Growing The Family Business The Kelkar Way
September 24, 2012 Leave a comment
When the 640-crore SH Kelkar & Company (SHK) , a maker of specialty fragrance and flavour ingredients , into which US private equity giant Blackstone invested 243 crore in early September this year, inaugurated an R&D centre on September 12,its CEO performed the puja.Nothing unusual about this except that B. Ramkrishnan,the 56-year-old CEO, isn’t the owner of the family-owned unlisted business,but a professional.Kedar Vaze, the third-generation family member, in India’s largest fragrance and flavour maker, sat and watched, as the man he reports to, did the honours.
There is a clutch of Indian family owned businesses from the Daburs in the North to the Murugappa group in the South that have brought in professionals to manage their enterprises even as they step back as owners.In some cases,the next-gen family members may be being groomed to take over at the top from the professional once they are ready for the task.
At SHK,however , Kedar Vaze, is pretty clear that managing the business is not his cup of tea.”I have the understanding about the industry as I am a technocrat,” says Vaze,a post-graduate in organic chemistry from IIT Mumbai,and one of the few trained perfumers in the industry who has published five papers at various conventions,including the World Perfumery Congress.”But I don’t have execution capabilities,which Ramkrishnan has”, adds the controlling shareholder,who is second-in-command as chief operating officer.Vaze says,his objective has been to put a system in place that should work even in his absence.
SHK,set up by two Maharashtrian brothers in 1922,has not only survived the onslaught of MNC competition,but also expanded its business into Europe,the Middle East and African markets.It did all this quietly.Its another matter that it came into the limelight only recently when Blackstone bought a one third stake in it,putting its valuation at 740 crores,100 crore more than its sales in fiscal year 2012.
For SHK,putting a professional at the helm of affairs and inducting Blackstone as equity partner are integral parts of the same goal to take the company to the next level,one that is beyond the reach of the promoter family.That’s why the Vaze family which includes Kedar and his father Ramesh brought in Ramkrishnan,or Ram as he is known internally,in 2010.Two years on,SHK has raised money from Blackstone so that the US PE major monitors the company continuously.I want Blackstone to put a mirror to us,everyday, says the 38-year-old Vaze.
Now a professional,Ramkrishnan has in the past worn the entrepreneur hat,too.A chemical engineer from IIT Madras,he started his own flavours company and later worked with the Geneva headquartered Givuadan,a global fragrance leader,when it bought his firm.Having seen the grass on both sides,Ramkrishnan was keen that the division of responsibilities between him and Vaze be made crystal clear at the time of joining.When Ramkrishnan wrote his job description and gave it to the Vaze family,they sat on it for two months before agreeing with a rider, Ramkrishnan would prevail on anything and everything in case there is a difference of opinion with Vaze.The only front on which Vaze’s decision would reign supreme is the company’s intellectual property.That settled the contours of the relationship between the CEO and COO.Nevertheless,there have been moments of frustrations,both acknowledge;there have been instances of conflict.
For Ramkrishnan,the process of execution is supreme.Vaze,being an owner and an entrepreneur,believes in doing things fast.One example of a difference in thinking has to do with the annual increment of employees.After taking over as CEO,Ramkrishnan introduced a process of annual evaluation;Vaze,on a few occasions,wanted to overrule him,citing loyalty of the concerned employee.”I was completely discomforted.I told him,this is this not your job”, says Ramkrishnan.Vaze too has had his share of bouts of despair particularly when employees used to look up to him for directions even after the professional CEO came on board simply because they were used to taking orders from him for the past 15 years.It was frustrating. More than anything personal,the organisation was not ready, recalls Vaze.But they managed to overcome those moments by talking.”There are occasions when we talk for six hours a day”, recounts Ramkrishnan.Together,they have put together a team of professional management.The list includes Pramod Davre,head of fragrance business,a veteran with 15 years of experience.They have also hired experienced sales personnel from MNCs in East-Asian markets.With professionals in place and Blackstone as a partner,SHK is aiming to sustain its annual growth of 12%,double the rate of the.1,400 crore fragrance industry,over the longer term.To that end,the company is looking to acquire smaller rivals.