GROWING BUSINESS IN

TIMES OF ADVERSITY
Family business adept at managing growth in the
face of high costs and tight credit fows
E
ven as enterprises around the world grapple
with the after-efects of the current global
economic slowdown, especially in the developed
markets, family-owned businesses, which make a
substantial part of the overall business world, have
indeed performed creditably. A recent study conducted
by Credit Suisse and Ernst & Young has revealed that
family businesses have outperformed non-family
enterprises with many recording strong growth in the
last year. The study was based on a survey of 280 family-
owned enterprises across 33 countries. The participating
enterprises are all members of the Family Business
Network International.
According to the study, 60% of the family enterprises
recorded revenue growth of at least 5% in the last year.
This was mainly seen as the result of the family businesses
innate characteristic of maintaining a long-term view on
business and investments.
The cash fow returns that listed family businesses
generated were consistently superior to the wider listed
sector. This was borne out by the Credit Suisse Family
Business Index that has outperformed the MSCI Global
Index by 8% over the past fve years.
Further, the study suggested that family enterprises
were less concerned about the eurozone debt crisis, with
only 15% of them citing it as a major business challenge.
They were also less afected by the ongoing credit
squeeze with the majority of these enterprises
maintaining that they have all along enjoyed access to
adequate and timely credit.
Most family enterprises have a long-term payback
approach to investment and focus on internal rather
than external fnancing models to fund future
growth. The study pointed out that 40% of the
family businesses were prepared to wait up to
10 years for a payback what the research called patient
capital. Their strong belief in patient capital comes
from a relatively stable global economic environment
that spanned nearly two decades preceding the
current slowdown. However, as the slowdown
continues, many of these enterprises could take a fresh
stance on patient capital.
Inside This Issue
FIRST PERSON PG 3
INTERNSHIP PG 7
ACTIVITY PG 8
NOVEMBER 2012, VOLUME 2, ISSUE 9 A JOURNAL ON FAMILY BUSINESS
CII-FBN INDIA CHAPTER JOURNAL | NOVEMBER 2012
2
Nonetheless, the long-term approach has helped the
family enterprises to stay ahead of the curve. In fact,
one specialist family business institute has stated that a
recession can be an opportunity for these enterprises to
emerge much leaner, stronger, and more capable than ever
before. The moot point is whether the emerging and young
leadership in family enterprises are willing to adhere to the time-
tested business approach.
Family enterprises pay attention to sweat-equity and low capital.
It is very typical of a family-owned business not to be burdened
by debt. When tough times hit, the members tend to take a
hands-on approach and work harder. At the same time, family
enterprises do not allow the economic ups and downs to afect
the relationship with their employee. As one expert put it, family
business leaders are much more likely to go to the mat for them,
using staf cuts as a last resort.

The economic downslide is also a time for some businesses
to leverage the growth opportunities that exist in certain
quarters. For instance, this could well be an opportune
time for cash-rich enterprises to buy or merge with distressed
competitors, increase marketing and promotion expenditures
relative to peers, negotiate favourable terms and conditions
with suppliers, reengineer systems and processes in the
company, undertake leadership development and improved
employee training, etc.
Experts have suggested ways to build on the opportunities that a
recession presents. Some of them are:
Judicious Management of Financial Resources &
Expenditure: Most enterprises tend to cut expenses across
the board in times of sustained economic slowdown and
market contraction. The thinking is if the revenue growth
is fat or going down, the management should reduce the
expense line even faster so they can stay in the black. However,
this approach is likely to scuttle current and future growth
opportunities. A more judicious approach to expenditure
cuts is likely to yield more durable solutions, which many
family-owned businesses tend to follow.
Boost Productivity Levels: Enterprises would do well to
adopt rigorous HR systems for developing job descriptions,
recruiting the right kind of people, hiring them through a
highly regimented process, and retaining them over time with
excellent compensation, incentives, benefts, and evaluations.
Process Review: A recent report suggested that one of the
counter-intuitive benefts of a recession is that an enterprise is
not running at 110% capacity anymore, so the management
can possibly undertake a review of the operations and
take corrective measures.
In building the enterprises competitiveness, the next generation
leadership in the family businesses could look to their own
family history for guidance about how earlier generations
managed adversity. This can be done without losing focus on the
current growth imperatives.
Families that own and operate a business venture during
recessionary periods do not lack and are not really afected by
the economic downturn. They would still be able to aford basic
amenities that make them comfortable and ensure enough
savings. They also would be able to lend to other families,
thereby, becoming a source of help to others.
