The panel discussion on Professional Outlook in the Family Run Retail Business had business leaders from several retail chains in south India, which have been family run discussing on dynamics of professional outlooks in such businesses.

Panelists in the session included:

M. Banumathi, Head Naidu Hall, Kovai

Gnanasekar Kandaswamy, MD, Pazhamudhir Nilayam

T.Shantakumar, MD, Kirtilals

Amar Subash, GM Security, Commercial &   Retail Biz, Tyco India

Moderator: Sanjay Badhe, Deputy Director, Retail School of Excellence, Great Lakes Institute of Management

Question: Do family run businesses need professionals?

T.Shantakumar, MD, Kirtilals

“Both family members and professionals go through a period of adjustment when professionals join the business.”

• Businesses need professionals to scale.
• Professionals bring in discipline, process and systems.
• The entrepreneur, though, brings in a level of customer connect that the Professional cannot.
• The challenge is to get the professional aligned to family culture and business values.
• We do several informal meets, lunches with senior professionals when they join.  Our purpose is to empower each Store Manager so that they can engage and connect with the customer, the same way that the entrepreneur can.

Question: How do you solve conflicts?

T.Shantakumar, MD, Kirtilals

“When new family members enter the business, we are careful to mentor both them and the professionals already in the business.”

• Take conflicts offline – for one to one personal discussions with both, family members and the professionals.
• Once the decision is made – then both have to align with the decision, even if they don’t agree.
• We are clear, that professionals who cannot align with the family values and the business culture – cannot continue with us.
• We use the period of the first 90 days on the job, to gauge that alignment.

Question: How do family businesses attract good professionals

M. Banumathi, Head Naidu Hall, Kovai

“Family owned retail stores provide high emotional connect to professionals – that’s why they stay.”

• You have to attract good people – not just at senior levels, but especially at the front end.
• Family businesses provide an environment which is an ‘extension’ of the home environment.
• For us, our sales men and saleswomen are our “Heroes”, and – like in the movies, we want them to be visible to the customers (audience) not us – the ‘directors’ and ‘producers’.
• We recruit for attitude not qualification or experience.  We also ensure that we take on and solve their problems, so that they are free to do what they do best which is sell.  (example – savings schemes)
• We encourage them to develop confidence, by getting them mentored by senior sales staff. Our staff calls seniors as “Amma / Appa / Akka / Anna” – a mark of the depth of relationship.

Question: How do family businesses attract good people?

M. Banumathi, Head Naidu Hall, Kovai

“Word of mouth is the best advertisement”

• Our sales staff help us keep our pulse on the market. They tell us what customers want – and purchase managers do regular monthly meetings to make sure that our range / merchandise reflect that local know-how.
• We have found, that customers in different towns (from Coimbatore to Madurai )have different tastes. By formally recording customer needs via salespeople,  we find that our business is better, and inventory lower.

Question: How do family  businesses retain professionals?

Gnanasekar Kandaswamy, MD, Pazhamudhir Nilayam

“Make sure that you treat family members and professionals fairly and equally.”

• Most entrepreneurs think that professionalism is about appointing a CEO – this is not true.
• A company is professional when it has proper systems and structures to run day to day operations without interference of the entrepreneur.
• The entrepreneur should focus on “directionalizing”  and setting targets.
• We do not differentiate between professionals and family members.
• Both have to take the consequences of their decisions – good and bad.

Question: How do you stop yourself from not interfering with the professionals?

T.Shantakumar, MD, Kirtilals

“Empower the professional and then “walk away” – let him do his job.”

• Once you have delegated authority to a professional – then you have to give him the space to perform.
• If you interfere and micro-manage he will not perform.
• At the same time, the customer needs you – so you still need to be available to the customer.
•  Other than that – you walk away – decisions regarding the stores has to be done by the manager dedicated for that.
• If you have to override the manager in front of the customer, then after the incident, you go back and motivate the manager so he does not lose heart (or face).

Question: How do you stop yourself from not interfering with the professionals?

Gnanasekar Kandaswamy, MD, Pazhamudhir Nilayam

 “Identify your core values, centralize and control only those. Leave the rest to the professionals.”

• If you are thinking about professionalizing – do not lose the core values – essence of the brand.(in the mind of consumer)
• We have “centralized”  the core values by a monthly review process – we focus on targets and the support needed to achieve the targets.
• This ensures that our presence is not needed – and that gives the professional the space to perform.

Question: How do family owned business score when it comes to adopting technology?

Amar Subash, GM Security, Commercial & Retail Biz, Tyco India

“Family owned retailers are profitable. They do not therefore view technology as a cost – they see it as an investment.”

• The key is accessing the entrepreneur and getting enough time from him to demonstrate value.
• Once you demonstrate value, then technology adoption and  rollout is much faster among family owned businesses than among modern retailers where decision makers span multiple levels in the hierarchy.
• Once you have built credibility – they are also far more open in terms of looking at technology to solve strategic issues. More importantly, willingness to be transparent about the issues is much higher.

From L-R: Anupam Bansal, Executive Director, Liberty Shoes Ltd.; Kishan Bherwani, General Manager, Kings Lifestyle; B. A. Srinivasa, Jt. Managing Director & Chief Executive Officer, Vivek Ltd. and G. Venugopal, Managing Director, Naidu Hall Family Store

In addition to integrating professionals in to the business, you need structures to socially integrate them into the family without compromising the family’s social fabric.

