The story is so familiar it is a script by now. The young scion of a great business family completes his education and joins the family business of oil manufacturing / machine parts / plastic models / publishing.
The parent plans to hang his boots, giving the son incremental responsibility as he slowly plans to retire.
Cut to 3-4 years later, the father is still in the stirrup, neither leaving nor willing to go on. The son, getting more frustrated by the day, being unable to prove his credentials to his father through business success.
Why do you think this happens ever so often in families? More importantly, the families who do get it right (Premjis, HCL's Nadars, TVS, Birlas, Tatas, etc.) - What did they do right?
Here are some thoughts, based on the new scions and the traditional practices:
- LOOOOOOONG gestation period
Most of these children started in the business LONG before they took over the reins - almost as much as a decade, if not longer.
- Start early, meaning, really early
When the owner's child comes to the premises, almost everyone wants to pamper the child and make them feel good. Over a period of time, everyone gets to connect with the child, watch their growth, and make a habit of changing their behaviour according to the age of the child. More importantly, it helps create that thing that is really important in the workplace - loyalty.
One of the TRICKIEST issues in Indian promoter led business succession, is the transfer of loyalty from the father to the son. (Yes, this issue appears to be more gender based).
Here is an interesting data point:
The father has possibly grown the business while the child was also growing up at home. So, the folks who are in the business for a long time, have seen both grow, and themselves.
A great thing to do, is to integrate the 3 growth journeys. The employees feel a sense of connection with the young scion and when he goes off to do the MBA, the employees know and anticipate that he is coming back as the Bada Sahib now, from Chhota Sahib.
So, the time to start succession planning in a family run business is not when the child is 24 or 27. It is when the child is 4 or 5. Worst case scenario, the child will not join the family business after growing up. In which case, the employees can ask after the Chhota babu once in a while, and its still all good. But if he does decide to join the business later, he will find an allied force the day he joins.
The term 'learn the ropes' , arguably*, comes from one of the most dangerous professiona on the planet - fishing. When you took your boat out to see, you had to know which rope led where. That would make all the difference to the direction and speed of the boat, and the survival of the crew. A young recruit started with the ropes, learning till he had mastered them.
If a young scion has to join the business, he has to start where young recruits typically start - by learning the ropes. The journey of Rishabh Premji has been truly inspirational on that account, and the journey of Neville Tata shows us what happens if a person does not have enough exposure to the 'doing' side of business.
*(The origin of the phrase is not certain, but most experts agree that it was this. Fishing is hands down among the top 10 most dangerous jobs across the world.)
"Let's try this and see" is far more likely to succeed than "We are going to do this". The Japanese have a term for this - kao o tateru. It means building someone up in front of others. When you are sitting in a room full of people, and someone senior in the organisation disagrees with you, NEVER confront them in public. Tell them that you respect their view and will reconsider. Then, bring them over in private and understand their real issues. Then explain and bring them over. NEVER let it become about the ego. Keep it about the ideas.
If there is no way that they are agreeing with you, tell them, let us try this, and if it fails, we will not go any further. Trial is a way for both of you to get kao o toteru - saving face.
This tip is in caps because many, many scions typically come back from their foreign MBAs with great education in western business practices, but none in their own business environment and practices.
One day, my family was playing a business game that some of us have created. One of the players ran out of cash though she had assets. I gave her the shortfall and said, "Give it back when you sell your stock. No interest."
My son immediately pointed out that i cannot give an interest free loan to a direct competitor and my Board will eat me up on this. I said, "But in trading, it happens all the time. We compete in the market, but we support in private."
My brother confirmed that this does happen all the time. My son was flummoxed (and that's putting it mildly).
In India, we know that the CEOs of Harley Davidson and Enfield Bullet were personal friends, even as their products competed for the same customers. I am currently providing content to a direct competitor at really low rates.
One day, all of us were stranded at Leh, and Sahara Airlines had cancelled a flight. Jet sent a flight from Delhi to ferry the angry passengers from Delhi to Leh. No ticket changes were done, no more formalities. We just sat in a Jet Airways plane instead of a Sahara Airlines plane.
This concept of collaboration in competition is unique to Eastern cultures, like many others.
Take time to understand them - the people, their motivations, the business practices that may be at so much variance from what you know.
- Modernising is necessary, but its not about modernising at all
Oh! If one had a penny for every time one heard, "But they are just not willing to change!"
It is about your assumption that your current team cannot and will not modernise. Maybe they won't. Every leader who joins the pack brings in his own people. But inheriting scions have an advantage - they have a bunch of people who want to please.
Rest assured that during his 27-40 years at the helm, your father pivoted many many times. So, that team has seen pivots. It is not about change at all. It is all about the leadership.
A trickier issue is when the patriarch does not want to change. One of the most difficult conversations we were a part of was between the 2 generations. The earlier generation had always sold their products at a 10-12% premium to the market. The scion had joined as the sales head and was just not able to meet those numbers.
"We cannot sell at those prices any more. There is too much local competition and the customer does to care that much about quality. My sales team cannot meet those numbers. They just give up and leave."
"But if we reduce prices, it erodes the entire premium placement that we have built over 2 decades. We are the only Indian company that has RnD capability in house. We are at least 40% more durable than China made products. We already have a suggestion to do a B2C branded campaign. Why would you not take those suggestions?"
Both valid points. And a perfect deadlock.
- Stakeholder Management and Negotiation
If I had to point out THREE top skills for an inheriting scion, they would not be strategy or MBA. They would be Analysis, Stakeholder Management, and Negotiation.
Western education teaches all three very well, all we need to do, is to start applying it at work from Day 1. Most heirs are deeply analytical, but don't always consider active stakeholder engagement and planned negotiations with them.
- Do bring your team, by all means
Every new leader needs to bring in employees who are loyal to them and more in tune with their modern ideas.
The challenge is not so much to find such people, as to make them work. You are comparing 15 years of loyalty to 5 months at the job. A generation that has grown old with your parents to people who quit and switch jobs every 2-5 years.
As a leader, your role is to not mix the 2 capabilities, but to use them both effectively. These are 2 different skill sets and they both bring a different value to the table. Use them effectively, and one has best of both worlds. Don't, and you are stuck with 2 problems instead of one.
Another issue will be the effective amalgamation of the young and the old, and that is a chapter in itself.
Endnote
Indian business, and Indian leadership are truly hard to understand. But the fault does not lie with the child or the scion. The fault lies with an education system that does not incorporate any of this.
Many years ago, I was in the waiting area of Emami Corporate office, waiting to see someone. On the table was a book called Marwadi.
I picked up the book, hoping to see a coffee table book. It was a periodical, and it listed personal and professional achievements of Marwadi business families all over the country, their family functions, the guest list, the works. (Yes, it did have updates on LN Mittal and whom he meets when he flies to India)
That was the day my eyes popped. Just do a mental calculation to understand the combined net worth of the people featured in that one periodical.
I had no idea that they were so deeply intertwined. They seldom give business interviews, and when they do, they are for an audience steeped in Western management practices. One cannot imagine that the best friends of the Mittals in India are (name withheld).
By the way, the Sindhis have one such magazine too, and it doesn't just cover India. It covers the entire South East Asia.
Enough. Said.
