Case story on leadership transformation & Patterning Organizational performance of Harischandra Mills PLC.

Abstract

The authorized and published papers revealed that the persistence of family businesses is controversial in future. There is empirical evidence to prove the fact that only 30% of family businesses span to the second generation and that only about 10% to 15% survive by the third generation. The major reason behind this failure is improper succession planning. This case story describes the leadership transformation pattern of a well-known Sri Lankan family business called Harischandra Mills PLC. While this case focuses on the generational differences and the leadership transformation pattern between the founder and the successors of Harischandra Mills PLC, it also offers some important guidance for the micro and macro perspectives in entrepreneurship. The Company has a long history of over seventy-three years along with a household brand name with quality assurance. During the period of 1943 – 2016, the contribution made by the family of the Harischandra PLC had been drastically declined to 57%. The conflicts existing among family members on succession process or their indifference towards business would have been the main reasons for this drastic reduction. Thus, this case review will pave a platform for the company to reconsider the succession gaps and take appropriate actions to ensure a solid succession process. “Harischandra” is a well-known family-owned business, originated in the district of Matara of the Southern Province of Sri Lanka. The Harischandra Mill was founded by C. A. Harischandra, in 1943, with an initial capital of Rs. 25,000/- on a plot of land of 20 perches. The Company has a long history expanding over 73 years and a household brand name, derived as a token of quality assurance. The vision of the company has been laid down to enhance the status of the heritage brand and also to serve the nation, providing enormous employment opportunities to people of the area, utilizing the local raw materials as well. The company was converted to a Public quoted Limited liability Company on 14th December 1959 under the name of Harischandra Mills PLC. At present, Harischandra is the household name for coffee, noodles, Kurakkan flour and Ulundu flour, leading the market in Sri Lanka. In addition, the company has an appreciable market share for rice flour, laundry bar soap and blue washing soap. Currently, the company offers a wide range of household goods and bakery products as well. All the “Harischandra” brands fall under two main marketing segments viz food and soap, being produced by a process involving a mix of traditional and state-of-the-art technology. Company’s business model focuses primarily on optimum human resources. Moreover, the company ensures maximum manual operations in the manufacturing and packaging processes whilst using state-of-the-art technologies for the manufacturing of bulk products. C. A. Harischandra is the very first manufacturer of noodles in Sri Lanka with a highest current market share in the local food industry. The “Quality Assurance” policy of the company is but to enhance the quality of the products constantly and also to enhance customer satisfaction in order to increase the market share effectively. The brand “Harischandra” has earned the respect as well as the appreciation from consumers mainly because of their quality products. The company has a strong and loyal customer base. Thus, for over seven decades, “Harischandra” has been able to maintain its market position at a remarkably higher level. C. A. Harischandra was a great industrialist, endowed with the talent for entrepreneurship. His theme was “Paribogikayata deviyek lesa salakanna (treat the customer as a god)” and hence he had advised his employees never to destroy the credibility of the business. He knew that the customer loyalty and the brand equity were the most important elements in dealing with household food commodities. He believed in his own ability to meet challenges and had the self-confidence to accomplish the set goals. He had greater entrepreneurial capabilities to wisely capture the correct and potential market share and opportunity. The founder of “Harischandra” was not aware of Corporate Social Responsibility (CSR) as a concept, yet intuitively practiced various CSR initiatives during his tenure. C. A. Harischandra was the first industrialist to have introduced the “Employee Provident Fund (EPF) for his employees in 1952 and ended up becoming the local business pioneer in the Southern province, by allotting 40% of the business- shares to its employees. Therefore, he could be referred to as the ‘God Father’ of CSR in Sri Lanka. C. A. Harischandra died in 1985 at the age of 74 years. He had always been maintained close rapport with the employees and with the general public. Hence, the company’s culture developed based on those relationships. After the demise of C. A. Harischandra, his wife Cornelia Harischandra became the Managing Director of Harischandra Mills PLC. Cornelia Harischandra passed away in 1989. Afterwards, the post of Managing Director (MD) was passed on to Senaka Samarasinghe, the Grand Son of C. A. Harischandra, and to-date he is holding the MD position. The present headship seems to be not maintaining close rapport with the employees and with the general public. Thus, the company’s culture has been transformed under the present leadership. When considering the period starting from 1982 to 2016, a significant drop can be identified in Return on Equity (RoE), where at the places of the transition of the business leadership. Within the same period, the company’s Current Asset Ratio had fluctuated remarkably 2:1 to 4:1, dropping some culinary household products from the manufacturer to market. The oil mill had remarkably shut down in 2003. The founder of the company had spent so much time on building and running the business and in the process of which he lost the attention in planning the succession. Therefore, at the time of the death of the founder, the next generation was not prepared to take over the business. Any postponement of the succession plan diminishes the value of the succession process. If the family has not planned and identified a proper successor to take up the business after the death or the retirement of the incumbent, the members of the family will have to face a serious problem of appointing a new successor. The success of a family-oriented business entirely depends on its ability to maintain the stability of the business. The planning of the succession process is vital for family-oriented businesses. Today, most of the family-oriented businesses give less attention for grooming future successors and succession planning responsibilities. The Harischandra Company needs a solid succession plan to ensure long-term success and smoother transition of leadership. A good business strategy will act as a roadmap for the succession process. However, succession planning would be more effective if it is performed at all levels in the company instead of focusing only on the top management.