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Why Do Family Businesses Face Hiccups in Having a Professional Leadership Team?

Why Do Family Businesses Face Hiccups in Having a Professional Leadership Team?
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The ongoing public spat between global enterprise Tata Group’s Ratan Tata and it’s recently ousted Chairman of holding company Tata Sons has left many surprised.

Hired in 2012 to head the Indian multinational conglomerate holding company, Mistry was looked at Ratan Tata’s golden goose. In less than four years of holding office, the Tata Sons board ousted Mistry for acting against the best interests of the group.

The corporate public battle between Indian housing startup Housing.com and its founder & chief Rahul Yadav also triggered many to wonder what really went wrong at the company.

Entrepreneur spoke with a veteran, researcher, consultant and professor at the Indian School of Business, Kavil Ramachandran, who threw some light on why family business face problems in hiring an external professional and how the problem can be curbed.

Much of Professor Ramachandran’s work has been dedicated to understanding and unravelling the dynamics and interdependence of entrepreneurship and strategy in the life of a firm. He is also the author of ‘The 10 Commandments for Family Business’.

Ramachandran think the problems happen for a variety of reasons. Here are the top 5 ways he suggests a seamless professional leadership hiring. 

Articulate the Kind of Leader You Desire

I think the big problem is that the person who is leaving the seat, doesn’t articulate the kind of leader who should be taking over the baton and running the next phase of growth or leadership, says Ramachandran.

The person who will be giving his role should have the confidence in the successor. One is on the family’s clarity on what sort of person they need and then defining the capabilities.

Answer ‘ASK’

If you look at the combination of values, attitudes, skills and knowledge, that is where many of the medium sized businesses particularly entrepreneurs too face a problem.

“I call it an ASK – ask attitude, skills & knowledge. It’s a question of attitude includes the value and the trust. It also includes the capability, confidentiality part of it and then the technical skills.”

If you choose someone who doesn’t have the proven values or who is chosen without looking at the background in detail and driven by only the managerial competencies, you may get into trouble.

Homework

In many cases, families or the promoters don’t do their homework properly. At the leadership level, it is not only making money, it is also about institutionalizing many things - building on the past and building it further. It means your values are important, your style of management is important, your ability to cover the continuity is important. If you don’t do the homework, you may get someone who may not be the right leader.

Play the Doubles Game

The fourth dimension is the ability to play the doubles game. At the end whether it is Ratan Tata or a startup entrepreneur like the Housing.com’s Rahul Yadav, the doubles game is played. The doubles game may be played between the promoter and the non-family CEO, it may be between the investor and the non-family entrepreneur, so there is a doubles game coming there. Both the parties don’t have the game plan between them so they keep clashing and they keep losing the point and that’s when they keep blaming each other.

The typical entrepreneur has been there for a long period of time before they hand it over to someone else, so you develop the feeling that it is your way, it should grow the way you have perceived it. It’s more like your child. So this is a major problem. The priorities may be on one’s own passion and this may not be the same as the person who hands over the baton.

Spending Enough Time on Selection

Also, very often companies do not spend enough time to recruit the person. And the process of selection may not be very good. If the person is coming from outside the organization, it is a bigger challenge. Hence, businesses should hire with a lot of care and preparation.

It’s more like a hurried arranged marriage and everyone is happy that the marriage is held and after the honeymoon, many of the rough edges start coming out. Whether it is family member or non-family member, I have seen this with sons Vs fathers. But it is much less but when it is non-family, the understanding is limited. 

Edition: December 2016

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