Family Business 101: The Changing Game of Family Business

Family Business 101 - 2

One of the constant refrains we get to hear from heads of business families nowadays is that there is no ‘fun’ in the business anymore. These gentlemen, typically in their late 40s or 50s, talk nostalgically about the ‘good old days’ when there was easy money, fun, excitement, and a sense of adventure in doing business, which is just not there anymore. Now what do they mean when they say this? They are actually referring to all the problems they are facing in running their business, whether it is ‘recession’, not getting good employees, or clients not paying up on time etc.

And what about the ‘good old days?’ Presumably, when there was ‘fun’ in the business, 10, 15 or 20 years ago, all these challenges wouldn’t have been there, right? But this was hardly the case. Challenges were present even then — in fact, the challenges would have been much greater, because of less developed modes of manufacture, of communication and transport, more regulatory restrictions, and various curbs on imports and exports. But for these men, there was so much adrenalin flowing through the veins in those younger days, these difficulties would have been seen as hurdles to overcome rather than the insurmountable obstacles that they appear to be today. Today, even a small difficulty is enough to overwhelm them. Margins are going down and costs are going up, they say, and they feel like they’re being slowly crushed between the two, apart from myriad other problems like political instability, corruption, increasing competition, and cash-flow problems.

These are not isolated grumblings, but rather a feeling that is increasingly being felt, and expressed in family-managed businesses that are at least a generation old, across the length and breadth of India. So how did the mood go from excitement to helplessness? To understand this, we must examine three key concepts: Personal life cycle, business life cycle and adaptation to change.

Personal Life Cycle

Things are different when you are young, carefree and have nothing to lose. However, when you are older, have the responsibilities of say, a family and children, life is a different kettle of fish. The devil-may-care and risk-taking attitudes of youth are replaced by prudence and sticking to the tried and tested paths in middle age. To cite an example, there was a businessman, who aggressively promoted his products in his town, and saw business growing rapidly in his youth. He set out every morning on his bike, and met shopkeepers big and small as he tried to convince them to stock his product. He went to new places, and met new people everyday. While most of them chose not to do business with him, there were many who did, and he formed lasting friendships and solid business associations. As he got older, however, he stopped going out on his business trips, and appointed a salesman instead. His circle was now restricted to the people he already knew. Business stopped growing at the rapid pace it did earlier. Life settled into a monotonous routine. He began to get bored with his life and business. But not once did he stop to think, that it was he himself that was the reason. He had stopped being as passionate or as hands-on as before.

At 25, the excitement, enthusiasm and approach to difficulties is different than what they are when one is 50. At 25, with nothing to lose, the fear of failure is different than what it is at the age of 50.

Business Life Cycle

Just as there is a personal life cycle, there is also a business life cycle. The business environment in India has undergone a sea change over the past few decades. The 1980s and 1990s were a period when the market was opening up and a lot of family businesses were set up and achieved stability. Then came the years between 1995 and 2002, when the business world was at a low ebb. Almost all major projects were on hold. No IPOs were being announced, and there was no money in sight for new projects. Reputed real estate companies were in serious crisis of liquidity and solvency. The going was tough and the common refrain was, “Where did all the money go?”. It was at that time that the BSE index went below 3000.

Then the tide, as is its wont, turned again, and between 2002 and 2010, business boomed. Family businesses, particularly, grew at break-neck speed. People had more orders than they could fulfil, and made more money than they had ever dreamed of! Of course, everything has its flip side. It was this boom period that unfortunately saw many businesses lose the fire that had forged them in the first place. Businessmen became complacent, they became used to counting money instead of looking for new opportunities. And when the good times came to an end, as all things must, the same people who had earlier boasted about snatching opportunity from the jaws of impossibility, were now bemoaning the ‘difficulty’ of doing business. Though the difficulties of today are less challenging than they were in the 80s and 90s, the ability of businesses to face them has drastically changed.

Adaptation to Change

Over the years, business has changed and the rules of the game have changed. What has not changed is the mindset of the businesses who believe that what helped them succeed in the past will continue to work even in the future. Faced with the new dynamic and their own failure in grasping it, they still continue to believe they know everything. They are wishing that this new world is just a passing phase. All this reminds one of an old fable about the character Miyan Khusroo, who was sitting by the roadside when one of his friends came along riding a horse. Miyan wanted to ride it too. The friend asked whether he knew how to ride a horse. Miyan emphatically said of course he did, what kind of a question was that, he had learnt it as a boy! But the horse was notorious for throwing people off, cautioned the friend. Miyan pooh-poohed this too, saying no horse could throw him off, he had been an expert horse-rider in his youth. So he got on, the horse reared up, and Miyan landed with a painful thud on the ground. The friend said, ‘See, I told you this horse would throw you off.’ But Miyan was obstinate, he pointed to his foot, which was still stuck in the stirrup, ‘No, I am still on the horse, look at my foot!’ It is this same kind of obstinacy which affects some businessmen, too. Changing times and new challenges may have thrown them off their perches, but they think they are still firmly in the saddle. Suggestions that they take some courses or attend workshops to get updated on current business trends and management practices are met with a dismissive, ‘those things are for kids!

It is not enough to keep dwelling on past achievements. What you did 25 or 30 years ago may be remarkable, but if your business is not growing now, the responsibility lies with you. An essential pre-requisite to keeping things fresh and exciting is to keep learning and experimenting. This is as true of life as it is of business. We do business by choice. We take on challenges by choice. If complacency has set in, the challenge is to regain the entrepreneurial perspective, confidence and the courage to do big things. In a rapidly globalising economy, we need to have the conviction that we are no less than anyone else. We need to not only change with the times, but also stay one step ahead. That is the key to success.

About the Author

Parimal_MerchantProf Parimal Merchant is a renowned industry leader in the area of family managed business. A pioneer in the field of family managed business, Prof. Merchant has successfully crafted a practical tailor-made program for family business scions over two decades ago and continues to do today with S P Jain School of Global Management’s Global Family Managed Business (GFMB Program). He has relevant corporate experience in profit improvement and transition management consultancy in more than 30 industries over last 35 years, and has interacted with over 3,000 family businesses across the industries. He has also developed unique programs in Learning Management, Managing for Results, Taming the Tiger of Working Capital, Trilogy of Finance, and Managing Cost for Profit. Personally, Prof Parimal Merchant has been connected with the Humanist Movement for 35 years, working for a personal and a social transformation.

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