GROUP MEMBERS

ANKIT
JAISWAL(NA14012)
KEVIN SETH
(NA14029)
ADITYA
RANJAN(NA14004)
MILIN

CONTENTS

1.
2.
3.
4.
5.
6.
7.
8.
9.

Introduction
Succession and continuity
Building Family businesses that last
Challenges in succession planning
Guiding principles
Benefits of succession planning
Impact of Family component on business.
Succession planning with reference to Ambani family
References

Introduction
What do we mean by the term family business? Because of the variety of firm profiles, the definition has
proven more elusive than you might think.

Family

businesses come in many forms: sole proprietorships, partnerships, limited liability

companies, S corporations, C corporations, holding companies, and even publicly traded, albeit
family-controlled, companies. That is why estimates of the number of family businesses operating in
the U.S. economy range between 17 million and 22 million. Worldwide, estimates of all enterprises
considered to be family businesses range between 80 percent and 98 percent.
we arrive at a working definition of a family business as a unique synthesis of the following:
1. Ownership control (15 percent or higher) by two or more members of a family or a partnership of families
2. Strategic influence by family members on the management of the firm, whether by being active in
management, by continuing to shape the culture, by serving as advisors or board members, or by being active
shareholders
3. Concern for family relationships
4. The dream (or possibility) of continuity across generations

SUCCESSION AND CONTINUITY

Family firms are unique in the extent to which succession planning assumes a key and very strategic role in
the firms life. Because competitive success, family harmony, and ownership returns are all at stake at the
same time in the firm, carefully orchestrating the multiyear process represented by succession across
generations of owner-managers is a priority. There are hundreds of reasons why organizations fail, but in
family-owned and family-controlled companies, the most prevalent reason relates to a failure in succession
planning. Whether the causal reason is incompetent or unprepared successors, unclear succession plans, a tired
strategy that is unable to contain competitors, or family rivalries and bids for power, if a family business is
going to survive, it has to successfully craft its succession process
Three patterns of ineffective succession were identified in one study:
1. Conservative: Although the parent has exited the business, the parental shadow remains, and the firm and
its strategies are locked in the past.
2. Rebellious: In what is often an overreaction to the previous generations control of the firm, the next
generation launches a clean-slate approach to the organization. As a result, traditions, legacies, and even the
business model or its secret to success are destroyed or discarded.
3. Wavering: The next generation is paralyzed by indecisiveness, unable to adapt the business to current
competitive conditions; it also fails to make its mark and assume leadership effectively.

BUILDING FAMILY BUSINESSES THAT LAST

Without vision and leadership from members of two generations and the use of select family, management,
and governance practices, the future is bleak for family-controlled enterprises. The blurring of boundaries
among family membership, family management, and family ownership subjects family businesses to the
potential for confusion, slow decision making, or even corporate paralysis. An inability to adapt to changes in
the competitive marketplace or powerlessness to govern the relationship between the family and the business
will ultimately undermine the enterprise. As a result, a family business that lacks multigenerational leadership
and vision can hardly be positioned to retain the competitive advantages that made it successful in a previous,
often more entrepreneurial, generation.
It takes ongoing dialogue across generations of owner-managers about their vision for the company to build a
family business so that it continues. Family businesses that have been built to last recognize the tension
between preserving and protecting the core of what has made the business successful on the one hand and
promoting growth and adaptation to changing competitive dynamics on the other.14 Family businesses that
are confident that each generation will responsibly bring a different but complementary vision to the business
have a foundation on which to build continuity.

Challenges in Succession Planning

a) Lack of funding for leadership development
b) Inability to locate or create a pool of active and passive candidate
c) Lack of assessment tools
d) Lack of succession planning tools and career development tools
e) Inability to identify the future talent needs of the organization
f) Lack of interest from senior executives

Guiding Principles
1) Supports the five fundamental values of the New Brunswick public service: Integrity, Respect, Impartiality,
Service and Competence.
2) Conducted in accordance with the Civil Service Act, its regulations and the policies established by the
Board of Management.
3) Strikes a balance between the values of fairness, accessibility, transparency, and efficient use of government
resources for current and future needs.
4) Aligned with current and future business needs of government and departmental/agency strategic plans;
5) Aligned with the goals of the Corporate HR Plan and the Executive Development Strategy to develop
current and aspiring leaders;
6) Candidates are assessed using methods that are competency-based and free from favouritism;
7) Communication is open and transparent.

