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Business of family business


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The Business of Family Business - Leaving a legacy of enduring leadership

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Business of family business

  1. 1. Mirza Yawar Baig Opening the world, one mind at a time© Work Experience:  International Speaker, Trainer, Author, Coach, Leadership Consultant with 16 years in Corporate General Management, 28 years in Training & Organizational Development, specializing in Family Business Consulting & Entrepreneurship, 24 books Director / Professional Member:  Center for Conflict Resolution & Human Security  Indian Society for Applied Behavioural Science Entrepreneur:  1994: Founded Education:  IIM-A , P-CMM®, MBTI©, WSA©, ISABS Books include:  Hiring Winners  Present Your Way to the Top  20.10.2010-55  The Business of Family Business  An Entrepreneur’s Diary  Leadership is a Personal Choice Member Consultant Panel: USA  GE Corporate University, Crotonville, NY  AMA International, New York, NY  Andersen Corporate University, MN India  SVP National Police Academy, Hyderabad  SSB Academy, Gwaldam, Uttar Akhand  LBS Academy of Administration, Mussoorie Clients Include: GE, Oracle, Motorola, Microsoft, IBM, Digital-Compaq, National Semiconductor, Unilever, BSNL, Tata Indicom, Colgate, Asian Paints, Siemens, Wartsila, MphasiS, CavinKare, EXL Service, World Bank, ICRISAT, World Fish, Tata Corporate, J & J, Accenture, Zeneca Seeds, Shanta Biotech, Advanta, Reuters, Air India, Yusuf Bin Ahmed Kanoo, Olam, Regal Beloit, Reliance World, NIS Sparta, AMKA, Emami Group, Suzlon, JP Morgan, SEW Infrastructure, LANCO, KAR Group, Expolanka, Brandix, Utah Group, Rahim Afrooz
  2. 2. Our Clients include India India International CavinKare Aditi - Talisma Emami Group KAR Group Cranes Software Bangalore Labs Suzlon Lanco Equations Reuters Wild India Camps NIS-Sparta Reliance India Career Launchers SEW Infrastructure Seapol AMKA Group Dawsons Checkout Expolanka Vidullanka YBA Kanoo Rahimafrooz Olam
  3. 3. Oldest family businesses  Kongo Gumi Construction/Japan: Founded: 578 (Takamatsu 2006), last President Masakazu Kongō the 50th Kongō  Hoshi Innkeeping/Japan: Founded: 718, 46th generation  Barovier & Toso: Glass making/Italy: Founded: 1295, 20th gen.  Château de Goulaine Vineyard, France, Founded: 1000  Barone Ricasoli Wine and olive oil/Italy, Founded: 1141  Hotel Pilgrim Haus Innkeeping/Germany, Founded: 1304 It can be done, if there is the will to do it
  4. 4. How do they do it? 1. Organization before self 2. Contribution before consumption 3. Conflict: Me + You versus the problem 4. Make good rules collaboratively 5. Never break your own rules 6. Clear headed thinking – not emotional soup Results come from execution alone
  5. 5. The Challenge Making the critical transition from ‘Person-Led’ to ‘Process-Driven’
  6. 6. 6 – CTS requirements 1. Maintain the spirit of entrepreneurship 2. Create systems to perpetuate what worked for you 3. Open doors for continuous innovation 4. Provide support for new ideas 5. Create a boundaryless work culture 6. Kill bureaucracy Create a culture of compassionate meritocracy
  7. 7. The Family Dynasty – John Ward Founder Sibling Partners Consortium of Cousins Beware the 3 – Generation Syndrome
  8. 8. The Negative Spiral Stage 1 • Compliance > Innovation • Disagreement = Opposition Stage 2 • Insiders = Family • Outsiders = Professionals Stage 3 • Seeking safety > Risk taking • Protection > Growth Influence comes from who you know, Not from what you can do…!!
  9. 9. The Critical Transition  Move from Person led to Process led  This is the most critical stage in organization development  Your organization’s life & growth depends on how successfully and quickly you can make this change Most powerful sign of this transition is how you reward
  10. 10. Critical Mindset Change 11 •What can I get out of it?Entitlement •What can I do for it?Contribution
  11. 11. In your family, which is more prevalent?
  12. 12. Shareholder Manager Shareholder Manager Shareholder-Manager is the most critical 3 – Critical Stakeholders
  13. 13. CTS parameters What must families ensure?
