Father to Son - Sumeet Verghese

The case
A family-owned company has the father as the Director and the son as the Managing Director. The father is in his 70s and has managed the company for more than three decades, developing long-term relations with his clients. The company is not very prosperous but has done some good work in its field. Now the son has taken over and wants to revive the company and make it more profitable. In doing so, he will have to take some hard decisions that will offend the company’s old clients and friends and also his father. So he dithers and lets the managers take these decisions. The managers, in the meantime, have to report to the father too and he gives them a different set of instructions.

What should the managers, who are already divided into camps, do?What should the son do to retain old clients, win the complete support of all his managers and make the business more profitable without offending his father?

The study
The case in question is typical of the kind of problems that family run enterprises face today. In India and elsewhere, many business organisations are controlled by families. And that makes the issue all the more pertinent. While some of these have been brave enough to usher in professional changes in their management hierarchy, many have not had the foresight and the wherewithal to do so. Obviously, this has resulted in a mixed run for many organisations. Since many such firms in recent times have been saddled with problems of some kind or the other, business analysts have begun to question the family’s role in running an organisation.
Interestingly, though family run businesses face a host of problems that are at times unique to them, there are some distinct advantages that cannot be negated. For instance, the following benefits have traditionally provided a strong business rationale for having family businesses.

Common values
When family members share the same ethos and beliefs regarding how the business should be run, it can only lead to greater unity especially with regard to business strategy and objectives.
As far as the case under discussion is concerned, there is certainly some reason to suspect that the father and son may not be sharing a lot of common ground with respect to values. For one, there is the age difference between the two and also, both probably pursue different styles of management. Apart from the generational difference which definitely results in variation in values, there are attitudinal disparities between the father and son especially over the way in which the business should be handled.

Strong commitment
Family members are likely to put in extra effort and have flexible working-hours because of a sense of ownership. It would not be an exaggeration, therefore, to state that because of the selfinterest, family members may display greater commitment than the other employees of the firm.
There is no gainsaying the fact that in the situation suggested by the case, both father and son are equally committed to the business. But owing to the generation gap, there is a possibility that the father’s commitment walks the tightrope between maximising profit and managing long-standing ties with the clients and business friends that he has found over the years. Apparently, the son is in a hurry to chalk out an aggressive growth strategy for the firm even if it tramples over existing business relationships and partnerships that the father has assiduously cultivated.

Loyalty
Strong personal bonds and familial ties cement the relationship between the family members and the organisation and translate into better levels of allegiance and devotion.

Without doubt, both the Director and the MD of the firm mentioned in the case under discussion are loyal to the organisation. However, because of their value and strategy-based differences, they have created an environment where the managers who report to them may develop conflicting loyalties. While there is no succession wrangle here, probably there is some confusion over who calls the shots.
Because of the personal interest angle, families managing a business are likely to ensure the stability of the firm. Accordingly, most of the decisions taken reflect the need to sustain the organisation over a long period of time. Now while this encourages long-term thinking, it also creates an inability to react to change.
It may not be difficult to believe that the Director of the firm has developed some set ways of thinking and acting that conflict with those of the MD. Interestingly, both wish no harm to each other or the firm but both are at loggerheads when it comes to defining what is in the best interests of the firm. This naturally arises from the differing perceptions of stability that both subscribe to.

Decreased costs
Family members may be willing to make financial sacrifices in the hope of future gain and thereby bring down the salary burden. But, at the same time, family members may also expect to be generously rewarded with wages, perks and benefits.
In the context of the case, it would not be off the mark to state that there are differences in the way father and son perceive financial reward. The son’s desire to grow aggressively may be fuelled by his strong profit motive whereas the father may have always wanted to balance such motives with the need to maintain less-profitable social ties at all costs.

Clearly, for a family run firm, there can be plenty of problems to tackle. And as the above analysis shows, those traditional advantages that are ritually acknowledged as an integral part of family businesses can be easily undermined when the scene is rife with conflicting approaches.
Some of the characteristic wrinkles in the case under consideration can be ironed out as follows. The first thing that the Director and MD of the firm should do is figure out the problem areas. These could be:

Roles and responsibilities
Father and son can work out a formula whereby enough authority is delegated to the son in some matters just in case the father does not want to relinquish all charge completely. The son should have the wisdom to take up fewer challenges initially, till he learns the ropes completely. Naturally, the new roles will come with additional responsibilities attached. A large part of the problem could have been solved had the firm practised some form of succession planning.

Business decisions taken for business or personal reasons
In case of conflict over decision-making pertaining to business, some common criteria must be agreed on. For example, as a rule, both the principal actors can agree that when taking any decision that is crucial for their business, the business reason must take precedence above others.

Conflicting emotional and commercial concerns
By taking an outright step to sever some of the older business relationships that the organisation under the leadership of the Director has forged, the MD may be hacking away at some useful roots. Before contemplating any such action he should ascertain whether the organisation’s existing clientele or present associates, that he is in a hurry to replace, are indeed beneficiaries of his father’s emotional weakness. If that is the case, he may have to take his father into confidence rather than pressurise his subordinates to do the job for him. The Director, on his part, could do some introspection and determine whether he has incompatible emotional and commercial interests.

Father as boss
There are many emotional factors at play in an environment where the boss happens to be a family member. It is imperative for family businesses to keep these under constant check. Depending on the quality of the relationship, both father and son share with each other on the one hand and, with other family members, on the other, there can be a million possibilities for conflict. Ideally, if families infuse a healthy dose of professionalism into their relationships at the office and get their priorities straight whenever there is a personal conflict, a lot of the tension can be diffused.

Personal ties inhibit honest opinions
The MD of the firm has clearly not expressed his opinions candidly before the Director. This could be a result of the kind of ties he shares with his father or his lack of faith in the boss’s ability to accept a strong business proposal. As a matter of fact, there is an opaque wall separating the father from the son and, consequently, the son has begun to take the help of managers loyal to him to do his dirty work. The MD should have a policy of confiding in and confronting the Director on all key issues and as a rule the goal of all such deliberations should be conflict resolution rather than conflict escalation.

Lack in business skills
Perceptions play a very important role in accentuating hostilities. Truly, both father and son may be operating to a certain extent, on the basis of certain perceptions they have of each other’s business skills. Probably, this has also led to some misunderstanding between the two. The father may feel the son has not grown up to handle the business and the son may hold the view that the father has lost his skills with age. To sort this out, both should highlight what skills each one has and how it can come handy in a particular situation. The son must accept that he does not have the benefit of his father’s experience just as the father must be gracious enough to admit his experience can be a handicap as well.

Non-family board or management members feel excluded
Since managers who immediately report to the two can come under intense pressure to toe either the Director’s or Managing Director’s line, they must ensure first and foremost that they are not already, among themselves, a house divided. This will have the nobling effect of preventing both the father and the son from exploiting anyone to further their respective interests. The managers, accordingly, should then make their representation in a transparent and uninhibited manner. The best course for the team would be to help reconcile the differences, if any, between the two major players and also seek expert help, if necessary, to sort out decision-making problems. An independent consultant can do wonders in a situation where the business heads are at war and senior management is faction-ridden and has no clue as to what it should do.
For a business enterprise that is controlled and operated by members of a family, the onus is on the family to ensure that the organisation grows and finds its place among professionally managed firms. Clearly, there is no room for relationship issues to spill over onto the organisational terrain. Apart from practising sound succession planning, such organisations should also take a closer look at change management just so that the older generation of the family is ready to gracefully make way for the younger generation when the time comes.