This is the Analysis of Case Study over The Harilela Enterprises

1. An Indian Family Business in Hong Kong
The Harilela Enterprises
Uğur Gürbüz G.Tutku Göker

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An Indian Family Business in Hong Kong
The Harilela Enterprises
Based in Hong Kong, but with properties and interests all over the world, the family’s businesses had been owned and run by six Indian brothers for decades. Dr.
Hari Harilela, the second oldest, was chairman of the Hotel Group. Like most of his brothers, he was well past retirement age, having recently celebrated his
eightieth birthday.

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An Indian Family Business in Hong Kong
History
The Harilelas’ story began in 1922,
when Hari’s father, Naroomal
Mirchandani, left his hometown of
Hyderabad, Sind (now Pakistan), and
set off for China in search of his
fortune.
Naroomal Harilela established himself
as a trader, and opened a small
company, Duru Star, which sold
Chinese antiques, jade, amber,
embroidered items, and other curios.Naroomal and the two oldest boys,
George and Hari, sold newspapers
and hawked shorts, soap, razor
blades, and daily essentials outside
the British army barracks.
After the World War II, the Harilela
brothers acquired exclusive contracts to
make uniforms for the british soldiers.
The family quickly became the largest
importer of British textiles in Hong Kong.

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An Indian Family Business in Hong Kong
From Tailoring to Hotels
Although the family’s initial wealth was
made in custom tailoring, Hari
recommended to his brothers that
they diversify into other lines of
business.
They bought their first hotel, the Imperial
Hotel, in 1960. Hari recalled, “Although
my brothers were against me because
real estate or other businesses meant
very small profits, I kept on diversifying
and I’m glad that I did.”

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The Holiday Inn Golden Mile
From Tailoring to Hotels
In 1965 the Harilelas bought the site
for the Holiday Inn Golden Mile at
Nathan Road in Hong Kong for
HK$13.7 million3 after intense
negotiations with a property broker.
Hari realized that the Holiday Inn model
had to be modified to suit Asian
conditions. The fundamental difference
was that the business in the United States
was a three-star hotel model, whereas
Hari planned for a five-star luxury hotel.
Hari argued, the general manager of the new hotel
had to possess the business mindset for a five- star
hotel as well as sensitivity to Asian cultural
values. Convinced by Hari’s arguments, Wilson
agreed to allow Hari to approve the appointment
of the hotel’s general manager, contrary to his
normal practice in the United States.
The family realized that the hotel
business was much more profitable and
therefore decided to slowly exit their
ventures in the textile business.While the Harilela Group focused on hotels, the family
members’ personal business interests further
diversified. For instance, George, Hari’s older brother,
owned and ran a company that focused on event
merchandising, which included manufacturing products
such as toys, watches, and other memorabilia items.
About 80 to 90 percent of the family’s
wealth was in hotels and real estate

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An Indian Family Business in Hong Kong
Group Structure and Management
While Hari was still the spokesperson
and the force behind the family, the
Harilela Group, which held the hotel
real estate investments, was owned
collectively by the family and was
structured in a unique way
Each of the six brothers was a voting
member and had one seat on the
company’s board of directors. Hari
served as chairman of the Group
Each brother could name only one
member of his family to the board if
he wished to be replaced
Hari emphasized this point: “There will
always be only six people at the top. If
you let ten or fifteen family members into
the business, you cannot control it

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An Indian Family Business in Hong Kong
Group Structure and Management
While each of the brothers had a seat
on the board, they did not hold equal
interests in the Group Despite the differential shareholding patterns, each brother
had equal voting power on the board. Directors’ fees and
salaries were a different matter; they had no link to the
profit-sharing ratio, but corresponded closely to the
cardinal principle of filial rank—the elder brother got more
compared to the next younger, and so onIf one of the brothers dies, the shares
are passed to his wife, rather than
directly to the offspring, and then she
decides to whom to pass them on The women in the family could own shares, but a majority of
them chose not to participate in or manage the family business.
They had primarily focused on maintaining family harmony and
unity, and had limited their direct participation in business
matters of their own volition. However, the Harilela family
placed no restriction or constraint on female participation in
business, either at the managerial level or at the board level

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An Indian Family Business in Hong Kong
Group Structure and Management
A “handcuff clause” prohibited the sale
of shares to an outsider
Although the collective family business focused only on the
hotel business, family members were free to start other,
noncompetitive businesses
Being a family-owned business enabled the Group to move
quickly to take advantage of opportunities. While the board
did have some regularly scheduled meetings, it operated
primarily on an ad hoc basis and met when an issue came
up or a decision about prospective investments had to be
made
The board operated mainly through consensus

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An Indian Family Business in Hong Kong
Group Management
Although the brothers were shareholders and directors, they had
delegated management of the Group to professional managers
ever since the family first expanded into real estate. This
transparency, Hari believed, was one of the great strengths of the
company
Qualities that Hari sought in employees included a good
family background, integrity, and sincerity
Although it could be viewed as somewhat paternalistic, Hari
set up scholarship funds and other assistance programs to
help employees when they or their children were facing
financial difficulties No special status was accorded family members. A new entry
had to prove his or her worth through experience before
assuming executive charge. It was common practice for an
offspring to start employment only on a salary basis
 Hari’s own son Aron began learning the family business at age eighteen by working in
various departments—room service, kitchen, restaurants, and housekeeping.
 When he returned to Hong Kong (after earning a Ph.D. in politics from the University of
Hull in the UK), Aron received further in-house training with the general manager, the
finance department, and head office people before he was put in a position of authority.
 After he became executive director, Aron reported to the board and oversaw the
individual hotel properties.