Benefits of Succession Planning

1) Aligning strategic goals and human resources to enable the right people in the right place at the right
time to achieve desired business results
2) The development of qualified pools of candidates ready to fill critical or key positions
3) Providing stability in leadership and other critical positions to sustain a high-performing public service and
ensure the uninterrupted delivery of services and programs.
4) Identifying workforce renewal needs as a means of targeting necessary employee training and development
5) Helping individuals realize their career plans and aspirations within the organization 6) Improving
employees ability to respond to changing environmental demands, and
7) The opportunity for timely corporate knowledge transfer

Defining Family Business Succession

Family business succession is the process of transitioning the management and the ownership of the business
to the next generation of family members. The transition may also include family assets as part of the process.
Family members typically play a controlling role in both the management succession as well as the ownership
succession. As such, the effective integration and management of the family component will have a
determining effect on the success of the succession process .Far too often the family business succession
process is governed by the technical components, which are typically worked out between the current owners
and their trusted advisers (e.g., accountant, lawyer). In these situations, although the impact of the family
component may be considered, it is not actively integrated into the process. In other situations, where there is
an attempt to integrate the family component into the succession process, it is often the process itself or the
lack of formality to the process that prevents the desired outcomes from being achieved .There needs to be a
departure from the traditional approach to business succession to a customized approach for family business.

Impact of the Family Component on the Business

The Three Circle Model outlined below is often used to illustrate the interaction/impact of the family
component on the management and ownership of family businesses. The Three Circle Model is represented by
the ownership circle, the management circle, and the family circle. The ownership circle and the management
circle are common to all businesses. The family circle is unique to family business and is what differentiates it
from its nonfamily business counterparts. In many family businesses, the family permeates the management
and the ownership of the business, making it a significant, if not the major component in the overall running
of the family business. It is easy to see how the interaction between these three components can create family,
management, and ownership challenges, as well as provide unique opportunities. The Three Circle Model
illustrates how each of the components interacts with each other and how all three circles meet in the middle,
indicating that at some stage of the family business, ownership, management, and family are mixed together.
Below is a variation of the conventional Three Circle Model that illustrates the significance or degree of
influence that the family component can have. We believe this to be a more
accurate illustration of a typical multigenerational family business. The family circle tends to be much more
prominent and has a much greater impact on the management and ownership of the business. In effect, in

many family businesses, the ownership is all family and the management is all or primarily family. In these
situations, learning how to effectively manage the family component is even more important.
The ability of family businesses to outperform their non-family counterparts and successfully transfer the
business to the next generations is very much dependent on their ability to manage their family component.

SUCCESSION PLANNING WITH REFERENCE TO AMBANI

FAMILY
AMBANI FAMILY TREE

DHIRUBHAI AMBANI

Dhirajlal Ambani was born on December 29, 1932, into the Modh Bania, a Hindu commercial caste based in
the arid Saurashtra peninsula of Indias western Gujarat state. Dhirubhai, as he was known, left home at 16 to
work as a gas-station attendant for Shell Petroleum in Yemen. Within a few years he rose to the position of
sales manager.

A successful employee, Dhirubhai had an entrepreneurs ability to identify and take advantage of
opportunities not observed by others. While in Yemen, Dhirubhai realized that the local currency (the riyal)
was worth more for its silver content than for its purchasing power. With this insight, he began to melt the
coins into silver ingots at a small profit.

Dhirubhai returned to India in 1958 with his pregnant wife and infant son to start his own business. He
founded Reliance Commercial Corporation with US$100 in his pocket and approximately US$275 in
borrowed capital. The company began as a trading company, exporting spices, nuts, and other commodities to
the duty-free Yemeni port of Aden. In Aden, Dhirubhai used his many contacts to help develop this market.

By 1965, Dhirubhai shifted Reliances focus from trading to textiles to take advantage of another opportunity
government programs designed to promote the export of rayon, which was plentiful in India. Reliance
exported rayon at a loss because doing so enabled the company to import nylon, which it sold at a premium.
By 1966 the Indian economy was growing, and the demand for better clothing was taking hold. Reliance
Corporation opened its first textile mill to take advantage of this new market

In 1978, Reliance began focusing on Indias domestic Indian market, after its successful initial public offering
(IPO) and the end of the government-sponsored rayon promotion. The Indian wholesale textile market was
crowded and extremely competitive. To gain market share and to bypass the competitive wholesale market,
Dhirubhai adopted a competitors idea and opened company stores. He then expanded the idea by traveling
throughout India franchising the store concept and promising advertising support to any outlet that would sell
Reliance textiles. In this way he built a national customer base that included previously untapped
nonmetropolitan markets. By 1980, Reliance fabrics could be found across India in 2100 retail stores and
franchised outlets. During this period Reliance established the Vimal textile brand (named for Dhirubhais
eldest nephew). Dhirubhai worked to create a strong brand image and was so successful that it took many
years for Reliance to have better name recognition than Vimal.

