Saturday, August 18, 2018

FAMILY BUSINESS SPECIAL..... Like Father, Unlike Son


Like Father, Unlike Son

The modus operandi of passing on reins of a small- or mid-sized family business to GeNext is changing with increasing corporate complexities. Though inter-generational friction seems inevitable, succession-planning advisers have a gamut of solutions, and some basic advice

My father ran it practically for 50 years in a culture where even discussion was seen as disrespect.”
An autocracy, you guess? You wouldn’t be far from the truth. For that’s the word Pranav Sharma, scion of the Baidyanath group, uses for India’s oldest ayurvedic pharmaceuticals company that his father, Suresh Kumar Sharma, built.
Pranav, 35, is at the proverbial crossroads. A decade ago, he had moved away from his family business when his father rejected his radically different views. “Today,” rues Pranav, “my father is 70 and keen that I take charge.”
The irony is not lost on him. At odds with his father, Pranav had started his own ventures in power and hospitality. “Now I feel, had I invested those critical years in my family business and had my father been more open to change, I would have raised the value of that business significantly. I tell that to my dad too,” he says.
Inter-generational friction is nothing new, but while large and established business groups systematically work out their successions plans, many family-owned/managed medium- and small-sized businesses in India are in a phase of transition.
The business environment itself is changing, and VUCA — defined as the volatility, uncertainty, complexity and ambiguity component — is now officialese for Murphy’s law. The older and younger generations are, at times, in a state of conflict, resisting each other’s approach to business strategies and working styles.
Pranav is emphatic when he speaks of his father. “The credit of building the business is his, but the discredit of not scaling it up is also his. He built the business brick by brick, but also destroyed value by not embracing change. The way the business has been run has been a bit like autocracy!”
As a result of situations such as this, the millennial GeNext of business families is either opting out in favour of another career, or losing interest in the face of too many instructions from senior family members.

EDUCATION VS EXPERIENCE?
No doubt, the next generation is welleducated and taking over the reins in a changed environment, but it also lacks the invaluable experience. On the flip side, in most cases, when successors learn modern management techniques, get exposure to industry practices and plan to do something bigger for their family business, the seniors are not prepared to accept it.
Mita Dixit of the SP Jain Institute of Management and Research is a family business adviser. “Their circle of influence and horizon of opportunities are still the same. The incumbent generation is baffled by the new ideas of youngsters. Many a time, they are discarded as fancy or impractical,” explains the head of research and consultancy at the institute’s Centre for Family Managed Business.
Amit, son of Anand Rathi and managing director of the eponymous financial services firm, says it is important for parents to acknowledge that their child may have a different style of business and people management and let them evolve.
“My father is a more ‘details and process’ person, whereas I am more ‘strategic and creative’ in my approach. So we could approach a problem or decision very differently at times. We’ve worked our way through this over time by separately carving out times or days to discuss and this has helped in my case,” says Amit.
Family business advisers ask senior family members to be more mentor and less father, boss or senior. The older generation is coming to terms.
In London this summer, a mining mogul was given this parenting tip by a fellow billionaire who also has children the same age — “Be a friend to him, have a drink together, talk to his friends, understand where he is coming from by giving him space.”
Bipin Shah, chairman of the 1,500-crore pharmaceutical SK Group, says senior family members usually do not object for the sake of it. But he admits that differences crop up initially due to different expectations; it takes at least three to five years for a proper understanding to develop.
The SK Group has five members of the third generation and seven of the fourth working together. Training from the chairman himself and an acquaintance with the history and business growth of the group starts at the tender age of 15 years.
“I do not get disheartened when ideas are not readily accepted. Handling differences of opinion is an art to be developed by the senior generation and appreciated by the young generation. Motivation should not be questioned or compromised,” says Gaurav Shah, one of the fourth generation promoters.

