbiah was 61 years old and has four before he retires at 65 years. He wondered how to get more
professionalism to secure continued success of the enterprise.

BUSINESS HISTORY:

The family enterprise grew through a variety of forms: start-ups, acquisitions, joint ventures,
diversification, vertical integration, public offerings, and divestitures. These different growth
strategies evolved as the political and economic situation of India and the surrounding area changed.
The family took advantage of opportunities that presented themselves, sought out others, and
regrouped after disappointment, all the while working deftly and ethically within the realities of
India’s governmental, economic, and political parameters.

In the 1960s and 70s the Indian government required difficult to get licence to start new business
exploring near monopolies call those audit licence

Murugappa group was awarded one of the server licence it applied for . 3 other methods for growth
were:

1. One method was to vertically integrate backwards in its current industries e.g. CUMI
became the only abrasive company to be totally integrated from power generation for its
plants to produce raw materials, to manufacturing, marketing and selling its finished
products
2. Another method was to purchase existing business. The boldest acquisition occurred in 1981
with the Purchase up Madras based EID - Parry.

MOHIT KOTWAL-PGDM(E)-024 2
 STRATEGIC LEADESHIP Prof: Sunil Maheshwari

3. The third method used by the Murugappa group was to enter business that didn’t require
licence in 1978.In 1978 they started a financial business called CIFCO.

FAMILY MANAGEMENT:

From the 1920s up to 1987:Each business unit was run by a hands-on family owner/manager, and
most decisions were made at the individual company level. The leveraging of resources and transfer
of knowledge across business was infrequent.

In 1995 and 1996 the death of Muru and MV stretched the surviving family members in business
leadership roles and revealed the shortcoming of the succession plan put in place in 1994. Even
family elder and kartha, AMM, who was 77 years old and retired, helped by making himself more
available to help fill the Group’s leadership void temporarily. The family realized that the Group
needed professional leadership of its companies; The Family, as members of a governing board,
should only offer policy guidelines and monitor results. Their numbers in the business would then
not matter.

By mid-2000 things had stabilized. Murugappan, age 65, was the family elder and kartha, but had
chosen not to play a role on the MCB.Instead he was very active in family foundation.

According to A. Vellayan, ―To make the transi on and succession work, trust across the
generations is paramount. Meritocracy is the way to the top. Upcoming family members understand
that a place on the board is not automatic. We have a clear-cut set of criteria for upcoming family
members to work towards to become board members. The family, and Murugappan in his role as
kartha, also agreed that a Family Constitution was needed that would articulate the family’s roles,
responsibilities, and relationships.

LEADERSHIP FOR THE FUTURE:

For generations, both family and business decisions were made by the oldest male family member
until death. Then AMM set a new tradition of separating the family and business leadership roles
when he retained his position as elder and kartha, but retired from business at 65, turning over
business leadership to his nephew, MV. Similarly, When Murugappan was next in line for all three
roles, he became family kartha and elder, but leadership role in the Group level business was given
to Subbiah.

As of mid-2000, Subbiah, as MCB chairman, had steered the family enterprise through a
reorganization that separated ownership from operations. Now he was in a fix regarding future
leadership both for business group and family.

 Family :On the family side also, he pondered whether he was up to the task of being
family Kartha, if eventually he became the oldest surviving family member. Or was there
someone in the family better suited to this role than he?
 Muruguppa group: He had various options before him for succession –when should he
retire and should he be part of board after retirement or should he set a new
precedence by offering Chairman post to non family Professional.?

MOHIT KOTWAL-PGDM(E)-024 3
 STRATEGIC LEADESHIP Prof: Sunil Maheshwari

RECOMMENDATIONS:

1. Need for a formal family Charter: The Family has grown to such a size that it is no longer
possible to manage the roles, expectation and responsibilities without a clear written
charter .A clear charter would keep harmony in family and would help to insulate business
as well .The family issues wouldn’t affect the business aspects of Muruguppa group.
2. Kartha: In a written Charter, the role of kartha is important and he has to be as much
competent and unbiased as the chairman of the board. So they can do away with the
requirement of having only eldest male member of the family as kartha. Seniority and
capability both should be considered while deciding kartha, as was the tradition before
British Rule.
3. Non family Chairman: MCB already had family members in board and also a chairman from
family only. To further enhance professionalism of the board and enhance rationality and
remove biases in decision making of the board, it will help to have a non family chairman of
the board.

MOHIT KOTWAL-PGDM(E)-024 4