By selling shares to the public in small lots, Dhirubhai introduced ordinary people who had never owned
shares to the financial markets while financing Reliances growth. In a short time, so many individuals owned
shares that Reliance was forced to rent football (soccer) stadiums each year to provide a venue large enough
for the annual meeting. Some entities, such as Reliance Infrastructure and Reliance Capital, were formed
primarily to support Reliance Industries. Other units, such as Reliance Telecomm and Reliance Life Science
were created to propel Reliance into new technologies and to take advantage of the opportunities presented by
the growing Indian economy

THE NEXT GENERATION

Dhirubhai and Kokilaben Ambani had four children: Mukesh, Anil, Nina, and Dipti (Figure Q). In the early
years, Dhirubhai, Kokilaben, Mukesh, Anil, and Dhirubhais mother, uncle, and brother lived together in a
one-bedroom house in a lower-middleclass neighborhood in Mumbai. As Reliance flourished, the family
moved to more spacious accommodations and most recently to Sea Wind, the family estate. Nina and Dipti
moved from Mumbai when each married.

Mukesh, Anil, and their families also resided at Sea Wind. While each family had its own living quarters, the
extended family usually had dinner together. Dhirubhai was known for quizzing his grandchildren about
current events, a practice he began when his own children were young.

MUKESH AMBANI

Mukesh, the eldest, was born in Yemen in 1957. He is described as analytical and detail-oriented; he is known
for taking detailed notes during meetings and conversations. Mukesh is a private person who rarely speaks
publicly
Mukesh earned a Bachelor of Chemical Engineering at the University of Mumbai and continued his graduate
studies at Stanford University. After his first year in the MBA program, Dhirubhai called Mukesh home. He
was 24 years old. Mukesh recalls that my father told me you will take this over and I will give you one other
person from Reliance. Everyone else has to be new.
The task he was given was to oversee the construction of the petrochemical plant at Patalganga. The
technology they selected for the plant came from DuPont. To get DuPont to sell their technology, Dhirubhai
sold everything but equity. He later explained, Technology is available for the asking in the international
bazaar. Why should I make a foreign company my partner and give them 51 percent? The plant was
completed in 14 months, ahead of a competitor who had started building before Reliance. Being first to
market gave Reliance a significant advantage in the marketplace
After the success at Patalganga, Mukesh quickly gained a reputation for building new mega-plants under
budget and ahead of schedule. He has since directed the creation of over 60 new, world-class manufacturing
facilities.
Mukesh happily entered into an arranged marriage at age 28. His mother reportedly saw his future wife, Nita,
at a recital and came home and told Dhirubhai that she had found the right match for Mukesh. Dhirubhai
interviewed Nita, and the match was made. From the start, Nita was a family insider, taking responsibility for
family philanthropy. A former teacher, she is responsible for the creation of the Dhirubhai International
School, a premiere K12 private school that opened in 2003. Nita Ambani serves as the schools chairperson.

ANIL AMBANI

Anil joined Reliance in 1982, a day after he graduated from Wharton with an MBA. Dhirubhai greeted him
saying, You have got an American MBA, now you must get an Indian MBA, meaning that the American
degree provided good theory but could not be applied to Indian realities. Anils first experience with Reliance
was in the textile business, where he stayed for 4 years.

After Dhirubhais first stroke in 1986, Anil assumed new responsibilities. He handled corporate finances and
became Reliances spokesperson. Anil is considered aggressive and has strong financial and networking skills.
Anil likes the limelight. Newspaper accounts about Anil and his family are commonhe is frequently
featured attending social events or advocating physical fitness. Anil was voted Youth Icon in 2003 in an MTVsponsored survey, and he has his own website

THE END OF AN ERA

India bade an emotional farewell to Ambani, who passed away on July 6, 2002, two weeks after he suffered a
massive stroke. Thousands of mourners, both famous and common, lined the streets the day of his funeral.
One day after carrying Dhirubhai Ambanis body to the pyre, his sons were back at work.

At the time of Dhirubhais death, the Ambani family directly or indirectly owned 46 percent of Reliance
Industries, including 5 percent held by the family in the names of individual family members. Additional
shares were held by a web of companies CASE 14 RELIANCE INDUSTRIES (PART A) 363controlled by
RILs chairman. Three months after Dhirubhais death, the four Ambani children relinquished their share of
their fathers assets and signed those assets over to their mother. This was likely done to take advantage of the
Hindu Undivided Family Unit, a tax status that permits families, especially those with family businesses, to
pay tax as a single entity.

THE STRUGGLE FOR CONTROL

Mukesh became chairman of RIL after his fathers death, gaining management control and moving into a
position to review and approve or veto major investments and changes in Reliances businesses. In the
beginning, questions arose about the cohesiveness of Reliances top leadership. The brothers denied any
difficulties, saying that differences of opinion are constructive tension of the type that their father
encouraged as a way to look at an issue from all angles.

