Un-please to succeed

This article was first published in Business Standard on October 26, 2017; Co-author: S. Subramanian

http://www.business-standard.com/article/opinion/unplease-to-succeed-117102501460_1.html

Leaders of family-owned businesses must adapt to the changing times

The role of the family business leader depends on the background of the family, its structure and the conditions under which he assumes that role. Someone who becomes the leader during times when the family and its business is struggling may face very different kinds of challenges than one who becomes a leader in a planned manner.

The challenges also depend upon the preparedness of the leader, turbulence or stability in business and the support of the family as well as the business team. While the role of the leader in the business and the family is shaped by the circumstances, almost all leaders must learn to un-PLEASE to ensure continued success.

·      Please: Allocating resources in a way that takes care of the necessities without demotivating the members, and at the same time keeping the respectability of the family and business intact. Many a times the family members may not be pleased with the decisions, but if it is in the long-term interest of the business and it must be taken, the leader should be able to convince the family members.

·      Loneliness: The authority that comes with being a leader often comes at the cost of loneliness, especially in the case of founder-promoters. The loneliness of the leader would prevent divergent viewpoints coming from different family members and next-generation members that often result in innovation, new venture creation and critical review of resources allocation to adapt to strategic changes in family firms
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·       Entitle: In financially sound business families, it is often seen that the members or the next generation feel entitled to the business. This is especially not right for companies that have external shareholders. The competitive environment and increasing shareholder activism would not allow such entitlement. A recent example is the attempt by the Singhania family factions to get the prime property owned by Raymond Ltd. at throwaway prices that was defeated by the non-promoter shareholders.

·       Assume: The “license raj” provided continued success for family businesses due to limited competition in the markets. Hence the leaders assume successful business is in their genes. Such assumptions don’t suffice in a competitive environment. Many top business houses that were a part of the Sensex in 1990 are no longer amongst the top, like Thapar, Mafatlal, Modi, Walchand and Kirloskar.

·       Settle: During the days of closed economy, business was predictable to a greater extent. However, recent years indicate that innovation is key to survival. Companies that become complacent soon turn irrelevant. Till 2014, Micromax was a leader in low-priced phones in India. 
   It had a good distribution model that helped it enjoy a lead. In the past two years, Chinese firms like Xiaomi have dealt a massive blow to it with innovative designs, reasonably good quality phones, high-end configurations and innovative distribution at low costs.

·     Establish: In family-owned businesses, the leaders have established authority over the professional top management. The leader’s decision is final, even if it is wrong in the business perspective. Often the Board of Directors too falls in line with the leader for fear of upsetting him. A good leader is one who is able to put processes in place for fair and informed decisions to be made.

The roles and challenges of each leader may differ. However, what cannot be questioned is that he must work for the welfare of the entire family and the long-term interests of the organisation. Whether the decisions are business- or family-related, the leader must be fair to all, there should be no imbalances. In the process, they may end up displeasing a few people. As long as it is in the long-term interest of the family members and the business, it is ok to un-please at times.