“Intent” is the key to sustainable legacies
By Parimal Shah
Research shows that family enterprises account for two-thirds of the world’s businesses; form an estimated 70-90 per cent of global GDP and fund 85 per cent of all start-ups across the planet.
These statistics establish that family enterprises are a common form of business structure and found in practically every sector of the world’s economy.
Despite being so common, why then are family businesses so complex? Why do most of us (within family businesses) struggle with ownership, management and composition issues?
Studies show that 70 per cent of family businesses fail to transition into the second generation. From the 30 per cent that survive, only 12 per cent transition into the third generation and a mere 3 per cent survive into the fourth generation!
Logic, on the other hand, would dictate that family businesses should have the highest survival rates, as a family is the closest thing to most human beings with trust, love, warmth are normal feelings found within most families.
As far as non-transactional relations are concerned, the above holds true. However, when we bring in the concept of recurring monetary transactions or economic considerations (meaning, a business), the relationship takes a whole new meaning.
This is because the two words “Emotions” and “Economics” are stark opposites of each other by their very constitution.
In a Family, “Emotions” rule supreme. In a Business, “Economics” does.
When we combine the two, we are dealing with a lethal double-edged sword, which when handled with expertise serves as a loyal weapon, but if handled callously, slays you.
Research states that putting in comprehensive SOPs and system checks in place normally helps a family business to define a strategy which then serves as the basis for sustainability.
However, despite extensive research, till date, the world is yet to come across a formula which can successfully transition a family business from one generation to another. If there was indeed such a system, the above-mentioned failure statistics would not hold true.
As a third generation family business member, I have seen that SOPs and checks are no-doubt great, but all they are able to do is to simply slow down the inevitable death of a family enterprise.
This does not mean that the research is useless. The real problem is not with the systems but with the “Intent”.
Any family enterprise stands on the foundation of Trust. The bigger the business, the stronger this foundation must be. ‘Trust’ on the other hand comes from honest and timely communication between family members. And communication can be consistently honest and timely only when the “Intent” of those within the family business is common.
Intent here simply means that common binding agent which “inspires” all the members of the family business to willingly strive and sustain the business generation after generation.
If this binding agent is “family money”, “status”, or “comfort”, then such a setup will most definitely fail regardless of whatever systems you put in place, because there is insufficient intrinsic strength in the very ‘Intent’ of working together.
For a family business, where emotions are a common ingredient in day-to-day decision making (whether one likes it or not), a higher “common Intent” must be identified, discussed with the family members and be made the ‘reigning mantra’ for the family.
This intent must be such that it is able to inspire the members to willingly keep their egos in check, and work for the benefit of the enterprise and not only their personal selves.
At our organisation, for example, the common Intent which inspires all of us to carry the business forward is to ensure stable employment for the 7,000-strong permanent workforce at our Tea Plantations in Assam and West Bengal. From an early age, we were made privy to the hard life of a plantation worker by way of frequent visits to the estates and regular interactions with the workers.
Hence, we appreciate the graveness of the decisions that we as family members take, and how they impact the job stability of 7,000 human beings!
Our “Intent” here is “To see to it that we work in a manner whereby we create a legacy business that provides for not only our current employees but even for their future generations, making us, in the true sense, a family business”. This is the binding agent which inspires us to work together day after day, year after year, generation after generation.
Of-course we have our fair share of problems, but because there is intrinsic strength and commonness in our Intent, at the end of the day, we all manage to come back to the table over a cup of Tea …. and sort it all out!
What may work for one business would not necessarily work for another. Every business mindset is unique. The point here is that Family Businesses are essentially a mixture of emotions and economics. If these two ingredients are to coexist, and that too generation after generation, then there must be a core common intent which is not limited to simply making good balance sheets.
When that Intent is established, the communication follows suit. This leads to Trust and helps both business and personal relations. In this type of a setup, SOPs and system checks then make excellent sense and they help immensely in transitioning the business from generation to generation.
The writer is Vice President, MK Jokai Agri Plantations Pvt ltd.
*Sources of Statistics: European Family Business Report 2012, Harvard Business Review, Sciascia and Mazzola in their Family Business Review ‘2008, Discussions with peers in family businesses, Internet searches.