Changing profile of family businesses

An article in FT.com on Ferrero speaks on how the famous chocolate company is changing. It also refers to Nestle and Lindt changing accordingly in tune with the more health-conscious new customer requirements.

A thought provoking article, for all family businesses to think, how do we remain relevant in today’s times?

 

My comments on the Visionary Cipla One vote

Ok I must confess that this piece in BusinessLine was somewhat not quite recent, but highly overdue.

This took some time to get the research, but I consider this as a fascinating story of how one family patriarch, Y Hamied of Cipla has shown vision in ensuring the longevity of his firm.

This is not new, and the Japanese have been doing this already for centuries, resulting in perhaps some of the oldest firms in the world still being Japanese. But the fact that this has been done in India within the purview of the law, to secure the single largest shareholder is a first.

 

Do you know how your customers are treated? Modern Retail’s new headache!

Given how QSR (Quick service restaurants) are hot now, with venture capitalists chasing them and newer stores opening up everywhere, I often wondered how do the new startups manage growth? how are they able to leverage the competencies of the systems and their people to offer an uniform customer experience ?

And I am disappointed to report, they don’t.  And given the state of things, I am not surprised that they are soon forgotten or are forced to shut down. Let me share my experiences.

Let us start with a new product, frozen deserts.

I sent my kids to pick up a frozen yogurt from a store in Napean sea road and was waiting outside the empty store. They returned back, with the product in hand, and handed me the change, which found was Rs 15 short. I was also told that they were given a bill only when they insisted on it. I went inside to ask the cashier, who feigned ignorance, and then on confronting her, she admitted her mistake. Her colleagues said that she was new, and she had made a mistake, inspite of using a computerised billing system, and a calculator! She offered to give me the balance change, but I asked that she write on the bill that she had paid me Rs 15 short, in a Rs 335 sale.

I took my kids to a newly opened showroom selling nitrogen ice cream. Pretty good stuff, and the newly opened store was pretty crowded too. Since we could not eat more than one shared one, we packed the others and took them home. Imagine our surprise when we reached home, and found that there was one cup less. I called the store to complain, and the attendant heard me and just hung up on me. Repeated calls were not picked up! And there was no response from the store on this subject.

I did write about these incidents on social media ( i am a senior contributor on Tripadvisor and have multiple followers on twitter and my blog) but the lack of response from these stores, frankly made me wonder.

What do you think is the future of QSR stores, if they do not make any efforts to check on what their customers feel about their brands? The fact that both these stores were empty after the first month, should send warning signals to the owners.

Let us also look at some other examples of super service.

I was in Starbucks, and the lady at the cashier suggested i try out the new flavour. I was not very sure, and stated that I did not want to risk trying out the new flavour. She said, if i don’t like it, she would change it. I bought the new flavour, and tried it out, and did not like it. She replaced it with the flavour that i wanted, at no additional cost!

On another note, I had booked an low cost airline ticket and found that I had to pay an extra Rs 200 for an aisle seat. Irritatedly I paid this amount. The site froze, and my payment could not go through, so I had to rebook my seat again. Mercifully , it went through the second time. However, on reviewing my AMEX credit card bill a few days later, I noticed that i was charged twice for the seat. I called AMEX and told them about this, and sent a mail to the airline, pointing out the mistake.  Guess what happened? AMEX gave me an instant credit for the amount.

Not an issue of the amount, but the fact the above two brands did this, speaks volumes. Maybe that will explain why the only card I use is  AMEX for over 20 years now, and guess which is the only store where I buy my coffee from?

There are many examples that I can give, of my personal experience of horror stories, which would make any entrepreneur’s blood freeze. And the best part is, that the management does not even care or know or even aware of what is happening!

I will tell you my story some other time, of how a Mumbai airport duty free cashier was willing to let go of a sale of 98 Euros, because I had given him, 97 euros in notes, and 1 euro as two 50 Eurocents. And he stated that they had a policy of not accepting coins. The fact that I had got these two coins as change from another cashier a few minutes ago, from another purchase, did not cut any ice. it was only when the manager went and verified with the other cashier, carrying my bill to him, did they agree to do me a “favor” and accept my money!

I know another water filter company which has film stars promoting it, but the after sales service is so lousy, that unless we called the MD’s office to complain, no one in the local office would budge. Finally, we got fed up and threw the RO water unit away and brought another brand. Thankfully, that is a little better.

