This article was first published in the New
Indian Express on September 21, 2017; Co-author- S. Subramanian
Can political parties in India
and abroad find their own Jorgen Vig Knudstorp (Lego), Sergio Marchionne (Fiat
Chrysler Automobiles) or Oh-Hyun Kwon (Samsung Electronics)? These people are
all successful non-dynast professional CEOs of family-run businesses. Do
political parties pick candidates keeping in mind what is best for the party,
its growth and purpose?
Typically, communist parties in
countries such as China, Vietnam, North Korea and Cuba are run as family
affairs. Party leaders pass the baton from one family member to the other and
one generation to the next. The descendants of the communist party elites, or
‘princelings’ as they are called, are usually chosen to lead the party, and are
given important portfolios in the government and the country when the earlier
generation retires or passes away.
It is almost impossible for
anybody to rise to the top of the party (and hence the government machinery)
unless they have strong family influence in the communist party. In China, four
of the seven members in the all-powerful Politburo Standing Committee of
Communist Party of China (CPC) are princelings. Similarly, in the Communist
Party of Vietnam (CPV), of the 19 members in the Politburo, 11 are princelings.
In North Korea, the ‘Kim’ family is in power for the third generation. And in Cuba,
after Fidel Castro, his brother Raul Castro came to power.
The above scenario is similar to
many family-run businesses all over the world. Closer home, in India, most of
the businesses are owned and managed by founders and their family members. The
reasons for this phenomenon of family-based succession are culture and the
‘correct fit’.
Asian countries are known for
their collectivist family-oriented culture, unlike Western individualist
culture. The elders want to pass on what they have earned to the next
generation family members. This is reflected in the literature on succession in
family-run businesses. The business is passed on from one generation to the
next for the family to retain control, even if there are better candidates
outside the family for continued shareholder wealth creation.
The founders of the party earned
power when they set up the party and they want to pass on that power to the
next generation family members. The thought process is that ‘the founders of
the party set up the political establishment in the country and even though the
government is for the people, the founders and their family members are best
suited to enjoy the outcomes and take the mission of the party forward’.
This thought process is more or
less explicit in the succession planning in Vietnam. The Communist party’s
informal rule set by Ho Chi Minh, the founding father of the CPV, states that
priority should be given to the children of the senior comrades, i.e. party
elites.
Even if the incumbent leadership
of the family business genuinely wants to consider outsiders for succession
planning, it does not work in many situations. The outgoing leadership
typically has a vision for the company and wants to choose someone who
understands and shares that vision.
When they search for a successor,
they find it difficult to find an outsider who fits their expectations. On the
other hand, they find that their own family member, who has been brought up
under their supervision, is entrenched in the same values and shares the same
vision. Hence they prefer to pass on the baton to someone inside the family
rather than an outsider.
The communist party elites feel
the same. It is up to the non-communist parties in democracies like India to
decide if they would like to follow this method of selecting successors. It
must be emphasised that if the next generation of the founding family is well
qualified, as passionate as the founder or incumbent and as suitable to lead
the company as an outsider, the family member may be given a preference over
the professional as the family member would be well entrenched in the values of
the company. But, if the next generation is not well suited for the top job,
the shirt sleeve to shirt sleeve in three generations saying may prove to be
right!
A look into the various Birla
Groups proves an important point. The Aditya Vikram Birla group which appointed
professional CEOs with strategic freedom at the business level for most of its
companies continued its success story in the liberalised environment, whereas
the other Birla Groups which continued with family leadership did not perform
as well.
The political parties would do
well to realise that the adage will apply to them as well if they don’t learn
from the experiences of family-run businesses and make course corrections.
Parties that subscribe to dynastic politics can learn from family businesses
that choose ‘outsiders’. Family-run businesses are realising the need for
change. So should the political parties!
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