Family run businesses are a significant segment of any nation’s industrial structure. 5% of US GDP is contributed by family businesses and 35% of Fortune 500 is family owned. They generate close to 50% of employment and 59% of all new job creations. In India 95% of business are family run, and 30% of BSE listed companies are family owned. These companies product more than 6000 products, contribute to 45% of manufacturing output and 40% of the total exports of the country. Just about 20% survive a first generation transfer and over 65% of the succession plans go awry. Succession has not been smooth affair within large companies like Tata’s and Mahindra’s. Success of succession depends on the planning and execution. Insights from successful entry and succession of wards into family business show there are some common principles that can be easily adopted.
While planning, entry at right level and mentoring are important, setting up wards with the right gamification principles ensures success.
- Do not burden the successor with constant reminder on results, instead focus on outcomes.
- Obsession with results can induce an undue pressure on the successor and induce her/him to focus on short term gains. Remember succession is an opportunity to rewire your business, and let somebody who is going to own and run the business in future unearth suboptimal approaches, bring fresh perspective and drive down the cobwebs.
- Limit praise, only for genuine reasons.
- Undue praise, which happens every day for no significant output, takes the charm out of appreciation. Overusing praise may make the successor believe less of you and less motivated
- Encourage them to take risk and experience failures
- Nothing teaches like the dirt on their own hands. Allow successors to fold up their sleeves, trip, fall and raise up to live with the experience.
- Allow them to solve the problems in their own way and learn
- Encourage them to go to the bottom of events, what happened, why it failed, what could they learn and how they would do it next time. Senior family members must dawn the role of mentor on the sides rather than leader on the dias if succession has to be successful