Transition in Family Business from Dad to Son
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Most businesses in the world are family-run contributing the most to the economy in terms of GDP and jobs. In India, their contribution has been immense. Companies like Bajaj, Emami, Marico, Godrej, and HCL are some of these in market leading positions competing with large transnational public companies. The returns generated by family businesses have been better than their peers on many counts.Management education however does not focus on the nuances of leadership practices for family business as much as it should.
Succession planning is one of the key HR practices that companies follow to make sure that they outlive the vision and charisma of the founder. While many companies cover layers of managers in this talent management process, it is most relevant for the top role of an organization. In a family-run business, finding a successor to the CEO is no less complicated than a public company. The transition from the dad to the son, daughter, son-in-law, nephew or niece isn’t a cakewalk as many might dismissively think.
Setting a Strong Foundation
Our world is full of opportunities; not always are the children of the entrepreneur interested in the business. Sometimes, they might not be capable of running the company as a whole. In such cases, someone outside the family has to come in and run it.
When the family has more than one successor, the organization could create different swim lanes for each of them so that they drive their own future along with the business they inherited. Deciding these portfolios and building separate groups isn’t easy. We saw the succession process in Reliance between 2002 and 2005.
Not every time can one identify separate swim lanes and split a business into different units. Different business units or verticals are created if they do not exist already and are allocated to different successors; however, all these units are connected by the same brand, ethos and values. They develop a trust or a family constitution that defines the guidelines and principles to share the values, ethos, brand and wealth. Business groups of Emami, TVS, Dr. Reddy’s, GMR, Dabur and Murugappa are examples to set up processes for the transition from father or mother to the next generation.
Gradual Fade and Letting Go!
The transition of management from one generation to another is not digital. The baton passes over a period of time; sometimes, it could take a few years. During the process, it is important that there is mutual understanding and trust in the family. The head of the family fades away slowly and the next generation steps in. This is easier said than done. Letting go is not easy for most people and hence, sometimes the entrepreneur does not let the next generation take independent control. He or she wants to control the enterprise in the guise of mentoring or guiding. Undoubtedly, the experience and insights of the boss are unparalleled compared to that of the children. It must be leveraged, however, one has to balance between the urge of getting into the driver’s seat and encouraging the young to make the tough calls. It calls for high levels of maturity and skilfulness to preside over the transition phase.
Nuances of the Presidential role
Children may want to venture into new areas and find support from the top to experiment. Expectedly, some of these could turn out to be costly mistakes while a few could be clear winners. Given this backdrop, the role of the father at the helm of the family becomes important in managing the pushes and pulls within the family and the business at the same time.
Sibling rivalry and camaraderie influence how the experiments are perceived. Sometimes victories are celebrated and losses are despised giving rise to a feeling of win-lose in the family. The head of the family needs to ensure that the children participate in group meetings and draw the lessons together. This is easier said than done. Many families after a point in time do not execute the constitution as it is meant to be and hence, become ineffective in leveraging upon the strength of the family.
Dad has to make sure that the norms of running the business are learnt well by the young. Right from strategic planning, budgeting to performance reviews and building teams have to be learnt. Resolution of conflicts, handling complaints and grievances must be a part of the transition process.
Before someone graduates into the Boardroom, it is important to experience the ground reality of the business, the dimensions of the market and understand what the stakeholders think about it. These essential conditions must be fulfilled either by rising through the ranks in the family business or by working in an organization for a few years before they are brought in.