Tips for family business

When Mumbai-born Indian entrepreneur Sanjiv Mehta bought the East India Company in 2005, he confessed to a “huge feeling of redemption”.

A kind of reverse East India Company trend is underway as homegrown enterprises seek to leverage their cash and talent across the seven seas. Family businesses have grown and expanded not only across geographies but across segments, verticals, functions and technologies.

But has this growth created enlightened leadership? Has Kautilya's ancient wisdom, “in the welfare of the subjects lies the welfare of the King” been internalised by business owners?

In large part they have been remiss in neglecting personal leadership change. And, within the contradictions and familial tussles, the owners suffer monstrous, concealed opportunity costs.

Assuming credit, arrogance

The first mistake these owners make is to assume that the credit for all the success accrues only to them. High-power managers run their companies. Managerial excellence is the engine that drives the cash flows. Yet, the recognition for this vital contribution by professionals is reluctant and grudging. Professional managers are far more intellectually robust than the owners; the owners are far more entrepreneurial than the managers. The entire business is therefore like a chariot with two wheels: entrepreneurship and managerial excellence. The wheels are connected with the axle of processes. If the axle is weak, the wheels come off!

The increased wealth and power of the owners has fed arrogance. Impatience, abusive language, disinterest in listening, brushing aside ideas and objections and patently selfish behaviour are all dangerous manifestations of this belief in daily interactions.

Unknown to them, the professionals, for self-protection, begin to harden inside and distance themselves. Can motivation remain unaffected? Can cash flows and profits not be impacted, sooner or later? Will safety and compliance not be compromised?

Negative halo effect

The second mistake is what I call the negative halo effect (NHE). You just focus on and remember only a particular negative trait, behaviour or incident relating to another person. So, in every interaction you unconsciously bring up the subject in some way or another. Successes, strengths or skills are underplayed, ignored or blocked out. Therefore the gap between potential and actual is ever widening.

Every interaction with the owner or leader who embraces the NHE (negative halo effect) is stressful to the extreme. If all the people around or reporting to the leaders are suffering from stress-induced conditions then it is axiomatic that the leader's style, behaviour and personality is a directly contributing factor.

Subverting chain of command

The third mistake is subverting the chain of command. Having created large organisations with top-notch professionals, who incidentally, are paid mini-fortunes, the owners fail to appreciate the lattice-work of formal and informal organisational hierarchical pathways. Many owners harbour a mistrust of professionals; a kind of feeling that “this is my business and only I am committed to it; all the so-called professionals can walk away at any time; I can't”. Without seeming to, they end up checking up on the managers from their subordinates.

This makes the position of the professional manager or C-Suite executive untenable. The organisation learns that the C-Suite executive is largely a figurehead while the real power is with the owner and only the owner's writ will run. The entire investment in the C-Suite executive and his position is infructuous and superfluous!

Leadership model

Since global growth is proceeding apace, family business owners must understand that their tight ‘control and command' model of leadership must give way to an empowered, result-based, respect generating model of leadership.

They must create opportunities for the individuals in their immediate sphere of influence to grow in every dimension. For this, they must let go while demanding results at all times. Simultaneously, they must provide leeway for the people to work. As long as their team learns from mistakes and maintains high standards of integrity and ethics, experimentation and mistakes are acceptable. Negligence and dishonesty are not. They must focus on generating positive energy and encouragement. Fundamentally, they must recognise the need for acceptance based on respect that drives every human being.

(The author is a management expert.).

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