'Business through generations'

Organisations are often deemed successful when they manage to achieve and improve upon their position in the industry over time. Professionalism provides resources and opportunities for businesses to not only sustain the success achieved but also to develop and grow further.
This is evident from numerous stories around the world where small entrepreneurial ventures have taken off and established themselves as industry giants. Most of these businesses have remained within the family or family members have been greatly involved.
With progress in all walks of life, family business environment has also seen tremendous growth both in terms of theories that govern the proceedings and subsequently the implemented procedures in this regard. Corporate governance has entered the family business environment and with time has reshaped it into a more efficient and productive workplace.
Christopher Samuel "Kit" Bond, former Chairman of the Senate Committee on Small Business and Entrepreneurship (USA) says, 'According to the Small Business Administration, more than 70 percent of all family businesses do not survive through the second generation, and 8 percent do not make it to a third.'
In view of this quote we can observe that a number of family businesses in the past have shown great potential but did not live up to the expectations due to their inadaptability to the changing environment and lack of advanced planning. The main reason can be traced to a lack of professionalism in the processes and procedures of the organisation. Over the years, good corporate governance has emerged as playing a very important role in re-defining organisational practices and structures.
Although one cannot limit the success of these organisations to a single factor, but along with vision, knowledge and resources, and professionalism of management and employees, governance has played its role in polishing the institutional structures to make the organisation perform in a more proficient manner.
There are numerous examples where family owned businesses have emerged on the international horizon, and with a professional attitude, have developed into world-class companies. Wal-Mart is the largest retailer chain in the world with more than 7,000 stores.
It was founded by Sam Walton and after the death of his wife now is managed by his son Robson. Toyota was founded by Kiichiro Toyoda and over the years it has become the leading auto manufacturer in the world. Non-family members had led the company from 1995 to 2008 but now Akio Toyoda, grandson of Kiichiro Toyoda, has been named the CEO of the company.
Other successful family businesses include Samsung, LG, Hyundai, BMW, Fiat and many others. In most of the cases, the shares of these organisations are traded publicly but the leadership remains with in the family. On the Pakistani business front, approximately 80% of employment within Pakistan is generated by family businesses ; therefore, sustenance of these businesses is vital for our economy.
We can identify local family businesses which have developed in to successful organisations. Center for Management and Economic Research, LUMS, has discussed this in their article "Succession in Family Businesses of Pakistan: Kinship Culture and Islamic Inheritance Law".
Incorporation of progressive technologies and practices, alignment of functions along more efficient lines and adoption of effective approaches have greatly helped local businesses in achieving success and coming at par with other market leaders. There are numerous examples in this regard Tapal Tea, Hilton Pharma, BBQ Tonight, House of Habib, Nirala Sweets etc to name a few. Success stories of GFC, Kart Limited and Star Fabrics have been shared to present the increasing trends of professionalism in succession planning being practised in our local industry.
The focus of business owners is changing from short term gains and installing their successors right away to a more pragmatic and professional approach, where sustenance of business, professional development of future leaders and growth of business over longer periods has taken priority.
This change in approach has provided an opportunity to the successors to focus more on their professional development in terms of knowledge in relevant areas, experiential learning by taking employment in other organisations and formal education to stream line the thinking process.
The article by CMER identified three stages of succession planning and how they play a role in personal and professional development of the individual. Pre-entry stage starts in an informal way in the early years of the prospective successor's life. From childhood, successors are socialised into the family business and they absorb tacit knowledge of it while at home eg informal discussions over dinner, casual meetings with elders and other industry personnel etc.
The entry stage involves induction of the individual in business. There can be different approaches in this regard; one way is through direct induction of the individual to the organisation. The individual can join the organisation at the bottom level and work his/her way up the organisational ladder like Sardar Qayyum joined BBQ Tonight at the bottom tier and after working at various levels is now the Chief Operating Officer of the restaurant.
Another approach is for the individual to join other organisations to gain market experience and then join the family business to add value through the experience gained from previous employment(s) such as Sheikh Akbar Hussain did; after gaining experience in other organisations he joined his father's business and is now the Managing Director of Kart Limited.
After the entry phase comes the succession stage, when the individual formally takes charge of the organisation. This involves transfer of responsibilities to the successor. The previous leader should lessen his/her role over time and should move away from business to provide the necessary space to the individual.
It can be concluded from these examples that approaches may vary nevertheless a conscious effort on the part of current owners, about a formal succession plan which would not only add value to the organisation in the short term but also provide an opportunity for long term success, is required to make the system work for the organisation.
The responsibility for implementing a successful succession plan lies on the shoulders of the current owners. They need to highlight the responsibilities of all stakeholders ie themselves, the organisation and the successor. They should be responsible for providing a personal touch to the whole situation by participating in development of the individual at both personal and professional levels.
Organisation and its processes should be dynamic and flexible enough to accommodate the new ideas of the successor and channelize his/her gained knowledge into activities that would result in a more beneficial and profitable scenario for the organisation. Furthermore, the successor should know his/her future role and should align goals and objectives with the vision of the organisation to synergize all efforts for a good affect.
Pakistani businesses have adopted this practice and today they are competing with multi-nationals. Succession planning is a continuous process and should be part of the organisational culture. Sustenance of the business and growth without disintegration are the core objectives of succession planning. Abdul Razzak Dawood emphasises this very issue of keeping the business together in these words "
If, 20 years from now, one of my sons states that he is now a first generation family business owner, then I will have miserably failed. If my grandson says this, I will be very disappointed. If subsequent generations say this, then perhaps I didn't work hard enough."