But a series of events in 2003 precipitated a struggle for control. Mukesh had taken an interest-free loan from
Reliance Industries Ltd. to finance the nascent Reliance Telecomm. Anil questioned this financing

arrangement, though the practice of making interest-free loans was common. Mukesh, in turn, was annoyed
because Anil, as head of Reliance Energy, had made a US$10 billion capital investment without consulting
Mukesh or the RIL board.

The brothers mutual dissatisfaction continued until a July board meeting. At the meeting, the Reliance board
passed a resolution giving Mukesh the authority to vary or revoke managing director Anils duties. Anil
maintained that the resolution had been introduced in a sneaky way and sent an e-mail expressing his
dissatisfaction to Mukesh. This e-mail was published by a local paper. Anils dissatisfaction with Mukeshs
actions was ironic, given that it was Anil who originally performed the ceremonial role of proposing that
Mukesh be elevated to the role of chairman. Mukesh in turn had supported Anil for vice chairman and
managing director

For the next 7 months, the brothers disagreements were played out in the media. Confidential e-mail
messages and internal boardroom documents were regularly leaked to journalists. The press suggested that
there was a lack of camaraderie between Mukeshs wife, Nita, and Anils wife, Tina, which contributed to the
disagreement. Anil ran a sustained campaign against Mukesh and his associates, accusing them of misleading
the public. As the discord continued, it became clear that a formal split between the two brothers would call
for a very complex settlement. The interrelationships between the companies that made up RIL were
significant. Reliance Industries, for example, owned portions of gas fields that powered Reliance Energys
electricity production.

KOKILABEN AMBANI INTERVENES

When the disagreement between Mukesh and Anil first became public, Kokilaben stated that she did not want
to mediate because she did not know enough about the business. She did observe that both brothers were
made managing director in Dhirubhais lifetime, a decision that did not seem to suggest to her that Anil should
be denied a say in running the business.

As the months passed without resolution, Kokilaben ultimately did intervene, but did so with the help of a
family friend and respected banker, K.V. Kamath. In March, Mr. Kamath performed a valuation of the
company and drafted a suggested settlement. In the months that followed, and at Kokilabens request, Mr.
Kamath continued to broker the settlement while she held almost daily individual meetings with each of her
sons. Together, they were able to fashion a settlement that was ultimately agreeable to both Mukesh and Anil.
Throughout the process, Kokilaben appeared to the outside world as graceful, even-handed, and mindful of
her late husbands legacy

THE SETTLEMENT

Peace was declared on June 18, 2005, almost exactly 7 months after Anil Ambanis public questioning of
Mukesh Ambanis authority. Peace came with a brief e-mail announcement from Kokilaben Ambani invoking
her late husband and the name of the Hindu god Krishna and announcing that she had negotiated a settlement
between her sons.
The following day, June 19, 2005, Anil Ambani announced his own plans for the businesses he would be
leadingReliance Energy, Reliance Capital, and Reliance Infocommto a gathering of journalists and
analysts
Under the terms of the agreement, Mukesh kept the flagship petrochemical business, Reliance Industries Ltd.,
and the smaller Indian Petrochemicals. Anil assumed full control of a power company, a telecom and
broadband provider, and a finance company. The brothers agreed to swap shares in each others companies so
that neither owned shares in the others business and Anil received an additional payment (estimated at
between US$2 billion and US$3 billion) to equalize the value of the divided assets. While Anils companies
are much smaller, they are in industries with much greater growth prospects.

SECOND GENERATION
The boards of Reliance Jio Infocomm and Reliance Retail Ventures, the telecom and retail units of
Ambanis Reliance Industries , approved the appointment of siblings Isha and Akash Ambani as
directors on their boards. This follows the induction in June of Ambanis wife Nita Ambani to the
board of Reliance Industries.
The US-educated twins are the eldest of Ambanis three children (the youngest Anant is studying in
the US). While Akash is an undergrad from Brown University where he majored in economics, Isha
is a Yale University undergrad with double majors in psychology and Asian studies. Akash has
already begun working at the telecom arm in Mumbai, whereas Isha was a business analyst at
McKinsey & Company and is reportedly likely to get involved with the retail business.
Reliance ADAG chairman Anil Ambani's elder son Jai Anmol, who had joined group company
Reliance Capital about a month ago, is expected to play a larger role in the company in a couple of
years
While Jai Anmol has a degree from Warwick Business School in the UK, his younger brother, Jai
Anshul, is pursuing higher studies in the US.
The next generation Ambani sons' joining the family business reminds of the similar pattern wherein
their fathers joined their grandfather's business.

REFERENCES

1. [Link]
2. Cabrera-Suarez, K, De Saa-Perez, P., & Garcia Almeida, D., The Succession
Process from a Resource and Knowledge-Based View of the Firm, Family Business
Review, 14(1), 2001, pp. 3747.
3. 6 Schein, E., The Role of the Founder in Creating Organizational Culture. Family
Business Review, 8(3), 1995, pp. 221238
4. [Link]
5. [Link]