Planning in Families

A recent article in Times of India on Sarabhais, the family behind Arvind Mills makes for interesting reading.  It states that Sanjay Lalbhai’s efforts to structure his family for the long term. He has also stated that the Lalbhai’s are currently in their 17th generation!

What is interesting is the realization in the family, to plan for the next generation, and to put in place a structure for the future. The fact that recent generations are increasingly choosing not to join the family business, it puts a great deal of stress on the existing families to plan accordingly.
An interesting survey by E&Y and University of St. Gallen, (link) have shown that less than 10% of the next-gen are looking to join their family businesses, immediately after their education! And over 60% would want to work outside for about 5 years, before they consider the family businesses! This has huge implications for the succession process and perhaps the Lalbhai’s have shown foresight in providing for this contingency.

In contrast is the experience with the Piramals, where Ajay Piramal’s son Anand, has preferred to join the family business. (link to article).  What is noteworthy, is the mentors that are guiding Anand during his induction. These include Nitin Nohria, the Dean of Harvard Business School, Deepak Parekh, undoubtedly the foremost expert in housing and finance. What are the learnings from this?

Choose the right mentors: having experts in the domain that one is operating in, gives you an insight which would be invaluable. External knowledge helps to overcome the bias that may occur while operating in successful family businesses. And more importantly, to listen to them!

Focus: Despite the fact, that the competition is spread all over India, the Piramals have chosen to focus on the Mumbai market, which brings us to the next learning,

Choose to compete on your own turf, and not where the competitors are: this gives you the advantage of redefining the rules, instead of just blindly following what the competition is doing.

And most important, Humility: to recognize that there is lot to be learnt and one can gain a lot from external help.

The other article of interest is one on the Baba Kalyani family where the niece has sued for a one-ninth share of the family wealth. (link). The article has drawn a similarity with another reputed family where the patriarch was similarly sued by a sibling.

These incidents emphasize the basic need in business families, to ensure that there is clarity of communication and expectations are set right. Very often, elders may choose to avoid asking the tough questions, with the expectation that these issues may not arise, and if they do, they would be solved amongst the siblings. there is always the danger of public perception that if a matter is made public, there may be much more than what meets the eye, like the proverbial iceberg, where over 90% is hidden and is below the surface.

The need for proper family structures usually done under the guidance of a family consultant does help to resolve issues in an impartial manner and ensures the survival of the family which otherwise could become subject to various disagreements. If we consider strictly the family longevity, then we can see that this has probably being put in place, with the Piramals and Sarabhais, and which challenge many business families are facing today, including the Kalyanis, Singhanias. Where there is clarity of thought and purpose, the family gains eventually.