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Entrepreneur (E): To what do you attribute the success of Indian family businesses in recent times?
Marnix van Rij (MVR): We conducted a research on Indian family businesses and were intrigued to see that such businesses have been growing by 30 percent between 2001 and 2009. This is much more than the 15 percent growth rate of multinational companies. In fact, it is almost a double growth for family businesses which shows that there is sustainable growth and profitability in this sector in this country. Indian entrepreneurs consider sustainable growth to be very important. According to Indian entrepreneurs, it is vital to have a bold strategy.
To rise in such an economy, one needs to have a vision and a bold strategy in place. There has to be a proper succession plan in family business as well. Most of the Indian family businesses are first generation ventures. Few are second generation and very few others are third generation businesses.
I have been dealing with family business and related questions for over 25 years now. I often ask my audience if they have made any legal and tax arrangements for themselves and their families. This is asked to find out if there is an apt successor for the business.
Most entrepreneurs sideline this aspect because all their attention goes towards building their present business. At E&Y, we developed a DNA gross model. When one talks family business, the private and the corporate side of it have to be balanced. As far as the private side goes, the family has to take care and preserve all its wealth and it has to be managed well. For the corporate side, the essential government rules have to be in place and the business has to perform well. ➜
E: What are the main characteristics of a family business?
MVR: I learn lessons every day because I believe working and advising entrepreneurs is very exciting. One of the most important characteristics is dynastic rule which makes you think about your own physical lifetime. You want to leave behind a legacy for generations to come. In Europe, we have a couple of very successful family businesses which are in the seventh or eight generation and one of the reasons they have been very successful is because there is a culture in these companies which states the ways to be a good human being and a great entrepreneur. Every generation has to prove itself and change according to times. In India, it is fascinating to see how many family businesses are doing this successfully.

E: What is a good time to plan your succession?
MVR: It may sound strange but as soon as you start your entrepreneurial journey you should plan out your succession aspect. While there will be a legal side to it, it has to be a thought process to determine who would lead the company when the entrepreneur is no longer there. The timing can be decided later but the planning has to start early.
While choosing a successor, one of the considerations that successful family businesses demonstrate is that they ask the successor to get a good and sound education, go through personal development and get some work experience outside the family business.
Once that is done, the successor must be given an opportunity to prove himself by applying the skills and competencies he has picked up outside.
One has to also manage expectations. It is not very easy to be the child of a very successful entrepreneur. He/she has to deal with the burden of over-expectations. It has to be the choice of the successor to lead his family business and not just a moral obligation.
The entrepreneur has to come up with a plan where the successor first works in various arms of the company and if he is doing well and meeting his objectives, he can be moved up. You will find that the best entrepreneurs surround themselves with people who can potentially take over the reins of the company at the end of the day.

E: Where should the potential successor begin from: the shop floor or boardroom?
MVR: You should always start at the lowest level and work your way up. When you end up at the top you have much more credibility with your employees when you have been through different parts of the business.

E: If you have more than one child, how do you balance rationality and emotions when choosing a successor?
MVR: Every child is different and you want to treat them all equally. There is always emotion involved and in a family business it is always important to have a sounding board, someone you can trust with business matters. Preferably, there should be someone outside the family.
For the father or mother, who in this case would be the successful entrepreneur, it is important to have trusted advisers.
These advisers, if chosen correctly, should possess a strong interest in psychology, sociology and should be eager to learn about human behavior. Such people are far more effective then merely having subject matter specialist.

E: How do you get top management and employees to accept your successor?
MVR: Good entrepreneurs usually surround themselves with good management teams. Involve your inner circle from the beginning since the people in this circle have actually made it possible for you to be successful.
If they are really hands on with the company’s future, they will covey their opinion on the successor. A good entrepreneur should never try to push a family member as his successor unless he is the suitable candidate.
Be as clear and transparent as possible on the objectives as well as be reasonable. Setting objectives is good but life always teaches us that things could be different and one has to always deal with some unexpected situation.
Whenever an unexpected event happens or a difficult situation crops up, the real mettle of a leader comes through and is proven. An entrepreneur has to be sure whether his successor can go through the journey.
Ultimately, always remember that a person who is trying to solve the real dilemmas of life is always far more successful than the one who is only good at numbers.

©Entrepreneur August 2011

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companies, entrepreneur, family business, management, Marnix van Rij, successor