Family business: Defining lines of responsibility is paramount

TT Jagannathan says succession planning should be a priority and future successors must be mentored and trained

Published: Feb 20, 2019

g_113283_family_business_280x210.jpgIllustration: Chaitanya Dinesh Surpur

Claude Picasso once said: “I could have been born into any family. I was fortunate that I was born to an artist as extraordinary as Picasso, and Picasso turned out to be the family business.”

Most of us who run family businesses can identify with the words of Claude Picasso. There is great satisfaction that comes from trying to grow and build a dream that was nurtured by one’s family. While I am not the biggest believer in legacies, I realise that there is a great responsibility to carry ahead the company built by previous generations and in turn pass it on to future generations. Today, family business is the most common form of enterprise. However, with the pros come the cons. Standard wisdom is that the first generation starts the company, the second builds it and the third destroys the business. This is particularly true because they are brought up with silver spoons and want to start their own businesses. Also, they are tech-savvy, talented and armed with attractive foreign university degrees. But they also have to contend with the fear of the unknown. Not all startups that we see mushrooming these days are successful.  

What then are some tips that I put into practice that can be adopted by future generations? I hope some of these learnings from my personal experiences will benefit the next generation of any family business so that it can continue safeguarding and growing the company.

THE IMPORTANCE OF HIERARCHY
In most cases, a family business is founded by one person. When the next generation takes over, it creates another layer of complexity in the form of ‘active and passive’ owners. Those businesses that have greater complexity need to place the emphasis firmly on business governance. This would include defining roles of the board and management clearly, setting guidelines for decision-making, building a strong leadership team, and most importantly, ensuring that family members working in the business have clear roles. Defining the lines of responsibility is paramount as it will help reduce feuds and arguments between family members on strategy and on how the business should be run.

BE PREPARED TO LEARN
I was an academic, who was happily doing my PhD from Cornell University in America, when my father requested me to come back to India to take over the family business. The company was struggling. I didn’t know a thing about business. I was not exposed to business functions such as accounting, HR, marketing and others. However, I returned to India and learnt the ropes of the business. I faced a lot of resistance from people who didn’t think I had the skills to nurse the business back to health. But I worked tirelessly, learnt on the job and we turned the company around and made it profitable.

AGREE ON A COMMON GOAL/VISION
A business will run smoothly when the leadership is working towards a shared purpose and a common goal. It is important to be collaborative and take people forward instead of following an autocratic approach. Assuming that several family members are owners of the business, all of them have to agree cohesively on a plan for growth and expansion. This will ensure that the business can be taken to the next level in a seamless manner. It is also important for the organisation to operate based on a set of core values and philosophies that can set the tone and pave the way for how the business is to be run. Identifying what sort of culture you want for the organisation is immensely vital too. Ultimately, it is even more important to create a professional and open work culture that can attract the best talent.

CHANGE ISN’T A BAD THING
All of us fear the unknown. We dislike change and prefer sticking to tried-and-tested methods. However, in a family business, the flexibility and openness to change have to come from the top. Every generation has to reinvent the company. If you remain static, you are doing a great disservice to the business. I also believe that to make the business a success, you need attributes like passion, drive and commitment. Therefore I strongly recommend that some family members establish careers outside the business. It is important to develop a skillset, get experiences and prove yourself outside before deciding to embark on a career in the family business.

SUCCESSION PLANNING
For a business to expand, the company needs to run smoothly without you. Therein lies the importance of succession planning… it is important to ensure the business continues to grow and thrive. Succession planning needs to be a priority in every family business as early as possible. It is compulsory to mentor and train the future successor for at least a year or two before the reins are handed over. This will ensure a smooth and seamless transition without hiccups. If a family member doesn’t want to take on the business, provision should be made to get a strong external leadership board in place.

My advice would be to not internalise failures, as they happen for many reasons. There is always a silver lining and solution to every problem. I would urge the future generation to never give up on their dreams. Even though I am from the third generation, I managed to build TTK Group to the scale it is today. And if I, a self-confessed academic, could do it, I am sure every third generation successor can do it. All it requires is for them to apply themselves as well as cultivate the skills and business acumen to take their family business to the next level.

The writer is chairman, TTK Prestige


(This story appears in the 01 March, 2019 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

Show More
Post Your Comment
Required
Required, will not be published
All comments are moderated
Indian Hotels enters the homestay segment, will open a new hotel every month
Corporate Venturing: How to bring a startup aboard for mutual benefit