AT ARM’S LENGTH
Promoters of well-established conglomerates, though, have a different view. Gopal Srinivasan, chairman and managing director, TVS Capital Funds, says a father should never mentor his child. The biggest danger is that the child may not mature enough and run the risk of going off-track. He cites the instance of Chettiar and Marwari families, where the successor always does apprenticeship outside the family, returning only after gaining in both experience and grooming. Srinivasan says a child should always make mistakes outside the ambit of the family business.
Harsh Goenka, chairman, RPG Group, has similar sentiments, saying the next generation in business should first report to professionals outside of family. “The fact is, many of them have bigger expectations and want to be catapulted straight to the boardroom. It is better to get them to work their way up the ladder, but balance it in a way by giving them freedom so they do not have a dependent mindset.”
Ajay Piramal, for example, leaned on the wisdom of four men — Deepak Parekh, Nitin Nohria, Robert Booth, formerly of Emaar, and Subbu Narayanswamy of McKinsey & Co — to groom his son before he became the face of the family’s real estate business, Piramal Realty. “I am a great believer in the power of sangat (the company one keeps). The association with good people with high values and unblemished careers at an impressionable age will help develop Anand’s character,” Piramal senior had told ET in an earlier interaction.

MADE BY THE MENTOR
According to SPJIMR estimates, by 2020, almost 37% of Indian family businesses would go through a generational change in leadership. For business owners aspiring towards the next orbit of growth, planning and preparation, GeNext will be crucial, and mentoring may well be the need of the hour.
Shah of SK Group says every individual must set his own path that fulfils his own set of goals based on his own aspirations. He has some advice for the older generation — remember, in the longer run, you would be happier to see your child at peace with him/herself.
Ways of taking decisions and handling disagreements change over the years. Initially, one tends to go more or less with the parents’ view but eventually, space is opened up for independent decision-making. A point comes when all decision-making is independent and the role of the parent is more of mentoring, according to Amit Rathi. “For businesses that I built from scratch within the group, like wealth management, I had my space to take decisions pretty much independently right from inception,” he says.
For the younger generation, Sumeet Kabra, director, RR Global, a listed wires and cables manufacturer, says it is important to first gain the trust of the elders in the business by proving yourself. “It takes at least four years to gain their confidence. The younger generation takes decisions faster and that worries our seniors. Our approach is simple — either you convince me or get convinced,” he says.
“I held a lot of discussions to convince my elders to set up a plant in Bangladesh. They were not convinced. But we did go there eventually, and now they are happy building businesses outside India,” he reminisces.
Kabra remembers the hard work too. “I worked at the Silvassa plant for five years before being made a director in 2010,” he points out.

TWO SIDES, SAME COIN
There were initial father-son disagreements in Dynacon Systems, specialising in IT infrastructure solutions and a mid-sized public listed company, too. “The business was small, so Dad had a controlled budget,” says Dharmesh Anjaria, 45, who moved into the family business after a brief stint at Birla Mutual Fund. “He believed ‘grow the business as much as you can control.’ I wanted to invest in people, attract larger customers and take on faster growth.” Dharmesh says, initially, “I had to agree to everything Dad said or (he felt that) I was defying him.”
Eventually, Dharmesh got a free hand when his father was convinced he would succeed. He now looks after business development, technology and finance, but quips, “Till today, Dad micromanages and believes he should know every customer and supplier.”
“I created the business and Dharmesh developed it,” says the 73-year-old Shirish Anjaria proudly. The chairman and managing director oversees administration, HR and daily affairs. “Even today, I am required in the company,” he adds mischievously.
There is no denying that mentoring is a skill and an absolute must for any business leader, especially when it is family-owned and managed, says Dixit of SPJIMR. The complexity and ambiguity of succession planning is a challenge as well as an opportunity.
Advisers put emphasis on open communication and absolute clarity. “From my interaction with about 120 mentors, I identified core expectations of mentors from their mentees, that is, future successors,” says Dixit. “I helped parents get the role clarity first – as the parent, as business leader and as the mentor. Each role has its own demands and characteristics. When the senior member masters the art of playing each role dexterously, he/she is able to communicate better and influence the millennial successors.”
After all, even if it is an autocracy, the autocrat himself will change in the next generation.

Lijee Philip & Kala Vijayraghavan
ET9AUG18

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