Sonu Bhasin, author of The Inheritors, is one of the early and senior women professionals in the industry and had led businesses in senior leadership positions during her corporate career. She is an independent director on boards of well-known companies. She is the founder of Families and Business (FAB), a platform for family businesses, and the editor of Families & Business magazine. She shares some of her thoughts and observations on family businesses.
The interesting thing is that there will hardly be any family business owner who thinks that his business is not being run ‘professionally’! Truly, if you look at any family business you will indeed find non-family executives in the organisation. However, it is the quantum of decision making autonomy given by the business owner to the management team that denotes the degree of professionalism.
The amount of autonomy is a function of many factors including the vintage of the business to the vintage of the professional and the nature of decision. Thus, professionalization is not an absolute point in the continuum of the life cycle of a family business but is an ongoing process. At the end of the day, to be truly professional the family business owners need to make the separation between ownership and management of the business.
It is this separation between ownership and management that is seeing an increased traction today. Families like the Burman family set the example in the late nineties by completely removing themselves from the actual management of the business. Other business owners have seen the professional team at Dabur grow the business with only some strategic guidance from the Burmans.
However, to my mind, the need for external funding to grow the business is responsible for many business owners to bring in professionals into their business. They understand that a financial investor, especially if it is an institutional investor, will look for the professional teams in the business. Thus, even smaller businesses today are seeing professional teams at the helm.
‘Soaking business on dining table’ so to say, or basically being initiated informally into the business right from childhood is something that features principally in all cases. Have you observed that a lot of the lessons of entrepreneurship are indeed inculcated in the younger generation in non-business scenarios of daily life?
Business is not taught but is learnt. The best learning is by a process of immersion rather than by formal tutorials. The Inheritors in my book had an unfair advantage over many others. They grew up hearing and seeing their fathers/uncles discussing business every day. The young mind is like a sponge. It soaks up all knowledge. Thus, discussions around the dinner table help the young inheritors to get a peek into what goes on at work. As they grow older and start spending time at the shop floor or at the office the immersion becomes deeper. The discussions around the dinner table then take on a new meaning. The young inheritors are able to get an understanding of how their elders look at situations, what information and data points are processed and how does any decision get taken. This ‘looking into the mind’ can happen only when the inheritors spend time with the patriarchs. This class of entrepreneurship is certainly not taught at any business school!
What are your comments on gender dynamics in the family business arena? Do women inheritors have a place? Does patriarchy play that vital a role today, especially when many family businesses are on the route to professional management?
Let me start by saying that women are considerably under-represented across all businesses – family or otherwise. However, a recent EY study showed that the large and old family businesses in the world are showing the way for others to follow. These businesses are moving their women up the hierarchy within their own businesses and are doing so at a rate faster than their non-family counterparts. This is an important development because family businesses are the foundation for any economy, India included. The trend of letting the daughters take charge of the family businesses is being seen in our country as well. Priya and Priti Paul, the Reddy sisters, Tara Singh Vachani, Pooja Jain are all examples of women leading the family business.
Societal trends cannot be changed overnight nor in one generation alone. However, a change effected in one generation acts as a catalyst for successive generations. Thus, patriarchs who enable their daughters to take charge of their businesses need to be celebrated and be shown as an example for others to follow. Global studies have also shown that when there is a woman in the C-Suite the rise of other women in the organisation is faster!
What is the role of a strong family culture and values in maintaining and growing the family business? Does this element have a USP?
Family values form the core of any family. In a business family the values of the family become intertwined with the business of the family. Studies have shown that these values are the foundation of a successful family business. In fact, the common thread that binds all multi-generational family businesses is the focus on the core family values.
It is worthwhile to note that most family businesses fail to perpetuate beyond a generation. Only 30 percent of all family businesses make it to the second generation and only 3 percent last for more than four generations or beyond.
In this context that the Japanese family businesses stand out like a shining example for others to follow. The oldest family business in the world is a Japanese one – Hoshi Ryokan – a hotel which is owned and run by the same family since the year 718. It is a business which is 46 generations old! Further, out of the total 5,000 companies in the world that are more than 200 years old more than 60 percent (approximately 3,000 companies) are in Japan. Sudo Honke – makers of the Japanese wine sake, is another example of an old family business. It is in its 55th generation.
