Next-Gen leaders' aspirations and expectations towards a sustainable business strategy
Conventionally, Indian Family-Led Enterprises (FLEs) have demonstrated long-term growth and sustainability and have avoided myopic vision, unlike some MNCs and public limited companies. There has always been a conscious endeavor from Indian FLEs to stay ahead of the curve as compared to the competitors in terms of showcasing a steep growth as well as showcasing agility.
However, there are issues such as ineffective diversification and internationalization, which still plague the India family businesses and act as a roadblock for their exponential growth. There is a need of supporting the visionary family leaders with outside professionals and their expertise and experience to enable the organization to stay ahead of the curve.
One needs to be mindful of the induction and retention of outside professionals and also cognizant of the equation with respect to the family stakeholders. Not just that, as the aspirations of the Next-Gen leaders are evolving, one needs to carefully align their expectations with the family values of the promoter, with the aim of having a sustainable long-term business strategy.
One of the most pertinent questions that we keep on grappling with in the FLE space is about building a strong and sustainable business strategy that not just aligns with the Next-Gen’s aspirations, but also ties closely with the overall value system of the promoter and the firm.
To understand the root cause of this problem, we must dig deeper and unearth the challenges the FLEs are facing while they move towards building a sustainable business strategy.
Structure of FLEs and Their Business Strategy
If we take a step back and look at the lifecycle of an FLE, the promoter, while setting up a sustainable business, has to think of at least 15 years down the line. The promoter has to manage the difference in expectations and aspirations of the Next-Gen as they want more challenging, intellectually stimulating roles with effective performance management and a dynamic growth curve. The onus lies on the promoters to ensure that they not just think about the induction and retention of the external experts, but also ensure that they continue to attract and retain the Next-Gen family members as they are not afraid to change jobs.
To build a sustainable business strategy, it’s important for promoters to understand the journey of an organization that has faced similar hurdles in its journey but has constantly evolved with the changing times. The key decisions taken by the board, across different milestones has translated into tangible business impact. To understand how one of the Indian FLEs has sustained its growth trajectory over the course of five generations, let’s dig deeper and zoom into their 100+ year’s journey.
Key Success Factors for the Company’s Transition Over the Years
1900: Strong culture and values enabling a robust business strategy was the foundation of the business since its very inception in 1900. Also, managerial styles of the sons complemented the entrepreneurial culture and mindset.
1949: There was concerted focus on developing young family talent through –
- Academic training
- International experience
- At least two years of outside experience
- Employment starting at mid-level in family business
1980: The firm sought professional guidance to address the needs of succession based on merit vis-à-vis seniority as they hired external management to review the organizational structure and succession issues.
1996: They underwent major restructuring to improve business sustainability and as an outcome achieved speed and nimbleness in decision-making in the rapidly growing global economy.
2000: In this year, they had the first independent non-family executive chairman. This fostered a culture that encouraged creativity along with a robust governance framework.
So, what are the key takeaways in preparing for the Next-Gen leaders talent to expand and sustain the family business? Our research shows: the first is that the Next-Gen leaders must constantly align the business strategy to the core family values and culture. Moreover, they must make continuous efforts to adapt to innovation and technology to stay ahead of competitors. Also, they must realize the importance of leveraging professional expertise to incorporate objectivity and agility in decision-making. And lastly, a robust succession plan around Next-Gen leaders' induction into the family business needs to be institutionalized that must focus on academic excellence on external exposure outside of the family business.
The following framework helps understand the four aspirations of Next-Gen leaders, the key levers that enable each of these aspirations and their consequent outcomes.
Key Enablers that Help Crystallize Aspirations to Reality
The promoters invest their blood and sweat in setting up the company on the foundation of strong value system and corporate governance. The DNA of the organization is built in such a manner that the people strategy and the business strategy are also aligned to the promoter’s values. When it comes to inculcating these values in the Next-Gen leaders, there are bound to be challenges.
What is the long-term aspiration for the family business?
In a survey conducted among next generation family business leaders, the key themes that emerged for this question panned across – sustainability, stability, consistent growth, disruption, automation and transformation. Family businesses need to understand these drivers and translate them into a simple concept that guides all organization efforts. As a first step, one needs to assess that why do they exist – this question would help articulate the organization's aspiration as the vision statement. After articulating the vision statement, the next question should be what do they need to achieve – this will provide some qualitative and some quantitative goals. These goals would help craft the mission statement. When there is alignment between the overall aspirations, vision and mission, then the business strategy is robust enough to achieve the organization goals.
What kind of experience is imperative for the Next-Gen to succeed in the family business?
In the same survey, most of the responses suggested the need for strategic mentorship, coaching and good leadership. Moreover, we also came across responses on the lines of international exposure, field work and working outside the business as well.
Research shows that transition from current generation to Next-Gen occurs smoothly when the Next-Gen is better prepared for leadership positions through:
- Diversity of experiences, inside and outside the family
- Fostering a culture of open communication and conflict resolution
- Early encouragement for Next-Gen to take up activities to develop leadership skills
What is the philosophy to attract and retain the professionals in your family business?
Trust, faith in the abilities, freedom and ownership were the major themes that emerged in the survey.
Along with the strong leadership of family’s visionary leaders, hire and retain external professionals. Leverage their expertise and experience to fill the gaps and propel business growth by ensuring internal parity between family professionals and external talent.
In terms of our point of view – the external professionals must get a perfect balance of individual rewards (differentiated pay for performance), transactional rewards (monetary or non-monetary “items” that have a financial impact), collective rewards (rewards that are collectively experienced by a group of individuals) and relational rewards (policies and programs that build a deeper connection between the employer and the employee.)
What is Next-Gen’s primary motivation for investing in HR automation and technology?
Next-Gen family business leaders realize the benefits of taking the risk to innovate and invest in technology advancement to further growth at a faster pace and in a seamless manner, than their competitors and enable business development.
The Way Forward
One must remember that the list of challenges is not exhaustive and the solution cannot be one-size-fits-all. The promoters need to sit down with their board and create a business strategy that lays out the challenges that they need to focus on.
Overall, capability and innovation focus are the keys for transformational growth of family businesses. Clearly articulated business strategy, aggressive leadership from the Next-Gen leaders, robust governance structure and calculated risks towards investing in innovation are the four pillars that can help Next-Gen leaders translate their aspirations and expectations to reality.
Director, Family-Led Businesses,
Aon Hewitt Consulting
Aon Hewitt Consulting
Aon Hewitt Consulting
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