Things that you can do:

1. Get your training right:   Let your people know, that their salaries come from the sales that the customers buy.

2. Don’t take customers for granted: This is a BIG mistake that most companies make, especially during the heady days of rapid growth. I see this with a lot of new restaurants when they open, when people are standing outside waiting for their tables. The attitude of the staff to the customers is sad. I have seen only a couple of restaurants, who have treated people right, even those who did not have reservations or could not get seats. And these are the restaurants that are always reasonably fully, even after the initial six month honeymoon trial period is over.

3. Communicate with customers : How easy are you to communicate with? If a customer has an issue, whom and how can she call? and if someone does call, what response does she get?

4. Encourage customers to communicate with you: I know a lot of companies which make it impossible for anyone to contact anyone at the top management. Try some of these cellular phone providers or even credit card companies, who are hiding their people behind call centers and automated phone systems which i think are built to frustrate any attempts to contact anyone empowered to make a decision or resolve their issues. In the meantime, they go along disconnecting phones if you have a disputed charge or seek clarification.

5: Communicate in simple english: Imagine buying an item and then finding out that the charge is a lot more, or that there are a bundle of other charges along with the product that you did not ask for… In fact, most cell phone plans, credit card charges, ketchup with burgers, minimum balance charges in savings accounts, are all examples of hidden charges which can cause problems if not communicated well.

Retail entrepreneurs should take heed that unless they make active steps to engage with, and communicate with their customers, they will lose, especially when the customers have no way to communicate their displeasure. Because it is one thing to assume that you are in an ivory tower and can survive without these irritating guys AKA “customers”, but most disappointed customers will vote with their feet and take their business elsewhere. And this is usually to the competition ! Going forward, my prediction is that we will see increasingly, a situation where those brands who care for their customers, being rewarded by increased repeat sales, and positive word of mouth publicity, and the others ? They will probably become an additional statistic in the list of retail failures. Already a field which plagued by high failures and rapid shifts in customer loyalty.

And the worst part is, if you do not know, (since the customers are not able to tell you what is wrong) you have absolutely no way of correcting it!  So make yourselves more easier to reach out to , incase the customers have a problem, after all they are the ones who bring you your profits. (The yogurt place did not even have a number to call, in case of difficulty!)

Ask your self, for every one customer who takes the pain to complain, there must be at least a hundred more, who will not even bother to complain and just shift their business!

Perhaps you will understand, why I will never step into the two above stores ever.

The question is, can you do something about this, or are you just not bothered?

When the next generation does not want to join,,

Two related articles in the FT, “Tears in Tokyo” and “Dealmakers salivate over succession survey” caught my eye. The articles deal with the lack of succession planning, and the first article speaks about how small and mid sized organisations are being sold to other buyers.  The second article describes how the M&A firms are awaiting the results of a survey, which the listed companies have been asked to fill in, by the Govt. of Japan seeking responses for their succession plans. the lack of which, indicates suitable M&A targets.

In a traditional economy like in Japan, large number of businesses are still family owned and family run. The lack of successors and/or succession plans have led to the existing generation seeking to sell these off, with the co-operation of the next gen who would prefer the sale proceeds to start their own new business with, rather than take over the headaches of the family business.

This is a sign of things to come, and if the current trends are any indication, then it is a matter of time before we start seeing similar scenarios playing out in india too. Families will have to overcome their long held beliefs that the family firm is a long term family wealth, and maybe, this would also influence successor traits in the long term as each successor would be expected to operate like an investor rather than as a family business owner. This would have repercussions on the training and expectations of the next gen. This would also need a separate skill sets for these next generation family members are expected to continue in the longer term.

this would mean that families would have to consider including these skills in the training of the next get. are we ready?

In Luxury businesses, Family businesses lead

My article on the SPJIMR Blog talks about how the leading luxury businesses are family businesses . While I have given research which shows this, i would contemplate that the family businesses are best equipped to handle luxury brands, since the interests of both are very closely aligned.

This should be an insight into future plans for family businesses, who seek to continuously differentiate themselves from the competition, and maybe could be a direction for future growth and survival? What do you think? 

When the patriarch just can’t leave…..

I read an article of the Emperor of Japan,  Emperor Akhihito planning to address the nation today. The article states that he may indicate , ” that it’s time for him to step down from the world’s longest-running hereditary monarchy. Taking that step may not be easy, however. No Japanese monarch has abdicated in nearly 200 years, no law governs such cases, and the popular 82-year-old monarch’s retirement could raise delicate questions about a ban on female succession and the imperial family’s place in society.” 

(EDIT: FT reported that he had mentioned that the Emperor did indicate a desire to abdicate, the first Japanese emperor to stand down since 1817)

I am in no position to and hence will not comment on the above article in any manner at all.