  14. 14. Survival Matrix Shared Values Aspirations Dead Break up Stagnation Winners
  15. 15. Growth Matrix Support Structures Entrepreneurship Dead Break up Stagnation Winners
  16. 16. Reflections ∴CTS parameters are:  Right shared values  Aspirations based on the shared values  Entrepreneurial spirit  Structures to support the above What’s the situation in your case?
  17. 17. 3 – Key Issues The rules determine the winners
  18. 18. 3 – Key Issues 1. Entry and exit rules for family members 2. Succession planning, formal mentoring 3. Conflict resolution – systems and processes Prevention is better than cure
  19. 19. Entry & Exit Rules Must apply to the family first
  20. 20. Entry and Exit rules  Competence, not lineage  Contribution, not consumption  Uniform rules for everyone NOT • Entry: If he is born, he will enter • Exit: If he enters, he will not exit
  21. 21. Because owning a plane and flying it are not the same
  22. 22. Entry Criteria  Business success is not a hereditary trait; comes from skill  High entry conditions that are a credit to those who surmount them to enter  People hire like themselves, so who is in will determine who will be taken in Make your business an aspirational place
  23. 23. Exit Criteria  What do you do if your son is driving, with you in the passenger seat and you realize that he can’t drive properly?  Just because you own a plane does not mean that you can automatically fly it A clearly marked ‘EXIT’ is a safety requirement
  24. 24. To take care of family members you don’t have to employ them
  25. 25. Succession Planning Preparing successors consciously
  26. 26. 4 – Models  Moguls and other Muslim rulers in India  Kill the incumbent and all opposition and cease the throne  Primogeniture: Eldest rules  Eldest takes all  Baniya – Traditional business communities  Divide between multiple heirs  Merit  One who is best for the business: Objective metrics
  27. 27. Successor Development Is a process – not an event
  28. 28. Successors must be nurtured  Succession planning is the name of consciously developing successors continuously for all leadership levels across the organization so that not one but several potential candidates are available for each position  Successor development will happen only when incumbents can see a clear timeline and development plan  Successor development will happen only when it is part of the KPI of the position holder Robust successor development is a sign of a healthy culture
  29. 29. 6 – Common Myths 1. External candidates are more exciting and promising 2. The successor has to be ready now 3. CEO succession planning is a single-person event 4. What worked in the past will work in the future 5. The successor must be like the incumbent 6. “We have a great internal candidate – we don’t need to look outside” How many of these are working in your minds?
  30. 30. Successor development  Will be happen only when  It’s need is felt in the entire organization  Career progress depends on it  You are evaluated for it  You invest time and resources to enable it  People can see proof and aspire for it Serious will from the top is essential
  31. 31. Capable Successors  Must have independent market value  Leadership track record  Record of handling crisis – business turn around  High acceptability among family and employees  Record of personal commitment and contribution Being a family member is not sufficient
  32. 32. Entry problems  Old people leaving  New methods create ripples  You fear looking bad in comparison  Systems free you but you don’t know what to do with your free time You become your son/daughter’s rival
  33. 33. Solutions  Bring in the successor consciously  Be prepared for change and that all change is painful  Welcome all development because you benefit from it  Find new things for yourself to do and don’t become a pain for everyone because you feel useless Beware of your successor’s dua for your Jannah
  34. 34. Succession = Survival  The one who is best for the business must be the one who leads  Eligibility criteria:  Consistent contribution, Future orientation, Track record, Leadership ability, Dealing wisely with conflict  What’s the data to support each of the above? From Person-led to Process-driven
  35. 35. Acid test  Name your successor  Will he/she pass an audit by an independent body?  What happens to you if you can’t name one or if he fails the test? GE airplane interview
  36. 36. ‘Jeans, not Genes’  Founders/family members must have retirement dates and be accountable for training successors.  Promising youngsters must be identified early and put on a formal training track.  All career progress must be based on results alone Family members must be seen as benchmarks
  37. 37. Succession planning  Raymond Ackerman – “I always pick the best person I can find to be CEO and the best family member that I can find to be chairperson, and I think that’s a very good combination. Otherwise you go and perpetuate family and maybe we don’t have the strength in the family to run those positions. So we made an absolute conscious decision to look for the best experienced person we could find – be it from within or from without – and the best family member, and to make sure the family member has as broad experience as possible.” From 4 stores in 1967 To 1076 stores and 50,000 people in 2015
