Succession has always been a tricky issue in most family businesses. Earlier, it would happen in an unplanned manner with succession being driven by either seniority or by death. Now it’s no longer a taboo to discuss a succession plan. With the changing environment and social media it’s now become a necessity.
Siblings are no longer the natural choice in a succession plan. A lot of them do not necessarily want to run the operations themselves but prefer professionals. The issue is that business survival is now becoming a very challenging affair. Technology changes, consumer preferences and unforeseen situations such as Covid and war have made conditions extremely unpredictable.
Changing priorities
The priorities of the younger generation too have changed for whom it’s no longer just about making money. It’s about their purpose in life that making new choices. This can build a lot of pressure going forward.
The younger generation could actually be very comfortable with applying a professional lens (i.e., appointment on merit, retirement with age/non-performance, role rotation so that performance and success are in better hands).
There are all sorts of animosities in family-run operations, especially regarding the use of money for personal comforts. To retain harmony in the family, better collaboration and communication is necessary which is possible with technology, mutual love and respect.
Family businesses can range from small mom-and-pop firms to some of the largest global groups such as Tata Sons, Wipro, Porsche or Reliance Industries. The difference between them often lies not just in the vision and competence of the family members taking major decisions but also in the kind of professional managers they attract in their enterprises.
Collaboration, communication
The best family businesses and members running the company have mastered the fine art of collaboration and communication. This is not an easy skill — and many cannot move from the personal realm to the “We and Us” mindset.
Of late, parents and siblings have begun to define at an early stage, the demarcation between joint expense and responsibility, as against personal expense and responsibility. The idea is to awaken the collective consciousness. A brother and sister duo decided to do their business activities differently. The brother expanded into new areas where there was no direct competition to the old business.
The sister ran her business in a hands-off manner with a professional CEO while the brother had a COO as he was in the driver’s seat, in a hands-on manner. They both ensured transparent communication and collaboration, enjoying the synergies of scale. In the absence of this understanding, the family businesses could split, parting with their respective share in the joint holdings.
Increasingly, family offices and trusts are being established with professionals in charge. A formal code of conduct, ideation and agreement of values are being put on paper.
For family members who are not seen growing their businesses, change may be in the offing. But such differences should not spill over into the personal realm.
The writer is CEO, NKH foundation