Business: Learning from top Sri Lankan firms

Turning a family owned firm to a public company helps the entity stay competitive in the market, according to a top business leader who has gone through the experience.

“Going public helps a company to stay competitive and forces good governance of family affairs; it helps to attract and retain top management talent and helps ensure sustainability of enterprise,” Hussein Esufally, CEO Hemas Holdings Limited (HHL) said addressing an eminent gathering at an event organised by the Post Graduate Institute of Management (PIM) and The Competitiveness Programme (TCP) recently.

He said that going public makes it a need to answer tough questions from the market and realises value for all stakeholders while giving the ability to raise funds for expansion.

TCP, a USAID-funded business programme, donated management case studies to the PIM at the University of Sri Jayawardenepura on how Hemas Holdings Ltd and Ceylon Biscuits Ltd., two Sri Lankan family-owned firms, overcame the challenges of different economic regimes and succeeded in an increasingly competitive marketplace.

The case studies document how these firms compete in their respective marketplaces and deliver continuous bottom line growth; exploring how best management practices, including innovation, strategic intent and vision, ability to attract good people, and leveraging core competencies guided these companies to the top of their respective markets.

Pointing out some statistics about family owned businesses, Esufally said that only 13 percent survive for 50 years and that only four percent continuously grow.

Highlighting the constraints of a family business, he said that more often than not the cash resources in such companies are not optimised and that there is poor governance while there is also an inability to attract management talent.

Explaining about HHL, which was a family business from 1948 to 1993, he said that the basis for restructuring an exit was mainly due to rational rather than emotional approach fair valuation, financing the deal and most importantly, maintaining family ties.

“The new direction for the new family owned business in 1999 was that it was always ‘business first’. We had separation of ownership from management and the main target of the new structure was to maximise the shareholder value,” he said.

As prerequisites to a family company firm, Esufally said that there has to be a passion to grow and willingness to face market, proper corporate governance standards, respected non-executive directors, a good investment banker, and most importantly there should be a good story to tell the market at large.

“Case studies like these enlighten and encourage the next generation of business managers,” USAID Mission Director Rebecca Cohn said, adding that they can help prepare a business for taking up the challenge of leading Sri Lanka’s companies into tomorrow’s increasingly competitive and globalised marketplace.

The two companies were selected on the basis of sustained outstanding growth performance. Both are Sri Lankan owned and managed, come from non-traditional economic sectors, and have demonstrated their ability to compete with global players.