The Inter-generational Conundrum
Seventy years since Independence, India has reached its $2 trillion mark for GDP size creating significant wealth creating families with large net worth. According to recent reports the current wealth of India’s billionaire club is approximately $479 billion, representing the eighth largest wealth gain globally by a country.
The early Indian entrepreneurs who have been in business for an average of about 35-40 years are a substantial portion of this super wealthy club. Now, the time has come for the next generation of those super wealthy entrepreneurs to seek leadership roles within the businesses. This makes it a very exciting time for the Indian private sector with the new generation actively getting involved in business, bringing with them the youthful exuberance, renewed hunger and the passion to prove oneself, all of which is typical and also attractive about this generation. But this youthful energy also needs direction.
It is sometimes difficult to relearn or rethink, especially something one has been doing their entire life. The best of the industrialists find it difficult to keep the non-linear growth momentum going by not adapting to changing times. However, when the next-gen comes of age, this is an opportunity for businesses to restart or revitalise. It is important to give the new generation, the option and freedom to explore, even if it is outside of business. It will be seminal self-learning experience. But for those next-gen who choose to leverage upon the existing business platform already created, to prove their mantle will require a certain maturity from both generations.
This intra-generational transfer can be classified into five stages: exposure, education, experimentation, endurance, evolution.
Exposure: The next-gen just starts to experience the platform that is created, the strengths, areas of development, the people and the biggest of all the opportunity. This phase allows a fresh perspective in evaluating the business. Apart from learning about the business and the industry, its trends, etc., it allows access to the softer aspects of the groups such as the culture, the values, the spirit of the people associated with the group.
The Education: This is a phase for the senior-gen to share their perspective and knowledge garnered over the years and also offer a platform for the next-gen to table fresh thoughts. This is the most critical period of the transition. Both the generations need to come to the table with an open mind and this requires trust on both sides. This phase can also be looked as a mentoring and guidance phase where development of emotional quotient takes place.
The family head can instill the business values, culture into the next-gen, which shall hold them steady in their many years into the business.
Experimentation: This phase addresses the low-hanging fruits to get both parties to start working together — work of the young and guidance of the old. Here the next-gen can start implementing ideas where they feel they can add value and start getting their hands dirty. The next-gen of today come with a strong global exposure and education and they actively take this opportunity to blend that with the business at hand.
Endurance: This is the sustainable phase where the next generation starts to be involved full-fledged in the business and takes ownership of parts of the functions. And maybe here the first-gen needs to exercise a certain patience, not always easy to do.
Evolution: Like nature, this requires the new to transition from the old. Here, the new takes over complete control of the day-to-day business activities.
All the phases mentioned are from the perspective of the new, which brings us to the core point of what all this means to the previous generation who have invested their entire life in creating value in the business. It is never easy to give up control or see someone else taking decision which one has been taking for decades. However, once the senior-gen decides that now it’s the time to handover control they have to prioritise critical items for transitioning control and decision making, over time. Two critical points will be beneficial for the senior-gen:
A) Security of ownership and, most of all; B) How best to utilise their time.
There are different approaches for handing over control however one possible approach will be as follows:
The relay, handing over the baton: Using the next generation for expansion projects where previously leadership scarcity did not allow the business to grow. It allows numerous interactions between the two generations and a formal mentoring process. It brings with it business expansion and opens up newer roles for additional people of the family to get involved.
The Reassurance: This is the endurance phase for the next-gen. It instills trust in the senior-gen that their position is secure and they are handing over the business to capable ‘safe’ hands. The next-gen take on different projects and roles where their learning, maturity and gut play an important role. While for the first-gen or senior-gen, this gives them the opportunity to see the business from a different lens and also evaluate multiple people in the family who have just joined; and in turn identify the core leaders.
The Role: Senior-gen then moves to the role of a Chairman, and not a CEO’s or a mentor’s to the next-gen, allowing them to spread their wings but by guiding them and prevent expensive mistakes, as mistakes will happen and it is part of the evolution. During this phase, we see most families setting up family offices, which does the following:
– Advise on separate economic benefit and control
– Help set guidelines for inducting the next generation into the business
– Help craft a preamble which guides the family when taking key decisions
– Allows the family to give back to society
There are many roles that the family patriarch can take up when the time comes, but it is all about being open to change. It is good to learn from the success and failures of other families both domestic and global, and there are many successful examples in India as well.
The Indian economy is due to touch its next milestone – $5 trillion GDP, and needs its next phase of sustained growth to reach there within the next 5-7 years. This momentum can only be possible with the right blend and partnership of the old and the new.