On a larger plane, families that own their businesses help to get
the economy back to normal by generating adequate demand
and employment. They contribute to the national income and
thereby help the nation through the recessionary period. And
when the slowdown abates and growth returns, these very
enterprises would be ideally poised to leverage the emerging
growth opportunities.
COVER STORY
NOVEMBER 2012 | CII-FBN INDIA CHAPTER JOURNAL 3
FIRST PERSON
EARLY MENTORING
NextGen family business members would do well to gain initial
experience by working with other global organisations
By Kanishka Arumugam
H
umata Hukhta Hvaresta
Good Words, Good
Thoughts, Good Deeds.
The Zoroastrian religion lays
great emphasis on these values,
and the Forbes family adheres to
them at all times. This attracted
me to Forbes Marshall and the
short stint with them has enriched
my knowledge and widened my
business perspective.
I hail from Coimbatore, an industrial and entrepreneurial city in
south India, dubbed as the pump city of Asia and widely known
for its world class pump manufacturers, textile industry and
international educational institutions. The city is also seen as an
emerging IT hub.
I am fortunate to be a second generation member of the Deccan
Pumps Group. I grew up in a business environment and decided
to be an entrepreneur at an early age. This took me to diferent
organizations around the globe where I honed my knowledge
and skills. I also owe my grooming to my prestigious alma maters
- Shefeld, Leeds and Stanford Universities.
My father P. Arumugam and uncle K.K. Veluchamy founded
Deccan Pumps 32 years ago with a mission to make the life of
farmers better by manufacturing highly reliable and efcient
pumps. Today Deccan Pumps is a closely-held conservative
Group with anannual turnover of around Rs 100 crore. It is one
of the top 5 manufacturers of submersible pumps in the country
and remains Asias largest producer of vertical open well
submersible pumps. The group is also engaged in trading,
real estate business and education.
My father is a keen philanthropist. He runs a home for
elders, has a desire to turn his ancestral farm into a model
agricultural unit, and spends time upgrading the basic
infrastructure of his home village.
He believes in not chasing numbers but in giving back to
society in as many ways as possible. Recently, he undertook
a not-for-proft initiative and incepted the Info Institute of
Engineering, along with his friends, mainly for the frst generation
learners of the country.
One can have simple living and be content but when it comes to
business I believe one should never think twice about making it
bigger. And this is what my father and I often argue about. Such
exchanges have helped me gain insights into the perceptions
and experiences of the previous generation which can be applied
in the current business scenario.
Last year, after my graduation, I spent time with a few European
family owned manufacturers and also had a short stint at Xylem,
a non-family owned American company, the worlds largest
producer of pumps and systems. Its major competitor is a Danish
family owned company.
I was awestruck to learn how a family tradition could bloom into
a highly competitive business. Now I am with Forbes Marshall in
Pune and I am immensely benefting from the myriad
experiences at the company.
The Parsis A Unique Community
in India
The Forbes family belongs to the Parsi community. The Parsis in
India have descended from a group that fed from the religious
persecution in Iran, then Persia, in the 10th century AD. They are
truly industrious people who observe strong business ethics
and values. Down the centuries, they have played a pioneering
role in the progress of their own families, their community and
the country as a whole, and prominent Parsis have established
a tradition of benevolence in the country well before the 19th
century, building and running educational and health facilities
for the under-privileged people of all communities. Some of
the most prominent Parsi businesses that have contributed to
Indias industrial development are: Forbes Marshall, Godrej, The
Family Business International Internship Programme
The Family Business International Internship Programme is open to members of any of the national chapters of FBN. Owner-members
can host interns, from both within India and abroad, who would indeed provide a fresh perspective on the business. This is a
particularly good opportunity for Next Generation members to gain valuable experience in diferent business areas.
Next Generationers can be interns in a family business in a foreign country for between one and twelve months. It is a great way to
learn before one takes up a position in his or her family business. The CII-FBN India Chapter also ofers the Family Business Exchange
Programme which invites family business members from around to world to connect with Indian family business hosts throughout
the country. This provides the opportunity to share and experience the Indian family business culture. If you are interested in the
programme, write to: pooja.jha@cii.in
CII-FBN INDIA CHAPTER JOURNAL | NOVEMBER 2012
4
Tata Group, Shaporji Pallonji (scion Cyrus Mistry is set to become
Chairman of the Tata Group), Thermax and the Wadias.
The Forbes Marshall Group
Forbes Marshall, a closely-held family owned business with a
turnover of around Rs 850 crore, is a leader in the area of process
efciency and energy conservation. The companys corporate
mission is to be a developed company in a developing country.
