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Professional Leadership in Family Business
Kavil Ramachandran
Managing self is one of the greatest challenges faced by family business leaders. They face several dilemmas and often do not watch out for the emerging possibilities for changes in the roles of all stakeholders including themselves and key employees at the top to further build the organization. A refined professional approach to leadership is the solution.
Why leaders have dilemma?
Just as a rocket requires a different fuel mix while moving from one orbit to another, the mix of capabilities required in the leader will also be different at different phases in the life of an organization. Because of a mix of intertwined factors, family business leaders often do not get clarity about this and their own roles in the new paradigm. Some of the dilemmas they face relate to the possible involvement of non-family experts in determining the strategy of the business. Often recommendations of younger family members get greater weightage over the wisdom of outsiders. This is primarily because of the assumed “owner” feeling of a family member who is supposed to implicitly consider the downside effects of the decision on the family’s wealth. Also, the indispensability feeling of the self and lack of clarity on possible involvement of other capable people adds to the dilemma. Leaders get into a trap of their own creation in this process.
The basic problem lies in the leaders not grooming themselves and adapting the dynamic capabilities required. They may not dispassionately analyze the capability requirement of the top team, and the existing stock of the same in the organization. They may lack the ability to have “detached passion” to evaluate what is good for the business and develop themselves accordingly. As a result, some of the retirement challenges of meeting their need for power and identity when changes are effected come up as fatal hiccups without a solution. In the process, effectiveness of professionalization implemented till then is not put to test for its robustness.
Across the world, successful family businesses have demonstrated the need for an oversight from the owners’ side in terms of the long term existence of the business. Family owners work with other stakeholders to develop business strategy and governance practices. Multi-generational family business such as the Merck in Germany and Dabur in India have inbuilt mechanisms to “get a feel” for what happens in the organization without getting operationally involved. Since the goal is to provide an oversight, there are multiple options for organizations of different sizes to consider. For instance, creation of a board of directors or advisors that work in reality as a true watchdog is one option.
Professional leadership at the top is more like a team sport, much beyond the doubles game that family and non-family executives play operationally in a professionalized environment. Here the challenges to address consist of a dynamic mix of operations, strategy and governance, and the organization needs a team to provide the required mix of expertise. Here the basic assumption is the existence or relevance of multiple stakeholder approach to leadership. Family business leaders need to appreciate that they themselves cannot play from all positions in a game like cricket, and they need other strong players in the team. Also, because of the inevitable mortal nature of human life, the leader’s role takes the shape of a mentor of a good team when he/she is not playing the game. Leaders need to recognize the complementariness in capabilities of the players and groom the team to play a collective game without the captain dominating unnecessarily.
Practically, it is difficult to predict a fixed timeline for leadership transition; hence, leaders should prepare themselves to manage the transition from early on. This is possible once they can visualize the challenges of capability building at the top when they have to redefine their own roles. With shrinking family size and growing career options including creation of new entrepreneurial ventures for succeeding generations, it is critical for family members to prepare the ground and play a team sport at the top, sooner than later. None of these will work unless the leader consciously encourages and allows rest of the team members to play their natural game.
(The author is Thomas Schmidheiny Chair Professor of Family Business and Wealth Management at the Indian School of Business)