Knowing When To Hold Or Fold!

Scattered holdings with too many people involved, cousins in different countries running their own kingdoms in silos, & the changing environment of business can often get too complex.

“If you cannot make it greater, at least preserve it. Do not let things slide. Go on doing my work and increasing it, but if you cannot, do not lose what we have already done,” said Jamsetji Tata to his sons on his death bed!

This is the emotion, which most founders of Family Owned Business (FOB) worry about and yet are unable to help the next generation to achieve.

FOB’s can be very complex for the next generation if they don’t understand the business. Scattered holdings with too many people involved, cousins in different countries running their own kingdoms in silos, changing environment of business, etc. can often get too complex. A desire to have their Presence in Absence is present in most founders & for that good succession planning is a must.

Steward leaders understand and start planning about their legacy early in life. They ensure that the best of education is provided, and values/sanskars of the family are transmitted through different experiences to the next generation. Attendance on Sunday for lunch or dinner wherein all family members are present with each one tasked to do something small to make the whole event significant is compulsory.

Rotation of such responsibilities prepares them for success, failures and team work, family marriages, founder’s day at the factory/office, hosting customers at home, meeting senior bureaucrats, diwali puja in office and these are all direct/indirect transmission of the business values and culture of the family.

In India marriages are a big affair and have a community-meet kind of environment. Hosts spend months of planning to give it their best. With it also comes a lot of social pressure. Yet it’s great learning to make it better or manage things within a budget.

A founder entrusted the 2 sons with almost equal abilities to manage different business verticals. Both performed well & there was a critical decision point where one had to be chosen as the next leader. Then came an opportunity for a large family wedding & he put them to test in a social setting. Both were asked separately of their plans. One of them did what he felt was right, outsourced most work to professionals and did not pay much heed to the opinions & sentiments of of others in the extended family. He felt times have changed and an open bar with a separate counter for non vegetarian food was a must.

The other one took a different approach – he asked for suggestions & incorporated a lot of the family traditions with a modern wedding. Alcohol & non vegetarian food which was taboo in their community was to be kept out. For some who wanted some of that he provided it in another venue before the marriage ceremony. It was clear that he would be able to lead the team & keep them together and undoubtedly he was chosen.

He was seen as someone one who would keep the family values intact & be able to deal with multiple factions much better than his brother. Visits to the office, factory and market place are a part of the informal training. At times an internship or small projects also build a lot of pride and passion into the next generation. I recall my friend’s grin when he was doing an IT project and his grandfather offered him his chair; pride was mutual. On the chair he listened to the views of people with intense curiosity & was more than courteous in his answers (maybe a rub off effect ).

He did a live demo of his project & had succeeded in addressing the elephants in the room so well. His sitting on the chair also had unconsciously signalled to others that he was the future Boss!

Story telling & dinner table conversations often rotate around things which impart lots of learning. Questions are answered and clarified; also at times values are imposed with long term discipline in mind. One day the Patriarch was asked why he left the Mercedes for other members to come to the meeting whilst he went in a smaller car. He smiled to say that he wanted to reach the meeting on time & since he was alone it was more economical & faster in traffic to use the small car, after all it was a machine used to carry people from one point to another.

The use of the right machine for the right purpose at the right time is critical and was a solid message to deliver to the next generation. If its a customer visit he will use the Mercedes as its the FOB & first impressions do count. The value of money and the problems that money brings if not used with wisdom are explained thoughtfully.

With changing needs I have seen many families that co-exist yet give freedom of choice to the members. Lifestyle needs are different and yet staying together means so much automatic learning.

In India we have KARTA – the head/custodian/trustee of the family, normally the eldest male who by seniority of age runs the show.

Active ones can do much & the passive ones just let the opportunity pass. Lifestyle changes have different people wanting / having different desires. One wants to travel, the other buy’s solitaires and someone wants the best food. The Karta outlined a plan wherein all personal expenses were to be borne by respective personal accounts for lifestyle needs. At a family value proposition no one was allowed to borrow money for any lifestyle need. Any medical or educational need out of the ordinary was to be fulfilled with a majority vote through a family trust although the KATRA would have a VETO!

Active ones, knowing that they are going to give up power & position, command control in the larger interest of the family for generations. They keep communication open, allow for peaceful co-existence of different people & ideas and have a balance of compassion & objectivity in decision making. They make way for the new generation by moving into the background pursuing their other interests like philanthropy, creative pursuits etc. They know when to HOLD & when to FOLD.

Look at the Tata’s – Mr Ratan Tata planned succession objectively and got in Mr Mistry. He was groomed & on boarded well. Yet after a few years when it was felt that things were not moving in the right direction he deliberated and took the hard step of ousting him. Mr Mistry held on & then folded back. Now I hear he asked for the Tata Sons board to be sacked for non performance…let’s see what the future unfolds. Both in my personal view are good human beings and are working in the larger interest of the business house of Tata’s. What the future Unfolds or happens next only history will tell but I hope peace prevails in Bombay House.

Stewardship demands a lot of sacrifice and putting others ahead of you. Succession is one such issue which can make or break the legacy of a Steward if not handled well.

About the Author - Naveen Khajanchi is a practising Executive Coach supporting senior level leaders to transform and adapt to the current business environment. He has worked with organisations from start-ups to high-end real estate consulting. Today, he leads a search firm that helps top Indian corporations in their leadership hiring. Naveen has more than two decades of experience in Talent Acquisition and is also the author of Evolutionary leadership – A Holistic Perspective.