Family Business: Mails to my Clients – 14 – A Note prior to my 4th. Round of Individual Meetings: I do feel it is about time that ‘Real’ over-rides ‘Convenient , Friendly, Safe Opinion’ if we are to progress further (Raju Swamy: July 2012)
Before starting my 4th. Round of individual Meetings, I need to set out some issues that keep bugging me…….it is not about what is right or what is wrong…..it is about reality…….I do feel it is about time that ‘Real’ over-rides ‘ Convenient Friendly/ Safe Opinion’ if we are to progress further:
- There does appear to be a ‘Family’ Brand that all of you seem attached to, from a Social and Societal point of view, and are proud of, and which has evolved over 100 years.
- However, I am not sure that the attachment to the ‘Family’ Brand is equally strong in the 4th. Generation, and is likely to weaken further in the 5th Generation unless ‘Re-Juvenation’ takes place right now, at the meeting point of the 3rd and 4th Generations.
- When it comes to the ‘Family Business’, Business Brand Attachment as an Umbrella of Businesses appears to be weak, almost all across the board.
- Concern for Individual Family, Individual, Individual Business as a permanent ‘right’ or ‘property’ or entity, appears to outweigh any considerations of thinking of the XYZ Group as a ‘Father Entity’ that nurtures individual companies or businesses for the overall mutual good…..on a Long Term basis.
- I see a relatively ‘Soft Concern’ – almost bordering on defensive concern/ reaction to Market conditions, business performance, need for growth, need for change with the times, need to look medium and long term, need to be ‘aggressive’ when required…..
- There is strong resistance to
6.1. ‘Exploration’ and the costs associated with it
6.2. Professional Networking,
6.3. ‘Sticking one’s neck out’
6.4. ‘Strategizing’ with clear focus and aspiration
6.5. Treating Business with an entrepreneurial zeal……..and enjoying the experience.
- An analysis of Real Growth needs to be understood:
7.1. Over the last ten years, physical landed property value would have appreciated many times.
7.2. Business Growth percentage, for each business, would vary enormously if compared in Rupee Value, and in terms of sale of Physical Units, and in Number of actual off-warrantee equipment servicing. The same logic would also apply to the manufacturing business..
7.3. What therefore is the Net Growth in Business, or ‘Real Growth’? Are you really growing or is there an element of Stagnation?
- Family Managers have a much larger role to play as ‘Entrepreneurs’ to promote success and Growth, and realize their own aspirations, within self and within Society. However, sensitivities within the Family in Business may not always bring desired results, and adjustments to mutual sensitivities may actually lead to FMBs – Family Members in Business – settling to a ‘safe’ pattern of business existence, and at the worst, start developing the traits of glorified employees with simple bureaucratic, hierarchical sensitivities. Obviously, this is also a reason for possible Stagnation.
- The answer to the Above could be ‘Professionalization’: In a recent article by Harsh Mariwala, Chairman & MD of Marico Ltd. (Saffola and Parachute) in the Economic Times of July 14, 2012, titled “Professional managers can help family businesses grow” he makes a number of important observations based on his experience of being part of a Family Business:
9.1. “The transition towards professionalisation is crucial for a family business. In such an enterprise, typically, members of the family handle virtually all key aspects. They take most decisions with or without professional qualifications or business exposure. However, a mix-up between ownership and management could lead to conflicts in decision-making. I have seen organisations where relationships among owner-manager siblings get too complex.”
9.2. “Finally, the business wilts under emotional strain and lack of business focus. Interestingly, the seeds of such a decline are sown during growth itself.”
9.3. “Families could differ over the pace of growth and the investments required or eventual aspirations. This eventful phase in the scaling up of an enterprise is crucial and needs careful handling. A key institutional decision that needs to be taken is about the role of professional managers. My experience with professionalisation has been excellent. Since I stressed on professionalism, Marico’s business has grown 50 times — from Rs 80 crore in 1990 to Rs 4,000 crore in 2012.”
9.4. “The dilemma before owners is not whether to professionalise. It is about when to do so. Scaling up business requires scaling up the organisational apparatus and management.”
9.5. “Usually, there comes a point beyond which the owner family cannot meaningfully organise and manage the business. If a family business does not professionalise in time, it could end up restricting its growth orbit.”
9.6. “I do, however, reckon it is natural for family businesses to be and stay confused about the need, suitability and timing of inducting professionals.”
9.7. “I recommend that a family take time to get concurrence. It is also important to send out a unified and sustainable signal to build a good brand in the talent market, to attract the best possible hands. This strategic clarity on recruiting professionals enables the owner family to tap head hunters with a clear brief, precise needs and realistic targets.”
9.8. “A family business may have to struggle to overcome the initial challenges of the professionalization process. My experience is that it pays to be resourceful in this struggle. For instance, it could take time before one starts attracting quality talent. In the mean time, growth could reveal talent gaps. I filled up such gaps resourcefully, using individual consultants.”
- Let me also quote what Mr. M. V. Subbiah of Murugappa Group had to say in the Economic Times of July 07, 2012 in an article titled “Five Lessons from Family Businesses: Cultural continuity, long-term vision and a more meaningful involvement with all stakeholders set family-owned businesses apart from non-family entities”. However, please appreciate that the Murugappa Group has been heavily professionalized over a very long time, back into the 1960s atleast:
10.1. “In a family business, culture evolves and becomes sustainable over time. It doesn’t change with the boss, as in a non-family business.”
10.2. Long-Term Vision: “For a non-family business, quarter-on-quarter growth is so important that the obsession remains even during extreme situations such as downturns. As a result, they can’t take bold decisions that may help in the long run. A family business, on the other hand, is rarely under such compulsions. It can invest even during a downturn. After all, the capital belongs to the family. There’s merit in it because a downturn is the best time to invest in capital goods, since that’s when their prices are weak. What is needed is a bit of patience, giving time for the market to recover and the investment to bear fruit.”
10.3. Family businesses are far more meaningfully involved with all stakeholders. The relationships forged by those running a family business with suppliers, customers and employees are family relationships, not transactional ones. It isn’t uncommon for a family to be doing business with suppliers for generations together. Trust is easily built in such relationships. The ties are so deep that a dealer in Ludhiana or Kanyakumari expects to be invited to a wedding in the business family.
10.4. Finally, members of a business family are trained to become stewards, not charismatic leaders. This ensures continuity of culture. There can be different personalities in a family, but that can be provided for so that the business isn’t affected. This is an aspect where non-family businesses struggle.
Before we have our 4th Round of Individual Meetings, I would urge each one of you to think carefully about my own observations, and the experiences of noted Family Business Leaders, integrated in this email, and try and arrive at what you consider as the best actions/ options/ strategies for the XYZ Group of Businesses, and for the FMBs as Entrepreneurs, in moving forward…….what you finally collectively recommend will provide the direction to the Executive Board…..I reiterate that if the entrepreneurial motivation levels of the Executive Board, as individuals and as a Team, do not scale up substantially, the future structure of the XYZ Group will be radically different…..
There is now an urgent need for a critical shift in the way business is managed, as a Family Business, into the 2nd Century, if XYZ is to be remembered for the good work of its First Century……
In about a week I will call each one of you for the individual meetings as per mutually convenient dates.
& Advisor to Family Business
PROMAG Consultancy Services
Apt. 206 Brigade Rathna
42 Ranga Rao Road
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Strengthening Family Dynamics for Family Business Growth…….since 1985