The company lays strong emphasis on HR practices and is ranked
the ffth best workplace in India by The Great Places to Work and
The Economic Times in 2012.
The group was founded by Mr Darius Forbes in 1958 and is run by
the second generation members Farhad Forbes and Dr Naushad
Forbes who are siblings. They spearhead the groups divisions the
Control Instrumentation Group and the Steam Engineering Group.
Both the brothers are Stanford graduates, pioneers of
innovative ideas and above all are extremely modest and have
great regard for every member of the organization. They have
clearly taken the group business to the next level with their hard
work, global exposure and smart strategies.
The group is one of the most professionally run family owned
companies of this size in the country. The group management
comprises the Board, the Supervisory Board and Senior
Management. Both the brothers are actively involved in the day-
to-day operations and work towards the empowerment of the
employee who in turn treat the company as their own.
It was an amazing experience working under Mehul Vaidya
who heads the Actual Users Division of the group. I saw a deep
sense of entrepreneurship, freedom and trust in every member.
The family spirit and strong values percolate down the line and
are imbued in all the employees. Both Farhad and Naushad
are approachable by any member of the company at their ofces.
The company also has transparent cabins, making everyone feel
equal and easily approachable. They look for people with unique
talents and give them all the freedom to convert their passion
into work. An employee is allowed to even work part time if he
has to attend to any personal matter. The groups people-centric
approach is a key contributor to its growth and development.
I have had varied experiences at Forbes Marshall given that the
group handles a wide range of products. In the frst month of my
stint, I worked with the strategy department. Then I moved to
the valve division where I learnt about machining. I also got the
opportunity to interact with workers on the shop foor and learn
about machining and the assembly line.
Even when I was at Xylem, my frst few weeks were spent on the
shop foor and I was in fact asked to assemble a pump. Those
experiences gave me a clear understanding of the challenges
on the shop foor. Now I have specifc plans to reorganise the
designing and line up of our own products so as to make the
assembling easy for our workers. All this practical learning
wouldnt have been possible if I was in my family company where
people, out of concern, wouldnt let me do any manual work.
Also, working across all the departments, I realised how Forbes
Marshall has become an evolved company in a growing country,
and how important it is for organisations to acquire talent. Every
person is a specialist in his feld and a key resource for a company.
Forbes Marshall practices some of the best management
processes like the balanced scorecard method, and value added
per person business models. They do not just chase top line
growth and numbers in the balance sheet. Instead, they focus
upon bottom line growth and the long-term sustainability of
the business. They are on the path to build a great organization,
from being good to great.
The management is open to any innovative idea coming
from the members, provided it is based on sound logic and
can be supported with a business plan. A happy work culture,
world class practices and highly skilled people make
the group a great place to work.
Joint Ventures
In an era where many joint ventures do not last long, the Forbes
family has a diferent story to tell. They have long standing
partnerships with some of the best names in the industry such
as Spirax, Arca, Codel, Vyncke, Krohne and Shinkawa, to develop,
design and supply innovative solutions for the measurement and
monitoring of process parameters. They have the countrys second
longest joint venture with SpiraxSarco, UK, a world leader in
technologies for the efective and efcient use of steam for energy.
Looking into their successful JV models, I learnt that basically
the company collaborates with similar family-owned companies
and usually works on a 50:50 partnership; this gives equal rights
to both the parties and makes long term commitments easy.
They are completely transparent in all respects with their joint
venture partners. The ofce is always flled with international
interns, and guests from all parts of the world, making it truly a
FIRST PERSON
With Mr. Farhad Forbes
NOVEMBER 2012 | CII-FBN INDIA CHAPTER JOURNAL 5
global organisation. They have adopted many best practices
from their joint venture partners.
Corporate Social Responsibility
A team of personnel trained and experienced in social activities
constitute and run the groups Department for Social. Mrs Rati
Forbes leads this part of the organisation.
CSR is a part of the groups annual business plan and is managed
professionally. They are also accredited by several European
institutions. This has motivated me to chart out new CSR activities
for my family business where the activities can be carried out and
measured more professionally.
In the past I had often wondered why my father started a not-
for-proft engineering college, a home for the elderly, rural
development programmes and similar activities instead of just
growing the business. But now I realize that companies with a
deep sense of social responsibility contribute to society in crucial
felds such as education, healthcare, women empowerment and
other important social causes. Forbes, Godrej, TATAs, Thermax
and Wadias are all living examples of this in India.
Recently when I was in Germany I visited my friends family-
owned company VIEGA, a ffth generation enterprise that makes
pipes and systems. It was interesting to learn how the family
and business have involved the small town of Anttendorn in a
major way and how the feeling of goodness pervades everybody
including the taxi drivers. The spirit of entrepreneurship and
drive for growth were writ large in the current generation of the
company, perhaps more than seen in the previous generations.
