The Godfather by Mario Puzo, Chanakya, family values, inclusion & diversity – Dilemma of SME owners on succession planning...a perspective...

SMEs are an integral part of the Indian economy.?They provide employment to over 11 crore workers, 29% of the GDP and yet they are overshadowed by the big names in business.?Stigmas are attached to working for a family-owned business, that are often not true.?Brand recognition, product quality, customer service, financial stability, company culture, are all put up under the scanner, by consumer, high-power professionals and the investment community. The MD, top man, is literally quite alone.?He does not have the luxury of a team of highly educated and trained staff who can aid him in all areas.?

In larger companies, though success is largely driven by the vision of the top person, there are people who surround the CEO. People who have in-depth subject matter expertise, and are more qualified than him.?It is this ability to surround oneself with more talent, that helps an organization to excel.?

Succession planning is an area where most SME owners fall behind.?

A nagging thought in the mind of the SME owner is the question “If I pop off tomorrow, what will happen to my business?”. This was the exact words expressed by an SME owner.?He is just over 70 years old, physically and mentally active, the first generation of Indian entrepreneur and had grown a fairly large business spread across few countries in the world.

When we reflect on this question, it is clear that he had survived difficult times but not an unprecedented time (like now) and he recognizes the imperatives of a changing world. Market conditions were tough before, there were government regulations, long lists of approvals were required to set up and grow a business, and a lot of personal connection had to be built to ensure the growth of the business. The Digital world did not exist for some industries and for some, it was in a stage of infancy.?And the SME owner faced all these challenges, mostly by himself, by goal setting and working long hours.?But conditions have changed.

If those conditions were to hold true now, he would not have been much bothered about the popping off question, as he would have safely passed on the baton to someone in the family who would have leveraged his connections and carried on business as usual. Then why this question of “if I pop off tomorrow, what will happen to my business” comes from. ?

The fragility of our live and uncertainty is the core.?We tend to take our life as granted, thinking that we will survive a hundred years, and if that be the case, why worry about who is going to run the business after me, NOW.?But the uncertainty of lifespan brought about by the current pandemic has made us realize more our vulnerability, and unpreparedness.?The SME owners, like many others, have realized that they have made sacrifices in their personal life, especially their physical well-being, because they have taken all the responsibilities on their shoulder, even for minor decisions.

The SME owner is aware of that. The entire organization depends on him, he is indispensable.?He is surrounded by people who do not question the wisdom of his decisions and carry out executive orders to the drill.?He has a “solid grip” over the business. But with one decision maker, and little empowerment, his socially distanced team is forced to move in low gear.

?What are the choices? The SME owner has choices:

First, Pass the baton to the eldest son, the mantle falls to him automatically, like the dynasties of yore. But he might have other passions, and is getting dragged to carry on the family business.??He may not be genuinely interested or really capable to run the business. There are umpteen cases. ??

Second: Pass the baton to the child who is the most capable and has the most promise, irrespective of gender/age.?Walk the talk of bringing gender equality in the workplace. Walk the talk of “meritocracy driven culture irrespective of age”. Start with your organization, and specifically you.?

Third: Pass the baton to one of the current management team who has the potential, enthusiasm, vision, vigour, adaptability – all the right qualities to take the organization forward successfully. The only drawback, he is not a part of the family.?

Fourth: bring in outside talent, groom the talent on the family values of the business and let him take over at the right time.?This is the hardest option. ?

We can relate to each of the first 3 options with stories.?

1st option: pass the baton to the eldest son, irrespective of his capability or interest.?

Many of you might have read the book “The Godfather” written by Mario Puzo.?The family head is Don Corleone.?He knows that he has to pass the baton, and he chooses the eldest son Sonny to lead.?He had another son and a son-in- law, but he never considered them in his succession planning.?He knew the shortcomings of Sonny, and also knew that those shortcomings could not be overcome by simply coaching or mentoring.?So, what did he do??

He appointed Tom Hagen, an outsider to the family, a non- Sicilian, to become the consigliere.?A low figure, non-family, but very capable person with a strategic mind to surround Sonny. It is like having a modern day Chanyaka in your team, with immense power to influence but no formal title.?If the SME owner chooses this path, then find the best Chanyakya to surround the eldest son to help him take the business to the next level.?

2rd option: Inclusiveness, equality and age.

Indian tradition has long considered that a girl in the home is meant for another home.?Inclusiveness of the girl child in family business has been rather a lip service. However, we see very encouraging signs of women coming at the top of the business.?That might be too early to celebrate, but the fact that women are emerging as the second generation of owners, is indeed encouraging.?Corporates are waking up now and talking of inclusion, equality, diversity etc. ?

To expect the SME owner to handle this tricky issue is a hard task, as personal belief, and societal norms comes in play, and kudos to the first generation for opening up the gates.?You can take the lead and show to large corporates the values of gender equality, and open the gates to make India a more equitable place.?

Coming to the issue of age:?Traditionally the eldest son gets the last word.?It is pervasive in our society, seen even at times of grief. The world has changed, looking at grey hair to decide on competence is no more a criterion.?Creativity, innovation, agility is required, not by looking at past performance, which does not predict future performance.?

?3rd option: Pass the baton to one of the current management team. This is an area of concern. In most SME, HR function is relegated to mundane tasks, hiring, onboarding people, training and development, and various HR policy implementation. Rarely do we see HR being considered as a strategic source of input to the SME owner.?It becomes too close to comfort to talk about succession planning to an HR employee for the SME owner.?It is harsh to hear, but is the stark reality.?How to handle this? There are well established processes of succession planning for any organization. Embrace that with an open mind.?Be open minded in discussing things, which have so far been in the closet, with your HR leader.

In conclusion, the business landscape is rapidly changing, disruption to businesses is happening more frequently, and SME owners need to take a hard look on how to create a meritocracy driven culture, and make a seamless and successful transition of authority and collective decision making.??