Family businesses and the brand

September 19, 2011

(The views expressed in this column are the author’s own and do not represent those of Reuters)

I’ve had a lot to do with family businesses, in India of course, but also in Britain, Spain and quite a few other places. In fact, I come from a family business. My father was head of a transport business and all his brothers (my uncles) and, maybe more important, all the brothers’ wives were in it too.

The wives didn’t work in it, of course, not in those days, but they were pretty good at being involved (and sometimes stirring up trouble — ‘he earns more than you’ or even ‘his office is bigger than yours’). The trouble with family businesses is that not every member of the family is suitable material. It isn’t just an issue of intelligence; it also has to do with motivation, temperament, age and a whole variety of other factors.

I had a very good friend who became head of a large family business and he was haunted by the idea of heredity. Would he have been good enough for the job if it hadn’t been for his name, he thought? The business was publicly quoted, the family only had a protected minority interest but, in the end, it was taken over and he left. Thrown out? Not quite; but he wasn’t welcome to stay. Look at the Murdochs today. It seems to be a repetition of the same old story.

Family businesses often split apart. Brothers and cousins take their parts of the business in different directions. Some are successful, others flounder and they often keep the same name or one so similar that it confuses everyone. ‘No, it’s not that Shree Ram, it’s the other one!’

Is that a way to carry on a business? If you are going to break away, make another business, you are going to do things differently then you must have another name and a quite different brand.

You can’t keep pretending that you are the original and that the others are imitations — it just doesn’t make any kind of sense. It’s confusing and, ultimately, self-destructive.

It’s clear when you look at successful family businesses, that is businesses that have been running successfully for two or three generations and more, that there are a few rules that apply.

First – be very strict about entry. Only let family members in if they are really good enough.

Second – promote objectively without favouritism and family influence.

Third – encourage professional management at all levels of the company, even to the very top. What that boils down to is a recognition that shareholding and management are not the same thing.

Fourth – and perhaps above all, remember what your company stands for, remember the brand.

Of course, not all family businesses break up into separate bits. Most stay together and many become hugely successful.

Tata is probably as good an example as any. The Tata family has been gifted with a few really brilliant family members whom people talk about and remember, plus a number of duds — best forgotten. Ratan Tata, perhaps the most brilliant of them all, may or may not be succeeded by a family member.

But the Tata brand worldwide is now much bigger than the family from which it emerged and what counts now is whether the person at the top is really first class, not what his surname happens to be.

And that is what matters about family businesses. They have to be grown so that the brand — Godrej or Mahindra or Bajaj, or even Ford Motor Company of the United States, whose Chairman still happens to be a Ford — has a presence, a strength and a personality that is so much part of the organisation that, whoever is in charge, it represents a certain continuity.

If you don’t get that brand strength separate from the family itself, then there is a real danger that the family that created the business and its brand — will also destroy it.

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