Is there some special ingredient that the Japanese have that makes their businesses go on for generations? Research carried out globally points out that the adherence to family values is the key reason for Japan to have the distinction of having the oldest family businesses. The core value in any family, anywhere in the world, is the trust between its members. In Japan this core family value is taken into the business very seriously. Thus, I do believe that family values play a non-trivial role in maintaining and growing the Family Business. There is no template for family values as each family is different and so are its values.
The Inheritors is a book that has clearly demanded a lot of intensive research. You have not only spoken to the businessmen themselves, but also key people from the respective industries in order to get a clearer picture. From all these varied narratives what according to you encapsulates the secret of being a good entrepreneur?
There is usually a set of qualities and characteristics that are associated with any entrepreneur. Such is also the case with family businesses. Each family business has its own set of characteristics that makes it unique. However, I discovered, after my interaction with the owners of nine of the most well-known businesses in India, that there are three qualities that run through all successful family businesses. These are the following:
The spirit of entrepreneurship: The Oxford dictionary describes entrepreneurship as ‘The activity of setting up a business or businesses, taking on financial risks in the hope of profit’. However, as I sat and listened to the protagonists of The Inheritors tell their stories, I realised that the dictionary meaning was unidimensional and somewhat dry. It fails to capture the grit and determination, the ambition and passion, and the focus on getting things done.
The spirit of entrepreneurship displayed by the people in The Inheritors goes far beyond the activity of setting up a business or taking on a financial risk. During my conversations with them, I heard of their ability of being able to look at early failures squarely in the face, their refusal to stay down after their early stumbles, their ability to get up, dust themselves and move on, their conviction in their own self and their business concepts, their confidence to do things differently, their ability to force their competitors to also do things differently, their ability to treat their legacy as a blessing rather than a burden and, most importantly, their unrelenting focus on their family values.
Refusal to take Failure as The End: It is a commonly thought that children of successful family business owners are handed the business on a platter and that they lead a stress-free life. It is also assumed that the Inheritors glide in smoothly into their new roles. My conversations with the chosen Inheritors gave me a completely different perspective.
The young inheritors come into the family business with their own ideas and thoughts. They are mindful of the fact that there are professionals in the business that know more about the business than them. Each of the inheritor that I spoke with for my book went through an initial set back in his/her work life. Amit Burman set up Real Fruit Juice as a separate company which took years to turn profitable. Agastya Dalmia had to shut the first store of Keventers due to losses. However, both Amit and Agastya refused to be cowed down by failure. Instead, they took it as a stepping stone to do better. What separates successful people from the rest is their ability to look at failure squarely in the face, analyze what went wrong, take corrective steps and move on to do better
Keeping to the Family Values: Family values form the core of any family. In a business family the values of the family become intertwined with the business of the family. Studies have shown that these values are the foundation of a successful family business. In fact, the common thread that binds all multi-generational family businesses is the focus on the core family values.
Successful family businesses pass down the core family values to the successive generations. The Dhingra brothers, owners of Berger Paints – the second largest paint company in India, have built a colossal business without sacrificing even an iota of their family values. The word of the eldest in the family is law in the Dhingra family and this has been the case for over 5 generations. Sure, there is discussion and debate but once the eldest takes a decision everyone abides with it. This value, respecting the word of the eldest, has ensured that the family has grown the business without any acrimony or discord.
Similarly, it is the focus on core family values that got Tara Singh Vachani to be a pioneer in the space of Senior Living communities. Seva Bhavna is core to her and the young girl focused on this value to work in the space of providing enhanced quality of life to people much older than herself.
The focus by each business family on the above three qualities has ensured that they remain among the top business houses in India. Young entrepreneurs have a lot of learn from them!
Indeed, these are some insightful and inspirational learnings right from inheritors of successful family businesses in India.
The Inheritors by Sonu Bhasin, 2017
Published by Penguin Random House