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An Indian Family Business in Hong Kong
Management Philosophy
“People work with me, not for me,”
and “Nobody is perfect; everybody is
different,” were two mantras that Hari
used in his everyday dealings with
employees
He saw mistakes as opportunities for employees to improve
performance
The Harilela Group rewarded loyalty and trust. Kalra and J. V.
Raman, for example, had both been with the Group for
more than thirty years. They were treated like family
members and were invited, to most family functions and
parties at the Harilela home

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An Indian Family Business in Hong Kong
Community Service
Hari believed in giving back to the
community
To that end, he generously donated both money and time
to a variety of civic and philanthropic causes in Hong Kong
He contributed to the education sector, providing
scholarships for ethnic Chinese in Hong Kong as well as
Indians in India. Hari established his own foundation with a
focus on higher education

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An Indian Family Business in Hong Kong
Business Strategy
Hari was a conservative businessman
by his own description Hari believed that establishing and maintaining sound
relationships with friends, colleagues, and government officials
was essential to doing business in Asia. He frowned upon the
Western practice of not trusting anyone unless the agreement was
signed. Throughout many points in his life, he had to rely on
connections and borrowed money to start his ventures. In these
cases, his word had been the main collateral, rather than financial
assets
When the Holiday Inn Golden Mile first opened,
the Harilela Group focused consistently on value-
added services rather than on cutting costs or
prices. For instance, Hari paid top fees to expert
service providers such as interior decorators to
ensure a world-class atmosphere and customer-
friendly services The Holiday Inn property was located in the busy Tsim Tsa Tsui
District, which was crowded with tourists and business people;
the Group took advantage of the location to strengthen not only
its hotel business, but the food and beverage business as well
Hari also pushed for technology-based improvements. For
instance, the Group tried to enhance the quality of client
databases at the individual hotel level. Smartcard technology was
in place to capture, store, and retrieve data so the Group could
offer loyalty programs to its frequent hotel guests. A wireless
LAN providing Internet access for guests was being implemented
in some hotels to meet the needs of business travelers These improvements had to be balanced with the need to keep
costs under control, and several of Hari’s brothers and managers
would have liked to see more cost-cutting measures implemented

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An Indian Family Business in Hong Kong
Family and Business
Hari noted that tolerance was the key
to keeping family and business
together
Although the brothers had disagreements, they usually worked
through them together. By not letting small issues become major,
they maintained harmonyTo avoid conflict and to maintain a harmonious relationship
between business and family, the Harilelas relied on an informal set
of rules. The Group refrained from competing if one of the brothers
or his children wanted to start a business. For example, a son of one
of the brothers owned a top-quality Indian restaurant very close to
the Holiday Inn property in Hong Kong. The Group, therefore,
chose not to open a competing restaurant on the hotel premises
In addition to working together, the six brothers, their families,
and their sister also lived together under one roof
Hari and his family were also bound strongly by religion and
faith in God
Spouses are playing a role to keep family together. You can leave if
you want to, but we are staying here

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An Indian Family Business in Hong Kong
The Future
Aron reiterated this strong preference for the hotel
business. He was even willing to consider a shift from
Stage One (acquisition of assets) to Stage Two
(portfolio management leading to possibly starting a
management company) While Hari preferred maintaining the Group as a private
company, others believed that the lack of access to capital
markets constrained its growth. This constraint became
especially important as the Group considered entering
other markets, including ChinaAnother issue was whether to maintain the current
management contract system or to adopt a franchise
system. Hari emphatically stated that as long as he was in
charge, he preferred the management contract system, and
it was up to the next chairman to decide if the strategy
needed to be revised later

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1. Consider The Harilela's HR strategy. How is it different from that of a multinational companies?
Questions & Answers
This is a family company. They have a paternalistic approach. For
example, «Hari set up schoolarship funds and other assistance
programs to help employees when they or their were facing
financial difficulties.»
Hari emphasized on moral values and sought a good family
background, integrity, and sincerity in employees
Involving in recruitment: The group recruited some key managers
and sent them to various business units to strengthen the
management of individual hotels. (At the junior levels, recruitment
was outsourced to local consultants.)
They prefer people from their origin instead of local ones. For
example, They have companies in different countries like US, UK,
Singapore, Canada, Australia.. but the ratio of indian and non-
indian was 50/50
Treating loyal employees like a family member. Kalra and
Raman, more than 30 years employees, were treated like family
members and were invited to family get-togethers and social
parties

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2. If Aron does finally assume a leader of the family business, what should he do in order to be successful?
Questions & Answers
Aron should change informal set of rules of Harilela into a formal
way. This is because other generations cannot be like brothers so
it will be harder to avoid conflictions if the rules are not clearly
set. For example, the group refrained from competing if one of
the brothers or his children wanted to start a business but this
was only an informal rule Aron should establish a more formal structure with a greater
division of labor and a hierarchical structure to keep the family
working together harmoniously
Aron should sustain paternalistic approach in especially Asia.
Aron should act as the bridge between the older and younger
generations in the family and should Show leadership styles in
order to persuade his uncles
To expand globally and enter into other markets, Aron should
support stock exchange instead of staying as a private company
Thanks to being exposed to western ideas and education, Aron
should implement innovative approach into family company
Aron should continue the current management contract system
because it allowed for learning and adoption of best practices
from the global brands and provided flexibility to employ or
change the general manager

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An Indian Family Business in Hong Kong
The Harilela Enterprises
ThankYou!