It is very essential for the next generation family members to
involve society and community at large, in which they operate,
and help the under-privileged and make the world a better place
for all. A companys purpose is not to acquire wealth and markets
alone but also to contribute to society. This is key to building a
long lasting organisation.
Values
Forbes Marshalls core values of family spirit, innovation and
entrepreneurship, integrity and value delivery to their members
(as every employee is referred to) and society at large have been
their guiding principles in everything they undertake. Care for the
members, humility, simple living and high thinking, engagement
with society, respect and care for the under privileged, professional
management with family members on board and participative
management are all important to the company.
The role of family business leadership can no longer be authoritative;
only an inclusive leadership model with the best value system works
in todays business environment. In a nutshell, the secret behind a
successful business is a long-term outlook, highly ethical practices,
family spirit, integrity, value delivery to customers and developing an
entrepreneurial attitude in every employee. Keeping the company
fnancially stable and risk-proof, and safeguarding and adding value
to the business are equally important; these must be the goals of
the NextGen members who wish to grow their company manifold.
Ownership, Management and Family
Ownership, management and family should be viewed diferently
among the NextGen members. At Forbes Marshall business and
family matters are approached diferently. The brothers live in
a very compatible ambience of love and joy with their family.
But when it comes to business, the decisions purely rest on
logic and strategy. They do not confuse personal relationships
with professional operations. They combine the cumulative
experiences of the previous generation with their own ideas and
strengths to attain excellence in business.
My view is that your father might have been a great product
designer who has helped the company grow, but that doesnt
mean the NextGen should follow the same methods. There is no
point in just holding on to positions. Success lies in adding value
to the business. Perform or else take the back seat.
Family involvement in a company defnitely helps it grow at
a much faster pace since the output would beneft the whole
generation. More than money, emotions and attachments drive
individuals towards better growth.
I believe family-owned companies and the NextGen should clearly
diferentiate between ownership, management and families. It is
simple when said, but Im sure it is difcult to practice. My father
and I might have a disagreement inside the ofce room, but that
should not hinder the father-son relationship. My style of working
is diferent from that of my father. It doesnt mean one is right and
the other is wrong; we have to identify our own strengths and
contribute to the growth and development of ones organisation.
FIRST PERSON
Working hand in hand
CII-FBN INDIA CHAPTER JOURNAL | NOVEMBER 2012
6
In India families tend to grow faster than their business and so
the members are compelled to enter into agreements to secure
the future of their business and the brand value created by
their previous generations. We, at the Deccan Pumps Group, are
currently working on ownership and brand sharing methods
with the NextGen members. The ultimate goal is to secure the
business, brand value and at the same time allow every family
member to pursue his own interest, while the foundations and
social initiatives are jointly managed by the members.
The company and the brand have been built up over three
decades and more, so extreme care is called for in architecting
the future of our business. The ultimate goal is to protect the
business and the brand that the previous generation has toiled
all their life to build.
Every NextGen family member should take on a stewardship
/ trustee role. I fnd myself not as a maverick, but as a star in
my own way. NextGen entrepreneurs are fortunate to be
born into privileged families and should be thankful for
their education and resources that not many are fortunate to
have in a developing country like India. So we should add value
to what the previous generations have created, protect it and
pass it on to the NextGen.
Im just 22 years old and have a long way to go and I am sure my
thought process and learning will evolve as I observe, learn and
grow. I strongly believe that every nextgen member should spend
time with at least two companies for some time before joining
their respective family businesses. It gives one great insights on
how business families work across the globe, which elevate the
thought processes and enhance ones entrepreneurial skills.
My time at Forbes Marshall, Pune has been an incredible
learning experience and a good transition phase before
moving to my hometown.
Im looking forward to creating a great family-owned company
with strong values and best practices that I have seen and
learnt in the last few years across the globe and act as a trustee
to the future generations. One thing I have learnt from the
West is that family companies are held by foundations
and work on the model of investing all profts back into
the company where the family is allowed only a small
percentage of proft. I shall try and work out a similar
model for my family business.
I am happy to have Naushad, Farhad and Rati as my mentors. India
has many family-owned medium and large-scale companies and
the next ten years is very crucial for the country. I am sure there
will be many globally competitive family-owned companies
operating in India across all sectors, if family companies practice
the best processes and systems. I hope to put myself to work
and add value to what my father has created. I am sure every
nextgen member is talented, unique and can contribute in his
own way be it CSR, marketing or research.
