The Hindu Business Line : Shaping a business dynasty

Many believe that sending their children to a good business school alone would give them the necessary knowledge and skills to step into their business shoes. But, one has to catch them young and start the process.

Niall Ferguson, a widely published specialist in financial and economic history, in his review of the book Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses by David S. Landes, aptly titled `Heir Pressure', says that "powerful forces are always working to dissolve business dynasties. The first of these is the `Buddenbrooks syndrome' named after Thomas Mann's great novel, subtitled `The downfall of a family', which tells the story of four generations of a Lübeck mercantile dynasty. The founder is smart and tough; his son is competent; his grandson is self-indulgent; his great-grandson is degenerate... Landes quotes a member of the Hambro family as having once declared, `Our job is to breed wisely'. But the lottery of genetics tends to foil calculated reproduction."

Perseverance and ingenuity

Notwithstanding these negatives, a significant number of family-run companies have dominated the world economy through perseverance, ingenuity and unwavering passion for the enterprise. The ideals for a family business are continuity, watchful leadership, dedication to success and above all, the determination to keep out bad behaviour, extravagance and laziness — all very real enemies of family business. Publishers Weekly (Sept. 2, 2006) states in its review of the book: "Landes' stories emphasise... as to how family considerations such as authority, love, trust, envy, marriage, adoption and succession determine the growth and direction of the business. While this may seem irrational compared to entrusting strategic decisions to specialised professionals selected according to talent rather than bloodline, Landes argues that family does a better job."

Thus, there is strong evidence to support the cause of sustaining business dynasties in spite of the overwhelming odds stacked against it. There are great advantages in growing a business. When a business group is partitioned, incalculable harm could come to the momentum and size built up till then. In an interview to Fortune magazine, Sergey Brin, the co-founder of Google, sums up rewards of size very succinctly: "... today we have more resources. If we decided that we need to have a big island for some operation tomorrow, we could buy an island tomorrow... resources give us opportunities."

It requires tremendous will and hard work to sustain business dynasties. An old axiom is `business is business and family is family and never the twain shall mix'. I, however, have a different take on this. As long as it is made clear to family members that business interests would never be subordinated to family interests and family needs to serve the business and not the other way round, the twain could and should mix!

If one were to cite the most important prerequisite, the keystone as it were, to building a successful business family, it is the passion and long-term vision of the founder or his heir who builds up the business. He would be passionate about the business and the family and he would be determined to nurture. He would communicate this passion to succeeding generations. That is, he would shape the family future too as if it were a business. He would have a vision for the family, formulate a mission statement, develop objectives and action plans and have processes in place with the participation of the relevant persons. In short, he will have a strategic plan for the family.

I plan to deal with each of these aspects in detail in future articles. In this article, I would like to concentrate on two crucial elements in preparing one's heirs for the challenges of family enterprises. If you want your business enterprise to see beyond the immediate generations, it is time to start worrying about the cousins' and second cousins' generations. I am referring to the task of preparing members of a large extended family so as to facilitate the best and brightest among them to take up the reins of the business.

Many believe that sending their children to the best engineering schools or an audit firm followed by a business education in a US university (often easier to get into than our IIMs) would give them the necessary knowledge and skills to step into their business shoes. Some would even send their children to work for other companies; some would even have their progeny start at the entry levels. I venture to suggest that this is not enough.

The word `dynasty' may conjure up images of the slothful Maharajas portrayed by Jarmani Dass in his book Maharaja: Lives and Loves and Intrigues of Indian Princes. However, much has to be said in favour of the efforts expended by them in preparing their princely progenies for the throne. They employed tutors and mentors to groom their children in various disciplines covering different aspects of statecraft.

Preparing your next generations is no different. You have to catch them young and start the process. Some may call it indoctrination and so be it. One has heard about the Maharishis chanting the Vedas or musicians singing to the foetus when their wives were expecting so that their children start their education in the womb itself. What I am proposing is not that radical, but almost so. Let your children hang around when you discuss business issues at home; let them soak up business lingo; that is when, through an osmotic process as it were, they absorb the nuances of running a business.

If you want your sons and daughters to enter the business and succeed, the name of the game therefore is education and social grooming, which Wikipedia defines "a major social activity and a means by which persons who live in proximity can bond and reinforce social structures, family links, and build relationships. Social grooming is also used as a form of reconciliation and a means of conflict resolution."

Liberal education

Coming to education, give your children a good dose of liberal education. Its importance as a base to succeed in business and life cannot be overstated. I would like to reproduce excerpts from an e-mail exchange with my friend Prof S. Ramchander, which captures the essence of this most eloquently:

"John Stuart Mill delivered a lecture to the students of the University of St Andrews, Scotland, when he was elected as Lord Rector in 1867. His lecture is a classic definitive work on the meaning and relevance of a liberal education for human beings. Liberal education concerns `the culture which each generation purposely gives to those who are to be its successors, in order to qualify them for at least keeping up and, if possible, for raising the level of improvement which has been attained. Professional education is something different.'

Mill does not mean to denigrate the professions or to deny that there is a vital moral dimension to the practice of law, medicine, engineering and business. The question is the most effective manner in which higher education can contribute to making professionals moral: `People are people before they are lawyers or physicians or merchants or manufacturers; and if you make them capable and sensible, they will make themselves capable and sensible lawyers or physicians (or business persons).' In other words, the cultivation that they bring to professional schools from their liberal education goes a long way to determining whether professionals practise their trade sensibly and decently.

Mill's analysis suggests several lessons.

First, a liberal education aims to liberate the mind by furnishing it with literary, historical, scientific and philosophical knowledge and by cultivating its capacity to question and answer on its own.

Second, a liberal education must, in significant measure, provide not a smorgasbord of offerings, but a shared content because knowledge is cumulative and ideas have a history.

Third, such an education must adapt to local realities, providing the elementary instruction, the stepping-stones to higher stages of understanding where grade school and high school education fail to perform their jobs.

Fourth, the aim of a liberal education is not to achieve mastery in any one subject, but an understanding of what mastery entails in the several main fields of human learning and an appreciation of the interconnections among the fields.

Fifth, liberal education is not an alternative to specialisation, but rather a sound preparation for it.

Sixth, it culminates in the study of ethics, politics and religion, studies which naturally begin with the near and familiar, extend to include the faraway and foreign and reach their peak in the exploration, simultaneously sympathetic and critical, of the history of great debates about justice, faith, and reason.

Seventh, all of this will be for naught if teaching is guided by the partisan or dogmatic spirit, so professors must be cultivated who will bring to the classroom the spirit of free and informed inquiry."

(The writer, an alumnus of IIM-A, was earlier with the consultancy division of ASCI, Hyderabad and a Director, A.F. Ferguson & Co. He is currently Director, Startup Focus Ltd, which specialises in strategic planning and counselling for family-managed companies and M&A. He can be contacted at trrajan@gmail.com )

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