"Family elders must step down at their peak"
M.V. Subbiah is one of the very few leaders of a business family who, after his retirement, chose to study family business—the subject he had practised for over two decades. His one-year stint as a visiting scholar to the Centre for Family Enterprises at the Kellogg School of Management gave him an insight into the subject, especially in the context of the Indian environment. Speaking to N. Madhavan he explains how Indian culture has all the lessons for running a family business successfully—but unfortunately most businesses have failed to understand and follow it. Edited excerpts:
How are family businesses in India different from those in other countries?
Every country is different. Their cultures are different. For instance, at the age of 15, an Anglo-Saxon family lets the son go outside and fend for himself. On the other hand, we in India tend to protect our kids—we pay for their education and take care of their needs till they settle down in life.
Also, in most parts of the Western world, the Law of Primogeniture operates where the first born son inherits everything whereas in India, it has always been all children, particularly the sons, are equal. When we understand the roots of our culture and those elsewhere, we get to know why certain things happen. If we want to become global, we need to adapt our cultural practices by retaining good things about our culture and assimilating some of the good things from other cultures.
And are we doing this?
No. We are not doing such things. We study in the West, come back and replicate their system. In the process we have lost our culture. We are not preserving the family values and traits that need to be brought into the company. We want to keep the family and business separate, that's what an MBA programme in the West teaches you.
But the Japanese did this (kept family and business together) successfully in the 1960s. They held onto the good things in their culture like consensus building and decision making in the families and brought it into their business while imbibing brand building from the West to become global players.
What lessons does Indian culture offer to family businesses?
Our scriptures tell us that our lives have four stages—Brahmachari (bachelor), Grihasthar (family man), Vanaprastham (moving away) and Sanyasam (renunciation). These are well thought-out stages arrived at by our ancestors.
The concept of vanaprastham is probably most critical to family business. It is something we could call close enough to retirement. What happens in most family businesses is that the successful entrepreneur does not find anyone as good as him to hand over the business and dies in office. This leads to succession problems.
Our culture teaches us vanaprastham which means moving away to a small house outside the village, allowing the rest of the family members to run the show with a clear understanding that, if required, you are available for advice or consultation. In fact, our scriptures teach us to live like a melon fruit which grows on the ground. When ripe, it detaches itself from the stem automatically. Other fruits which grow on trees, drop when fully ripe or get bitten by birds or squirrels and thus get damaged. The lesson is to move away when you are at your peak and when your feet are firmly on the ground, whatever be your profession.
What else does our culture teach about running business that B-schools don't?
There are plenty of other lessons. For instance, our culture expects wealth creators to be like a sea whose level never rises despite millions of cubic feet of water flowing into it every day. Whatever wealth they create, people are expected to have lots of humility and no ego. This is something that is not taught in B-schools.
Likewise Thirukkural (a classic of 1,330 rhyming aphorisms or Kurals in Tamil), written over two thousand years ago, says wealth and knowledge, if not shared, are useless. Today, unfortunately, we need an NGO to tell us about corporate social responsibility and its importance. Another interesting teaching is that there are four types of capital—financial, intellectual, human and spiritual. Of these, spiritual capital is the most important. These values have been lost as Indian businesses just ape the West.
CULTURE and FAMILY BUSINESS
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A business family has many stages—such as controlling owner stage, sibling partnership stage or cousin consortium stage. Each stage has its challenges. In a typical family business, the first generation will sweat because it is its idea and ambition. They have little time for the family and the second generation is invariably brought up by the mother who instills the values in the child. The son comes of age and the father asks the son to start at the bottom and work his way up just like him.
When the grandson arrives and grows, the grandfather has retired. He has a lot of time to spend with the grandson and partly due to the guilt of not taking care of his son well, he showers the third generation member with all the goodies. In short, the grandson grows up as a spoilt child. Imagine, a bunch of such people—the cousins consortium— coming over to take up the leadership as the third generation. This leads to the classic third generation syndrome. Unlike siblings, who are brought up by the same parents, cousins come from different value systems. All these begin to affect the family and then the business. On the other hand, if the family is aware of the value system, it will consciously teach the next generation those values which in turn keeps the family united.
You mentioned earlier that, in India, we tend to treat all children as equal. Has this not led to fragmentation of businesses which would otherwise have been on a global scale?
(But the) Reliance group, for example, has become bigger after fragmenting. Most fragmented businesses have become bigger. That is the other way of looking at it. Everything has two sides. If we have pride and practice our culture, we can succeed. That is what Toyota did. The Japanese car maker and Hindustan Motors had signed the agreement with Oxford Motors around the same time. Toyota is world #1 today because they valued their culture. In our country we do not do so.
To what extent have Indian family businesses professionalised the management?
Even if you go back 100 years, Indian family businesses depended on professionals. How else can any business grow? If you need to grow you need to have more hands, more brains and more feet. The moment you need more of these, the family is not sufficient. So you have to look outside.
My grandfather had started the business on his own but then he grew (his sons were very young) by training people, making them agents, and opened new branches in other towns by giving front end stock options to them. If you look at Burma and our small little community of Chettiars, it all started with some 32 firms in the1920s and in the next 10 years it grew to 1,600 firms. That could never have happened without the help of professionals.
