The Dangers Of Ossification


wealthymatters.com

In the story below Alok Kejriwal narrates what happens to a family business when it is ruled with an iron fist by the older generation which gives younger family members and outside professionals no opportunity to air new ideas.

Experience is good.And everything new is not necessarily good.Professional managers are not automatically better than family talent.It doesn’t pay to cast aside the old tried and tested methods without thought.However,nothing good comes out of eschewing new ways altogether.Taking a risk on something new,when the older way has been very successful,is hard.But regularly experimenting with new ways in a controlled manner and adopting them if they are good, is a must to stay competitive.

Old ways and older family members might have brought a family business up to a certain point but new ways and young blood and fresh ideas are essential to maintain vitality and forge ahead.It is not so much either or as finding a way where the older generation can mentor the younger members.Where experience and fresh perspectives can influence each other.

Think of a retirement age and groom younger members to take your place.And ensure that you still have a few good years after your retirement so that you can remain in the background and step in if absolutely necessary.

“12 years ago, I visited a large (100 crore+ topline) textile factory in Gurgaon (Delhi) and met the CEO, COO, CFO, CMO, and CTO. They all had Kumar printed as their last name! On inquiring, it turned out that the family tree right down to the grass roots was involved in running the show. In conversations, all they did was nod at each other for consensus. No one had the guts to tell Grand Dad Dinosaur that he was wrong. It seemed so stifling and stuck. When I asked the young 23-year-old MBA what his vision for the Company was, he said something that I felt was his father’s vision and definitely not his own! 12 years later, I did a recon – the Company had shrunk to 20% of its market cap.

Companies like these have no future. Their boardroom antique furniture doesn’t think laterally and has no clue of new business lines. They would get a heart attack to pay Accenture Rs 1 crore to suggest a strategy to uplift them. They don’t hire gold standard professionals because they can’t expose their business loopholes to them.

Think of it – most of the old family run companies I know still make steel, cement, ingots, rods and all kinds of cloth, while the Tatas play in Software, Telecom and other value added businesses.

Like the Tata retirement policy, all the granddads need to be sent home and professional CEOs hired across the board to run the Company. Else, most family concerns will cease to exist.”

About Keerthika Singaravel
Engineer,Investor,Businessperson

4 Responses to The Dangers Of Ossification

  1. Alex Jones says:

    A business that stops living, growing and creating is a dead business.

  2. Sharmishtha says:

    rigidity is toxic for business.

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