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Generational transitions: acknowledge them!

Posted by Mitali Bose

Mitali Bose

Generational transitions are landmark events in a family-owned business’ (FOB’s) lifecycle. It nearly always takes an epic infusion of time, discussion, and emotion to find a point of intersection between the soaring visions of the founding first generation and an achievable reality for the following generation. In my experience, these factors interplay to often create disruptive tensions that drive actions.

As part of an organizational restructuring engagement with a mid-size manufacturing organization (which is part of a larger, diversified conglomerate), we found ourselves involved in a long debate on the top-level governance structure. (Mostly because it involved deliberating the role of the entrepreneur and the first-level of professional management).

Towards the latter part of our discussion, the firm’s chairman invited his son to join in. The son had been part of the conglomerate for three years and was primarily responsible for incubating and running businesses in the services space. Now the son was clear that he did not want to get involved in the day-to-day running of the businesses he was responsible for. His role, he said, was to build the business and the team, and provide oversight where required. Good teams, he added, should run day-today operations.

To make sure this happened, he had painstakingly ensured there was a proverbial “Chinese Wall” between the business he managed and the one under his father’s direct management control. To a large extent, this insulated employees of both the existing manufacturing company and the new services company from changes in management style. Employees of the newly-formed services company were able to create their own roadmap—with practices and values more aligned to the nature of the business and the targeted talent pool.

Contrast this to another Indian entrepreneur we’ve worked with, head of large manufacturing firm. He has always struggled with his management style. His personal preference was to get involved in the business only when there is growth opportunity; rather than take day-to-day administrative and management decisions. While his father was respected for his deep operational knowledge of the business, the son wanted to play the role of the classic investor-promoter and not the hands-on, chieftain role that his father had played. However, because he and his father had worked together closely for over nine years during his initiation into the business, he tried to inculcate his father’s style. This struggle between his natural preference and his father’s management style found him oscillating between two very different styles of management. As a result, his team received confusing, often conflicting, signals on what was expected. The cascading impact was so severe on the teams that the son managed that in a few years, his firm went through instability, lack of cohesiveness, and ineffective decision-making.

When two generations overlap for an extended period—like in this case—the inability to break away from tradition to create or to lend legitimacy to a unique management footprint is common.

Clearly, the first generation plays a crucial role in determining how the second generation and the employees experience the generational transition. Their messages and actions set the stage for the change. Their willingness (or lack of it) creates space for the next generation – a thought to ponder upon by captains of Indian FOBs.


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