FAMILY BUSINESS SPECIAL...FAMILY COMES FIRST?

FAMILY COMES FIRST?

Family first, right? But when it comes to the workplace, favouritism can shake the culture of merit in the company, thus disengaging ‘real’ performers

    Imagine working for a company where the boss and his brothers, sisters and their children control everything. Imagine being party to their daily domestic issues at work. And on top of it, seeing their family generations climbing the business ladder in the company just because they own it, no matter how meritorious your performance may be. Sooner or later, you are bound to give up on such a dissatisfying job situation. “The aftereffects of favouring family members for a senior level position over the existing employees are severe. To begin with, it completely washes away the opportunity of growth for the non-family employees; their morale and trust in the organisation are shaken and it could lead to a high level of attrition,” says Ashish Arora, founder & MD, HR Anexi.
    Further explaining the psyche of family-run businesses, Mirza Yawar Baig, author of the book ‘The Business of Family Business’ says, “There is always a difference between ‘insiders’ who are family members and ‘outsiders’ who are not related. In many families, the business is treated as an extension of the family home and the same roles of elder and younger apply. Like employment, career progress is also guaranteed. A family member will always get his/her promotion, even if it means that someone else actually does the work. This encourages complacency. In some families, the incompetent member is shifted to some other part of the business where he/she proceeds to spread his/her negative influence, only to be moved elsewhere when he/she has done sufficient damage. The power of the bad apple must never be underestimated. Family members acquire even more significance because they are seen as most ‘loyal’ and ‘trustworthy’. Family members have a different status in the business, no matter what their designation and no matter what the official line on career progression may be.”
    Given this situation in many family-run businesses, Baig suggests four critical parameters that any family business that wishes to transform itself from being person-led to becoming process-driven, must define. “The first is entry – what does it take to enter the business? Then comes progress – how is success measured and recorded? Next is succession and lastly, exit. On what conditions can a family member be asked to leave the business? These parameters must be defined transparently,” he says.
    While defining these parameters is of key importance, how do they contribute to controlling the spread of nepotism? What are some of the other measures? “Nepotism is a very dangerous plague affecting the quality of an organisation and performance in the long run too. Within a family business, nepotism can be controlled through soft and hard mechanisms. Soft mechanisms are mostly based on factors such as a culture of merit, a well-defined job role; hard mechanisms are based on corporate governance and the promotion of IPO combined with the presence of independent directors and external managers who represent the safe support against the temptation of nepotism,” says Prof. Stefano Caselli, academic director of PGPB at MISB Bocconi and full professor at Università Bocconi.
    Likewise, Prof. Dr. Uday Salunkhe, group director, Welingkar Institute of Management Research & Development (WeSchool) advises, “To limit the negative consequences of perceived nepotism, HR must prevent the hiring of candidates directly related to the owner and existing employees; policies need to be introduced that do not permit relatives/family to work in the same firm (or at least the same department). However, family members being appointed to positions of management need not be necessarily negative. Many closely held family businesses in India have thrived on the capabilities and performance strengths of family members. In such cases, the family members were identified early, carefully nurtured, placed in challenging situations prior to them being placed in senior positions of responsibility. This approach facilitates harmony, commitment and a common purpose of unity between qualified non-family members and those that are qualified and related to the family.”

Unnati Narang TAS 120604