I have always been thinking and reading a lot on family
business management and practices. A few months ago
my friend Shankar Vanavarayar, National CII-YI Chairman
of India, introduced me to FBN. I am happy to share
my thoughts here now.
The internships I went through, systems I worked in, diverse
cultures I experienced and talented individuals I met have
left an indelible mark in my life.
I am currently working on a project to set up a state-of-the-
art new plant with the experiences gained from across the
globe. Though not a mega plant, I aim to make it a very
efcient one. I found the brand Deccan Pumps strong
only in certain segments. So my new brand extension line
would help create a new perception among customers
and drive growth.
The products are being designed and upgraded to world-class
standards with strong emphasis on manufacturing systems
and process technology. The new plant is a small test that I am
putting myself to. It will also increase our productivity in one
product line by up to fve times.
My professors in Stanford and Shefeld have been good mentors
and when I shared this idea they felt that this startup would
help me learn quickly all aspects of business and if I perform
well I will be ready for a bigger role.
Perform and preserve, else perish. With the strong support of the
previous generations and the wide global exposure that we have
had, it is time we the nextgen create history!
Kanishka Arumugam is part of the family-owned Deccan
Pumps Private Limited
A Rich Experience
NOVEMBER 2012 | CII-FBN INDIA CHAPTER JOURNAL 7
F
irst and foremost I would like to express my gratitude to
Mrs Gaucher who made that experience possible as
well as to Mr and Mrs Forbes who have have been kind to
welcome me at Forbes Marshall.
Forbes Marshalls head ofce is located in Pune. It produces
industrial boilers and is more broadly specialised in steam
engineering. Its Kasarwadi campus (Pune) was set up in 1958.
Since the beginning of that adventure, Forbes Marshall has strived
to work hand-in-hand with local communities. The Department
of Social Initiatives, in which I interned for a few weeks, has been
taking care of this aspect of Forbes Marshalls activities.
The CSR department of the company is well developed
and cooperates with a number of NGOs (implantes) in the
region. As an intern, I joined the project called Akanksha. That
particular program strives to give better access to education
to underprivileged children. I helped the teachers with English
lessons and creative activities. The opportunity to work with
a group of ladies that produces artisanal objects has been
ofered to me as well.
Working with Forbes Marshall CSR department was a
thoroughly interesting experience. It allowed me to discover the
personality of that family business as well as the local culture.
As a European college student, that experience has, I believe,
helped me appreciate the Indian culture, patterns of thought,
corporate culture that can be found in India and those
that are present in Europe. However, these few weeks only
allowed me to scratch the surface of that culture and my
understanding of it is still very shallow.
Adapting to that culture was harder than I thought it would
be. It was equally more enriching as well. In my opinion, that
experience is one to be cherished and I would recommend to
whoever is willing to do an internship to join Forbes Marshall.
INTERNSHIP
KNOWING INDIA
UP-CLOSE
A European student shares a glowing account of her
FBN internship at Forbes Marshall
By Alys Grenier
CII-FBN INDIA CHAPTER JOURNAL | NOVEMBER 2012
8
CIIFBN India Chapter Activity Calendar 2012-13
Name of the Event Venue Date
Family Business Theme Workshops
Workshop on Family Business focusing on Business vs. Family values & Retirement process Bangalore 8
th
December 2012
ACTIVITY
FBN Xchange is a secure, international, on-line community Available exclusively to FBN members which replaces FBNs
old members directory and library and contains many new exciting features. Members of the Family Business Network will have
exclusive access to:
Members Directory Network with Chapter members and from across the world
Forum Exchange ideas & best practices with peers
Next Generation Events, networking & careers
Resource Centre Learn from a wide range of content on family business
International & National Events Stay updated with the latest developments and events in the Network
FBN eNews Our online magazine in any language.
AN INTERNATIONAL COMMUNITY WHERE FAMILY BUSINESSES
CONNECT, EXCHANGE & LEARN
CONTACT US:
CII-FBN India Chapter Secretariat
Mr Rajesh Menon, Executive Director, CII FBN India Chapter, Confederation of Indian Industry
India Habitat Centre - Core 4A, 4th Floor, Lodi Road, New Delhi-110 003. Tel: 91-11-2468 2236 Fax: +91-11-4682226
Email: rajesh.menon@cii.in Website: ciifnindia.org
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Copyright 2012 by Confederation of Indian Industry (CII), All rights reserved.
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Published by Confederation of Indian Industry (CII), Te Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA),
Tel: +91-11-24629994-7, Fax: +91-11-24626149; Email: info@cii.in; Web: ciifnindia.org