  38. 38. Aditya Birla Group (1857)  Kumar Mangalam Birla (4th generation) took over as Chairman of the Aditya Birla Group in 1995, aged 28  Group turnover was $US2 billion and overseas operations accounted for a very small part of the overall business with Egypt, Thailand and Indonesia being major centres.  Under his leadership the group's turnover increased to $40 billion and it has expanded operations to more than 40 countries. 60 percent of the group's revenues now come from abroad, and employ more than 130,000 people
  39. 39. Succession Planning Strategy  Deputy Managing Directors for group companies  Dilip Gaur, DMD, of UltraTech  Satish Pai, DMD of Hindalco  Pankaj Razdan, CEO Financial Services business.  Ambrish Jain, DMD of Idea  Lalit Naik, MD Nuvo
  40. 40. 4 – CEO Selection Questions 1. What can kill our business in the next five years and what’s your combat plan? 2. What are the opportunities that can transform our business in the next five years and what’s your plan to access them? 3. Who’s ready to take your position? 4. What’s your Strategic Plan with timelines for the next five years? Objective criteria based on demonstrated competence
  41. 41. Key Criteria  All these questions must have ready answers. If he/she starts to think, when asked, they’ve failed to make the grade.  If he/she has not been thinking and writing about these questions for several years they’re not CEO material. Same standard for an outside CEO
  42. 42. If you can’t take hard decisions you can’t win
  43. 43. Objective decisions  The business is not you, your ego, your honor  A business that makes loss is a charity  Don’t throw good money after bad  Shed your tears, but kill the bad decision before it kills you  Process: Objective assessment parameters A good businessman is one who can recognize his own bad decision
  44. 44. It is better to cry in a Rolls than to cry in a Hyundai
  45. 45. The challenge of dichotomy Why the transformation is difficult and will happen only if there is enough sincere will from the Top
  46. 46. Family Business Process Driven Business 1. Family comes first 2. Guaranteed employment to family; automatic entry 3. Family members can’t be sacked 4. Loyalty to the family comes first and foremost 5. Power comes by birth or by being ‘close’ to the family 6. Low transparency especially in financial matters 7. Some people are beyond being questioned on anything 8. ‘Who’ is usually more important than ‘What’ 9. ‘Respect’ is for ‘Who’, not ‘What’ 10. Questioning and disagreement is seen as opposition especially if it is to family members 11. Owners manage whether they are professionally qualified or not 12. Family members lose their ‘homes’ for a bad decision 1. Company comes first 2. Employment only to those most suitable to the position 3. Anybody can be sacked 4. Loyalty is primarily to self and own career, then to the company 5. Power comes from performance and delivery beyond expectations 6. High transparency especially in financial matters 7. Anyone can ask questions to anyone else about anything 8. ‘What’ is always more important than ‘Who’ 9. ‘Respect’ is for ‘What’, not ‘Who’ 10. Questioning and disagreement are seen as essential leadership qualities and appreciated 11. Only those who are professionally qualified, manage 12. Professionals lose their jobs and call it a ‘learning experience’
  47. 47. Please reflect  How many of the factors on the previous screen apply to your business?  If we asked your constituents – customers, employees, suppliers – would they agree with your assessment? Because their perception is their reality
  48. 48. When a caterpillar looks in the mirror, it does not see a butterfly.
  49. 49. Transforming by chance or by choice? Choosing not to transform is choosing to die
  50. 50. Always from the top
  51. 51. Structure  What needs to change?  Why – Why not?  What is the new proposal?  Why is it better than the present?  What do you need and what’s your plan to get it?  People – support? Resources? Structure influences behavior – Behavior drives results
  52. 52. Division of estate  Divide shares, not the business  Don’t disrupt structures  Change of ownership pattern need not mean change of operating procedures  The Family Constitution facilitates smooth transitions If you rock the boat too much, it will sink
  53. 53. Bibliography  Built to Last Collins & Porras  Good to Great Jim Collins  Leadership is a Personal Choice Mirza Yawar Baig  The Business of Family Business Mirza Yawar Baig  Hiring Winners Mirza Yawar Baig  An Entrepreneur’s Diary Mirza Yawar Baig  Governing Family Businesses John L Ward  How to Choose & Use Advisors: Getting the Best Professional Family Business; Craig E. Aronoff, John L. Ward  Generation to Generation: Life Cycles of the Family Business; Kelin E. Gersick and others.
  54. 54. Twitter: myawarbaig Books: