Independence must be earned

Happy Independence Day to you.

Independence doesn’t just happen. It must be earned.

Let us reflect that real bondage is of the mind and spirit. Nelson Mandela for 27 years in the South African apartheid prison was actually free.

But today in India we have accepted the slavery of discrimination against each other, of corruption and of mutual hatred. It’s not the politicians who are corrupt. They are the visible symbols of our entire society which is corrupt and finds nothing wrong in being corrupt. What we accept as a defining feature of our identity, we will never fight against or try to change.

In our country to kill an Indian is a crime according to the IPC 302 – and it should be – but to kill a Dalit, an Adivasi, a Muslim, a Christian, a Sikh or a Hindu, is acceptable and is justified. So who is an Indian, if it is not the Dalit, or the Adivasi, or the Muslim, or the Christian, or the Sikh or the Hindu, we just killed? Because believe me, when it happens, we are all collectively culpable.

In our country it is a crime for a politician to take a bribe – and it should be – but it is acceptable for the industrialist and businessman to give speed money to a judge, to give a ‘gift’ to a politician, to contribute to political parties using unaccounted funds, and for each one of us to give small and large bribes to get our work done are all acceptable on the excuse…yeh Hindustan hai meray bhai!

Tho phir aap hi boliye ki yeh Hindustan abhi azaad hua ki nahin?

I remind myself that this nation will become free not when modern day Avatars and their media slaves try to create modern day mythology but when you and I and every Indian decides that he and she is a part of the problem and that if he or she wants a solution then he or she has to decide to become a part of the solution.

Denial is the first and surest sign of mental illness….of self delusion. But neither denial nor delusion can save us from destruction.

If we really want to celebrate Independence Day, let us decide to become truly independent and understand and accept that we will have to work for it. Not wait for someone else to come and free us from ourselves. 

Jai Hind.

Exit: Terminating Family Members

This is a big one. Some people are of the opinion that family members can’t be terminated under any but the most extreme circumstances like theft or doing something detrimental to the family. My view is that like performance bonuses, termination must also be linked to productivity. To allow the business to suffer losses because a family member is ineffective is to punish the whole family and all employees for the doings of one person. This is not only grossly unfair on everyone, but more importantly it vitiates the atmosphere of a results driven culture that we are trying to create. By such a policy we are at once undermining all claims to fair-play, justice and merit based career progression. So people who don’t deliver must go; family or no family. Such people must not even be put in some other part of the business for the same reason – their presence will legitimize ineffective working. Also more than likely they will create their own politics, especially as they are family members which can lead to all sorts of undesirable results. When you decide to terminate, the best way is to do it as quickly and decisively as possible. A clean cut with a sharp knife is always better, cheaper and kinder. The individual remains a shareholder and part of the family. It is just that they no longer come to the office. As I have said earlier, owning a business and running a business are not the same.
Keeping the Business Family intact – 5 Key Structures

I have suggested 5 structures that are most beneficial in achieving our goal: Making the business process driven while keeping the family together.
For details of that please read my book, The Business of Family Business (Serene Woods Publications) available in India on Flipkart and internationally on www.amazon.com

Career progress for family members

What must they do to progress in their careers? Is anything in this different from what professional managers must do?
Short answer: Yes.
It must be more difficult, the standards higher, the challenges more exacting because your child is an owner and so must be an example-setter. Also that is how he will gain respect in the system. Remember that ultimately the professionals will report to him and you want them to do that with pride, confidence and knowing that he knows the business better than they do. That way they will look up to him and not see him as being dependent on them. After all this is how the founder earned his own prestige and respect, by clearly being superior, inspirational and seen as someone who adds value to anyone who is fortunate enough to be associated with him. I have seen too many family businesses which would not last one week if key professionals walked away. And they know it and demand their pound of flesh which is willy-nilly given. I have even known where professionals have literally held owners to ransom as it were and then walked out and set up in competition.
This will never happen if you develop your family members such that each becomes an expert in his or her own right. Career progression must also be on the same terms as it is for other professionals with only one difference: the family member has the opportunity to sit on the Family Board one day. Opportunity, not certainty. Within the organization promotions must be need and merit based. Remember that a promotion is not a reward. It is an opportunity to do a job that is more complex and difficult and a great learning opportunity. So people who are promoted must be monitored and coached and supported.
How is succession determined?
The one who is best for the organization must succeed.
The only acceptable criterion for succession is to see who would be best for the organization. Not who is the oldest or any other criterion. There are two essential mindsets that must be in place to ensure smooth succession.
1.       The ‘Family’ depends on the business and needs the business.
2.       Inside the business, the only factor for preference is contribution.
This is often the most difficult of decisions because it is an issue of power. In the desire to hold onto power people don’t share information, resent being questioned on the performance of their businesses and generally act as if they were running personal fiefdoms. Like the GE airplane interview method for selecting successors, if you create a system where the superior will actually lose his job if he does not develop successors you will build a culture that enforces empowerment and subordinate development. Organizations where you need to persuade or force superiors to train subordinates or to delegate some powers are organizations with a ticking time clock waiting to be taken over.
Leaders who become indispensable are usually very poor at developing people. They take pride in the fact that the place can’t run without them. Such people must be put on a monitoring plan to shape up or ship out. It is better to fire someone who will not develop others early in the game rather than be faced with a leadership vacuum when you actually need to hand over to successors. Show me a company where the CEO’s job is threatened if he does not develop someone to take his place and I will show you a company which is well suited to outlasting its founders. This culture must be propagated strongly and seriously all down the line. Delegation and people development suffers because it is treated as a ‘nice to do’ rather than as a ‘critical to personal success’ issue. Where there is a reward for developing subordinates and a price to pay for those who don’t you will find that people development is taken very seriously.
To encourage collaboration, create peer rating and reward performance. Openly sharing information, offering to help each other to succeed and shared responsibility for decision making are the keys both to business success as well to keep the family together and these must be institutionalized in the system and not left to anyone’s individual inclinations. I have described how to do this later in my book where I have suggested several things that business families can do.

Careers in Family Businesses

There is much confusion in most business families about what to do with non-contributing family members. The only way of ‘taking care’ of family seems to be by keeping them in the business. However negative or incompetent people have a disastrous effect on the morale of others, especially when they are themselves seen as powerful by association with the family. I am not talking about someone who misappropriates funds or does something dishonest. I am talking about someone who is not competent in business and does not produce results. If that person had been a professional, he would have been sacked without question. But if he is a family member he is usually shifted around from one job to another. All that is achieved is that his attitude spreads. The fact that the only reason he still has a job is because of his family’s name on the door, is not lost on anyone. That such a situation will in the long run destroy the whole business and consequently the whole family will suffer, is something that is conveniently ignored, most often because the family has no process to confront each other constructively. Consequently family members have a different status in the business no matter what their designation may be and no matter what the official line on career progression may be. The fact remains that the family member has lifetime employment and his family is looked after, no matter whether he is productive or not. Family members acquire even more significance because they are seen as most ‘loyal’ and ‘trustworthy’ as they are ‘insiders’ while professionals are seen as ‘outsiders’ and so by inference less ‘trustworthy’ and ‘loyal’. The organization collects obedient disciples who may well be great at implementing instructions but not much else. Mistakes are treated as failures at best and crimes at worst and are punished. Consequently all intelligent people avoid making mistakes in the only sure way, by taking no initiative or risk.
Once again social traditions outweigh good business processes with attendant consequences.
Defining 4 Critical Parameters
There are 4 critical parameters that any family business that wishes to transform itself from being person-led to becoming process-driven, must define. It is essential that all these parameters are clearly thought out, defined and the criteria made public. It is the lack of clear definitions that leads to claims of nepotism from one branch of the family and discrimination from another. When these four parameters are clear, it preempts a lot of internal conflict and clears the muddy waters and promotes transparency in all dealings.
1.       Entry
2.       Progress
3.       Succession
4.       Exit
·         What does it take to enter the business?
·         How is success measured and rewarded?
·         How is succession determined?
·         On what conditions can a family member be asked to leave the business?
What does it take to enter the business?
Business success is a skill, not a hereditary trait.
Ask, “Is our business an aspirational place for high potential employees who have multiple choices? Or a parking lot for those who have no choice? Do young professionals in various disciplines who are wooed on campus by major corporations choose your company over others?” GE for example has been ‘Most Preferred Employer’ for decades even though it is not in the top three salary payers in the United States. People join GE with the same state of mind as they go to Graduate School; to get training and experience which will enhance their market value. The working atmosphere, the collegiate partnership and the challenges that working for GE provides are so stimulating that most stay on, many for their entire careers, like Jack Welch did. Those who leave do so after making significant contribution and become ambassadors of GE worldwide. GE gets a huge amount of business from ex-GE people who are working in different companies. It is no accident that GE has provided the highest number of CEOs to American business. Ask, “What value do we add to those who work for us?” That is the key to attracting and retaining the kind of talent that you need achieve your goals. Like most things this is not an accident. Success is never an accident. It is the result of planned, intelligent effort.
Entry criteria for family members
Who can enter? How must they enter? What must they do to prove themselves worthy?
The first challenge is to set entry criteria for family members to enter into the business. In most families it is a default setting that all male members will enter the business. In some countries youngsters in business families seem to be allergic to education and enter the business immediately after leaving high school. Given that they are youngsters with little maturity and often an inflated sense of self importance, the results are not pleasant or useful for anyone, least of all for the youngsters themselves. Some families are more mature in this.
They insist that the youngster first finishes his tertiary education and then joins. In my view the best way to ensure that you get the best is to do the following:
1.       Change the default setting and make a job in the family business an aspirational achievement that has to be won not merely inherited. Make it clear from the outset that the family and the business are two different things. That though family members will naturally enjoy their share of profits as shareholders but for those same profits to keep accruing the business has to be managed well. That is a skill, not a genetic factor. So only those who can prove that they are ready to contribute can enter the business.
2.       For that they need to be able to do two things: the same as anyone else who wants to be hired: get a great education and get some good worthwhile experience in some good place. Insist that the scion of the family goes to a top notch college and gets a great specialist education. Let him stand on his own feet for that. Don’t buy the seat for him. While he is there don’t give him any preferential treatment. Let him stay in the regular college hostel and go around on a bicycle or whatever is the norm with other students. That way he will learn social skills and make some good friends along the way. Many rich fathers give their sons their own apartments and buy them expensive cars and then wonder why the kid fails in the exams.
3.       Keep a tight control on all expenses and focus on studies and hard work. Nobody ever died from working hard and neither will your beloved child. Remember that he has to return and inspire respect. Nobody respects a soft little pussycat that couldn’t make it on its own without holding its father’s hand.
4.       Once his education is over, let him join the biggest, meanest, leanest and toughest multi-national in the world and work for 5 years. 7-10 years is even better. That is the minimum time needed to get some worthwhile experience and learn the business. He will still be under 30 when he comes back. This will give him an idea of market competition, give him a standing on his own merit and if he is smart he will be able to pick up some neat tricks on the way. This way he will get a real-time international experiential education at no expense to you. He will also build a network that will come in very handy later in life when he is working in your company. Once he has his experience then invite him back. Don’t force. Invite. If he does not accept immediately then he is the one you want. Then induct him into the company and give him some real freedom and responsibility.
5.       Another even better way is to challenge him to start a new business. Let him present a business plan to you. Offer to finance him and then help him if he needs any help. If he succeeds you just helped create some more business for your family. If he fails, well that is the fee for his education. Analyze the learning; ensure he learned his lesson and ask him to give you a new business plan.

How is success measured and rewarded?

Success is not a matter of opinion. It is a measurable fact. 
 

           The credibility of any measurement is in its uniformity. Only if everyone is measured on the same standard does the standard become trustworthy. If you have one standard for employees and a lower standard for family members, then you are only lowering the dignity of your own family. People don’t respect those they consider less than themselves. And that is what family members will become if they are rewarded according to a less exacting and rigorous standard of measurement. I am amazed at the number of family business people who actually recommend that family members should have lower standards than professionals that the family employs. I can only assume that they are not thinking when they say these things. For how anyone with even a single digit IQ can say something like this is beyond me. When family members succeed on the same standard as everyone else they acquire high prestige and people will willingly follow them when they become leaders. Create a performance culture of measuring results. Everyone and everything should be measured and the family must set the example. If I had my way, I would set higher standards for family members that for outsiders. My logic is that this is precisely what the original founder did. The founder earned respect because he was clearly superior. Why anyone imagines that this logic changes from the 2ndgeneration onwards is something I can’t understand.
       It is essential to ensure that everyone is measured on the same standard. A rigorous and objective performance appraisal system is essential. In principle this consists of goal setting by mutual dialogue at the beginning of the year. Followed by ongoing measurement as the year progresses. And then assessment and reward at the end of the year. Making it a collaborative process enhances both transparency and trust and people feel empowered to know that they are working to achieve the goals that they set themselves. The feeling of being imposed on from above is eliminated and a high level of commitment is achieved. Rewards must be linked to contribution, in terms of annual bonuses and profit sharing schemes.
      Annual increments must be uniform to take care of inflation. All rewards must be based on current contribution and in relation to it. Senior management including family members must be measured on how they add value to the vision, how they are able to reinvent strategies and how they display structured ways of risk taking. For family and top management this can be a done by peer rating on a 360° basis. This is not about passionate speeches in favor of grandiose schemes. It is about the rigor to convert a dream into a strategic plan that can convince critical peers to commit resources to it.
          It is important to differentiate between the dividend that family members receive as a result of the business doing well and individual performance based rewards. For performance rewards there must not be any differentiation between family and non-family professionals. Performance rewards are for performing. All those who perform and meet the criteria of success must get the same reward. As a family member the individual will also be entitled to whatever dividend the family gives its members at the end of the year. That has no bearing on his or her individual performance.