But this article triggered some thoughts  on a different context. i was thinking of cases in family businesses, where during my discussions with the patriarch or the operating head of the family business, have admitted in a moment of candour, that they feel helpless, and stuck in the family business and cannot leave. This causes them to remain even though they would leave, given a choice.

I think that this is a phenomena that I have heard from one of the successors, in a top 10 Indian Industrial house make!

This brings us to consider a point, what if the head of the family business wants to exit? do we have rules which allow him to do so, or is the rules in the society, family or business, prevent him from doing so?

Usually, patriarchs design the processes and systems which revolve around them, so as to consolidate their position, and to maintain a control over the different aspects of the business, but this also results that the business cannot run without them! This may be great for the patriarch’s self esteem, but could be disastrous for all the stakeholders, if the patriarch was not able to operate for some reason. In fact, I have met many small scale entrepreneurs who claim that they are so busy that they did not have time for a holiday, or even if they did take one, they were too busy on the phone all the time! and then they want me to advise them on why they are not growing!

While there are usually emotional and personal individual reasons for most patriarchs not retiring, which have been exhaustively covered, it is interesting to note that there are other reasons, which compel a member to remain at the helm. Family traditions of primogeniture, have been the norm in societies, royalty or in family firms.

Which brings me to the fact that every family member needs to examine the social, family and business reasons surrounding the family firm, to be aware of such circumstances.

While a work life balance is definitely suggested for every individual (What’s the use of all the money, if you are not able to enjoy it? How much is enough? What are your goals and what are you exactly hoping to achieve? Is there a finish line or does the bar just keep on getting higher and higher? are questions that may help to determine the answers..)

Given the fact that the youth today are becoming more assertive and independent, seeking opportunities outside that of the family business, it becomes imperative that the the patriarch seek options to professionalise or sell the business. Furthermore, the rules binding him in the family business can be re-examined with all the stakeholders to update these with the current environmental realities. There is no reason, that while we talk about stepping into the next century, we, our families and family businesses  still continue to adhere to norms which may be hindering family relationships and family well-being. It may be a time to do a re-think.

The question is, are we ready to take the first step?

 

 

 

 

Done Deal! Few thoughts…

Todays TOI states that Nimesh Kampani has chosen to step down in favour of his son Vishal Kampani as the head of JM Financial.

This is at a time, the report states, when the firm has demonstrated, that it maintained its ability to make deals successfully.  This is a good move at an opportune moment. I have met many patriarchs who refuse to pass the baton on, under the excuse that the next generation will not be accepted by the customers who would prefer to deal with the patriarch, and the younger generation, feel inadequate at the lack of exposure in being prevented from engaging with customers or other stake holders.

It is very difficult in family businesses, especially those, which are successful, for the head to step down. Because this would mean sacrificing the positions of power, status, and sometimes even meaning to one’s life, as the family business may be everything around which his life may have revolved.

there is also the argument, that a business is a relationship business, and that the firm will lose a lot, if the relationships are not maintained, or if the existing customers reject the next gen.

In both cases, the arguments are superficial. Globally, there have been cases of relationship businesses being successfully transitioned, with the next generation still maintaining the traditions and customer service that was provided earlier, so as giving a seamless transition. Secondly, if the choice of the successor is based on merit, then the transition should not pose any issues, for the customers, who will be eventually looking for solutions, more than relationships.  (Controversial, i know, but think about it, would the customers stay with a supplier, if they were not getting “acceptable” solutions to their problems?  “Acceptable” is to allow for the leeway that they may give, for working with slightly different operational styles of organisations)

The last concern, that I have, and I may be completely wrong on this, is to point out that most transitions are successful based on what the retiring patriarch does post retirement. Does he stay out of the business or does he still carry on, as if nothing has changed? Does he have something to keep him occupied, outside work ?

These questions will, in the long term determine the success of any succession which family businesses have to keep in mind. Coming back to JM Financial, this is a good move and let us wish that this leads to more future success!

Mars Legacy passes on: Lessons for family businesses

The NYTimes reports that the patriarch of Mars, Forrest E. Mars passed away yesterday. It is an interesting article to understand the thinking which had driven their company, one of the largest chocolate makers in the world!

The desire for low profile, away from the media, maintaining his attention to the business, and sticking to what he knew best, with a bad temper. But what stands out is the father-son relationship that ensured that his sons had actually forbidden that their executives to take his name before them.

But the adherence to principles (quality, mutuality, responsibility, efficiency and freedom) and the overall objective which Forrest had, ” to create mutual benefits that make a difference for people and the planet through the company’s performance” will ensure that the family business will stay long after him.

An action, which has ensured that the sweet taste of Mars will be there for generations, well after him, a lesson which can serve well for other family businesses to learn from.