Decoding this concept was the objective of the panel discussion on-Professionalizing Family Managed Businesses @ CRS 2013. Panelists for the session included –Anupam Bansal, Executive Director, Liberty Shoes Ltd.; B. A. Srinivasa, Jt. Managing Director & Chief Executive Officer, Vivek Ltd.; G. Venugopal, Managing Director, Naidu Hall Family and Kishan Bherwani, General Manager, Kings Lifestyle and Moderator: B. S. Nagesh, Chairman RAI & Founder, TRRAIN.

How do family managed businesses handle transition?

“Role mapping is the key in the transition to the second generation.  You bring in ‘professionals’ only for specific areas of competence which are missing within the family” –

Anupam Bansal – Liberty Shoes

 Its not about whether a FMB is professionalized or not – its about getting the balance right between skills and experience.

“Your responsibility as owners is to handover a great business to the next generation.  Professionals don’t have this view.” –

B S Nagesh, Founder TRRAIN

The single biggest difference between owners and professionals

•  Decision making by owners can seem subjective – because they will consider hard and soft factors – “SOPs” and “relationship” factors.
• On the other hand, scale requires standardization of process, policy and decision making.

“Professionals don’t always bring in a sense of ownership –  in such cases, the owners intuitive solution works better than the skill set of a professional” –

G Venugopal – Naidu Hall

How do you empower the professionals?

 “The debate is more about finding someone with the right mindset for the business – someone willing to learn constantly. He could be an owner or he could be a professional” –

B A Srinivasa – Viveks

• Its critical to ensure that the professionals feel empowered. Information about the business including metrics and financials should be freely shared.
• Create processes by which owners and professionals are engaged in a regular, two way, dialogue.
• Consider remuneration structures which give the professionals a share in the value creation AND the risks of building a business.
• Once empowered, owners have to ‘let go’ and let the pro’s do what they are good at. 

“In our case we have 9 family members running the business, but other family members set the measures by which we are measured as success or failure” –

Kishan Bherwani – Kingslifestyle

 Creating performance management standards

• Decision metrics for family members and professionals cannot be different.
• When the business is growing, its easier to manage the creative tension between KRA’s for professionals and family members.

“You do tolerate a disgruntled family member more than you would a professional. You would let the professional go.” –

G Venugopal – Naidu Hall

This was the perspective provided by Prof. S Sriram on the process of professionalizing Family Run Businesses (FMB’s) @ CRS 2013.

Some facts around Family Managed Businesses (FMB’s):

• Nearly all firms start as family businesses.  No firm on earth started out as a corporate.

• 33% of S&P listed companies still have 1 family member onboard. Globally, 70 to 90% of GDP comes from family run businesses.

• FMB’s are more stable during economic recessions.  When compared against non FMB’s on profitability parameters – they tend to outperform, especially during downturns in the economy.  However, during the uptick in the economic cycle, they also grow slower than their non FMB counterparts. This is a function of the inherent conservative DNA and focus on capital preservation.

“Family Managed Businesses are more stable and profitable during economic recessions, but they also grow less during economic upturns.” – Prof S Sriram, Great Lakes. 

Professionalization:  The word “Professionalization” has different meanings. In many cases, FMB’s believe that if they get an outside CEO they have “professionalized”. In other cases the word is applied to any structure which separates ownership from management.  However, we believe that Professionalizing is a mindset and an attitude – it’s about how you think and take decisions. It has nothing to do with ownership / management or structure (i.e. whether the company is a private or Public Sector Company). “How objective you are in decision making determines how professional you are.”

“How objective you are in decision making, determines how professional you are” – Prof S Sriram, Great Lakes. 

Why companies professionalize:  The usual motive is to deal with the pressures introduced by growth. Growth vs control is the classic dilemma that family businesses face especially, because in India, not only are 80% of businesses family owned, they are also privately held.  Some businesses look at the listing process to introduce not only external capital but also governance. Making a company list-worthy usually involves bringing in an external ‘professional’ CEO – this is one of the popular definitions of ‘professionalizing’.

Challenges: Key challenges are around success planning, “letting go” and finding a convincing answer to the question “Why professionalize?”.

Succession planning: 15% of FMBs globally survive to the 3rd generation. The biggest challenge is therefore succession planning and management – i.e. changing from an entrepreneurial mindset to a managerial leadership mindset.  This change is evidenced when the decision making process moves from individualized to a data based, consensus making decision process.

“We believe that the definition of a professional entity is one which places the interest of the consumer and the organization above self-interest. The decision maker may or may not be the owner of the company. This is easier said than done”.

“The challenge of ‘letting go’ – at its simplest level is answering the question of “What am I going to do with my time, now that I am no longer actively managing the business?”” – Prof S Sriram, Great Lakes 

“Letting go”: Once the owners professionalize the second challenge is about ‘letting go’ – at its simplest level its answering the question of “What am I going to do with my time, now that I am no longer actively managing the business?”.  Any attempt to professionalize will not work unless there is a concrete answer to the above.

“Why professionalize”.  Often this is the biggest challenge to starting the process.  While the usual answer is “scale is the tipping point” – most entrepreneurs chose control over growth. The internalized, often un-articulated reason is also because they believe that “if something isn’t broken, don’t fix It”. In other words, scale can be subverted to control.

“The unarticulated reason for not professionalizing is that many entrepreneurs believe that scale can be subverted to control” – Prof S Sriram, Great Lakes