Author: Suman Layak
Publication: The Indian Express
Date: October 28, 2006
Introduction: Indian family culture goes well
with business: Nicholson
Giving it up or grabbing it all, nothing works
in business if done mechanically Families that own businesses must not set
rigid rules about succession, says Nigel Nicholson, professor at London Business
School and a researcher of family-owned businesses.
In an interview with Hindustan Times, Nicholson
said that while families should not have a rigid rule about who should be
the successor to the CEO's chair, they also should not have a rigid rule about
giving up the executive role for family members either.
"In fact I would rather have family members
in the business instead of them all being on the sidelines," he said.
Jeh Wadia, the Wadia scion, who now manages
the airline business of the group, had told Hindustan Times that the family
should ideally be closely involved with a business in the first five years
of its life.
"After five years, the family should
let the business be run by professional executives and take on the role of
professional shareholders, managing their investments," he said.
Nicholson on the other hand believes that
families should remain involved in the businesses for a long time.
"The most successful expat community
in the UK are the Indians who moved from Uganda or Kenya. They have done well
in businesses that are controlled by families that have very Indian values."
Nicholson added that the Hindu Undivided Family legal entity available in
India is also something that helps in keeping the business together.
"But again one has to be careful and
not be rigid about these things. Otherwise running a business can often destroy
families even before the family manages to destroy the business," Nicholson
added.
There are a few decisions that a family has
to take about the business when it comes to succession.
The first decision is, Nicholson says: "Am
I going to involve my kids in the business or will I just give them the wealth
through the shareholding and let the business be handled by professionals?"
"The second most important decision is
how big do I want my business to grow or do I want to retain it as a mom-and-pop
store? Do I aspire to grow the business, because that will lead to external
funding and dilution of shareholding," Nicholson said. Some businesses
prefer to stay small, he points out.
"The Indian family is blessed because
of the value system it inculcates. And Indian business families also tend
to let professionals manage the show even though they have family members
in the CEO's seat," he added.
