Ties That Bind
28th March 2016 Naveen Khajanchi, CEO & Director, NKH Foundation
In family-owned businesses, it is important to remember that the whole is greater than the sum of its parts.
We're all in this together: A successful family owned business ('FOB') is one where all members involved put family first and work together as allies
A family that works together, may not always stay together. This is evident from the common stories of family-owned businesses falling apart in spite of familial ties and legacy. An FOB can consist of individuals across generations and families (such as in-laws, earlier children of a spouse now remarried, etc). Each FOB is unique but has to function as one hand — individual fingers cannot be of much use by themselves, but together, can achieve a lot. For a successful FOB, one must put family first.
Here is a hypothetical example of an FOB, where the brothers and their children have been running different parts of the business. After years of successful operation, the patriarch realises that there is trouble within the ranks, causing problems and dipping profits, and now, competitors are overtaking the company. He finds that each family member has created small monarchies within their purview of operation. They would give some suppliers preferential treatment irrespective of declining quality, clearly putting personal gain first.
He gathers the family and presents to them a wooden ship, asking them to consider it as the FOB. He speaks of the decline in quality, efficiency and profits, and illustrates this by creating small holes in the ship. Setting it in a basin of water, he then asks everyone how they would keep the ship from sinking.
One of his nephews says they could either mend the holes or buy a new ship. His niece says she would go all out to keep the FOB’s flag flying high. The patriarch says he is too old to build another ship, and that if they did not learn to think of the FOB as a collective whole, which would drown due to individual profiteering, they would not have a future. It is then that everyone realised that working together can save their business, bringing gains for each of them. Having made his family realise this, the patriarch’s next concern was to choose a suitable successor from within the family.
In our example, two members were seen as possible successors: a son and a daughter, who were first cousins. The son had no interest in the factories — his focus was on sales and marketing. The problem here was that this was a niche product, where quality and technology outsourcing could lead to a threat. For the girl, an older member of the family had helped her enter into the business and she, in turn, helped him update his IT skills. (Reverse mentoring helps build rapport across generations.)
Using this rapport, he convinced the girl to take up the COO position, while the boy was to be CEO. The senior members making the decision explained to them that the positions are equal, and that they would be allies, not competitors. So even though one successor wasn’t selected, this was a convenient arrangement for both parties.
Every individual is different in terms of aptitude, capability, interest and personality. Not everyone can shoulder responsibilities.
The key to efficient succession-planning in an FOB lies in a stable, harmonious environment where individual aspirations and group dynamics are in tandem, where both the organisation and the individual can grow together and people can come closer both as business associates and family members.
About the Author - Naveen Khajanchi, is the CEO & Director, NKH Foundation. He runs an executive search firm and conducts leadership coaching for stakeholders of large family owned businesses and MNCs in India and globally. He has an Executive Master in Consulting and Coaching for Change from INSEAD.