Family business is more about family than about business

The business and family love are
two different, mutually exclusive issues.
When the two mix, both self-destruct.”
Current Existence & Growth: Who has the power and why?
Performance versus identity: Who are you versus what did you do?
Succession: Family or business: Which comes first?          
Competence versus connection: Which is more important?
Families that understand these two questions and are able to address them succeed in perpetuating their growth, influence and wealth. Others disintegrate in internal strife and are relegated to the pages of PhD thesis on the subject of ‘Family Business.’ I have called this ability to deal with these questions, ‘The Critical Transition from being Person-led to becoming Process-driven’.
In my experience many business families spend far too little time on the upbringing of their children especially in inculcating the value of contribution. Of each generation creating its own legacy and not being content to ride on the back of the earlier generation. They give their children the same education that is given to the children of ordinary people who they employ. They don’t prepare their children for the distinctly different responsibility that they will have to shoulder. This is not about arrogance or about creating a new caste system. It is about merely recognizing the fact that the scions of business families are going to inherit power and wealth entirely out of context of their own effort. It is therefore essential for them to understand the distinctly different responsibility that comes with such wealth and power and for which they will be answerable to their families, their descendants and society at large.
I’ve met many founders who struggled very hard to set up and grow their business and who say to themselves (and to everyone else) with great feeling and tears in their eyes, “I will never allow my children to face the hardship that I had to go through.” When I hear this statement I say to them, “Please change the wording. Say, ‘I will never allow my children to build resilience, character and strength. I will never allow them to have the power that I have, to succeed.’ Say this because in effect that is what you are really saying.” For many of them this statement of mine is a shock. They had never thought about their view on upbringing of children in that light.
They equate expense with quality. They give their children the most expensive education which insulates them from the realities of life and so they never learn to fight the real battles. They give them the most expensive toys which in reality teach them to define human value in terms of material worth (the ‘best’ kids are those who have the best toys). They insulate them from poverty, deprivation, lack of resources and thereby they ‘protect’ them from being exposed to the power of drive, ambition, single minded focus on achieving big, ambitious, scary goals. They build walls between their children and the people who they must in the end, deal with. People who will one day, work in their organizations and decide their fate. People who need to be inspired, led, cared for and supported. And therefore people who must be understood. Not simply in order to do good and be charitable but because the success of the business and family depends on the development of these people; the great multitude. The fond parents forget or ignore the fact that one day the time will come for the soft little molly coddled pussy cat to enter the jungle of the real world without any of the tools it needs to survive, much less to lead others.
Possessions add cost, not value.
Children must be taught that humans have more intrinsic value than anything material which can be bought, sold or junked. That cars, branded clothing, watches, gadgets, material possessions, expensive houses don’t add value to the people who use them. Possessions add cost, not value. Anyone sensible will seek to add value to himself, not cost. People who believe that possessions add value or seek to convince others of this, have no value for themselves. They have low self-esteem and are seeking to lower the value of the human being. Children must be taught that a car, no matter how expensive, is transportation, not a symbol. Except of bad judgment which makes someone put huge amounts of money into a depreciating asset. A shirt is clothing, a watch is meant to tell the time and shoes are meant to walk in. None of these define you, are not statements, nor indicators of what kind of human being you are. It is your character, your actions, what you stand for, your principles and your values, which define you. Not what you possess. What you possess can be stolen or taken away from you. Your character, your values, your principles are the stuff of memories that you leave behind. By these you will be remembered, honorably or otherwise. Live a life such that you will be remembered with honor. Teach children these things by personal example. Because that is the only way to teach them.
Family is Family
There is always a difference between ‘insiders’ who are family members and ‘outsiders’ who are not related. Some of these differences may be overt as in rules applied differently. Some may be covert and under the surface but still clearly visible to everyone, as in forms of address, precedence, who can go to the Chairman’s home uninvited. In many families the business is treated as an extension of the family home and the same roles of elder and younger apply.
Guaranteed career progress and no door marked ‘Exit’
Like employment, career progress is also guaranteed. After all the family rarely promotes an ‘outsider’ over the head of an ‘insider’. So the family member will always get his promotion, even if it means that someone else actually does the work. I have seen many examples of this in the Middle East where the professional manager actually does the work while the family member is busy fulfilling decorative purposes. Needless to say the same logic extends to family members leaving the organization. After all, just as you can’t steal from yourself, you also can’t leave yourself. So no exits for any of the reasons that are guaranteed to send ‘outsiders’ into orbit. Needless to say this encourages complacency. In some families the incompetent member is shifted to some other part of the business where he proceeds to spread his negative influence, only to be moved elsewhere when he has done sufficient damage. The power of the bad apple must never be underestimated.