The failed lottery of birth
Meritocracy can no longer take a backseat to hereditary aristocracy, be It politics or business.
Uddhav Thackeray’s track record as Maharashtra’s chief minister wasn’t bad at all—under his watch, the Dharavi model to combat the Covid-19 pandemic was appreciated globally, and the mild-mannered son of Bal Thackeray successfully projected himself as a politician who was with the people when they needed him the most. Yet, there were very few who sympathised with him when he had to resign.
That’s because Uddhav perhaps depended too much on the fact that the Shiv Sena’s identity is tied with the Thackerays, and he was a natural heir to the throne. He also failed to feel the pulse of the average Sainik, who was used to aggressive Hindutva politics and noisy (often violent) street protests. The Sena leaders and cadres were not too happy to be part of an unnatural alliance with old rivals, the NCP and the Congress. They felt unheard and thought their leader was inaccessible. Uddhav’s not-so-subtle move to promote son Aaditya as the heir to Bal Thackeray’ legacy proved to be the last straw as a certain Eknath Shinde saw no future for himself in the party and delivered the final blow.
In the process, Uddhav may have won a few hearts but seems to have lost the plot—and the party.
It is a classic example of meritocracy taking a backseat to hereditary aristocracy, in which one’s social position is determined by the lottery of birth. Uddhav may have been a reasonable administrator, but failed miserably in understanding the DNA of his organisation. In that sense, he was unsuitable for the position he held purely because of the lottery of birth.
Uddhav isn’t alone. A lot of political families have made the same mistake—Congress is an obvious example where the current leadership has nothing much to show except their famous surname.
Indian family-owned businesses have done comparatively better. Mukesh Ambani came out of his father’s shadow by taking Reliance Industries to greater heights, though the same can’t be said about his younger brother. Rahul Bajaj’s sons have taken their respective companies in new directions, courtesy their abilities and a timely succession plan. After some hiccups, the Tatas have moved beyond the family name and have brought in top-notch external leadership. There are others as well, but the overall story is still hazy.
Most family-owned businesses in India have ignored the theme that the rewards of life—the top positions, power, etc—should be distributed according to skill and effort. Under meritocracy, power and privilege would be allocated by individual merit, not by social origins—more so when businesses have moved from just trading and licence-gathering outfits to prospering in a highly competitive external environment. As a result, quite a few family-owned businesses have found it difficult to expand their bases or live up to the aura of the founder-promoter.
Research studies by management consultants have shown more than 80% of company boards in India do not discuss chief executive succession planning at all, and as much as 90% do not have family constitutions or succession planning documents. Such an omission is a drag on investor appeal for many of India’s largest, fast-expanding companies. Indecision on leadership has led to family disputes that have split or disrupted companies. Consider the fate of the Thapars, Modis, Mafatlals, etc, each of whom delayed succession planning and failed to see beyond their offsprings in the hot seat.
Some family business members delay the process of succession planning as their decisions could create conflicts and criticism among the family, a Bain report had said. Some leaders find it difficult to let go of the reins and want to retain their powers as a leader. Also, issues like death could be uncomfortable to discuss.
Of course, such issues are, to a lesser degree, prevalent all over the world. Take the famous case of Gucci. For a while, this Italian fashion icon was a textbook example of first to second-generation succession. The founding patriarch Guccio Gucci started his company in Florence in the early 20th century. When Guccio died in 1953, the business was left to Aldo, the oldest of the three sons. While Aldo did a decent job as far as expanding the business is concerned, he floundered in planning for the next line of leadership. Result: his son, who had conflicting ambitions, nearly ran the business aground. By the time the family members were eased out of the company, Gucci had a negative net worth of millions of dollars
In this hyper-competitive world, the solution doesn’t lie in banning family members from the succession process. That’s an impractical and unfair approach. The solution lies in a proper assessment of whether the family member has it in him/her to take on the assignment. For that, a rigorous grooming process is required under which the successor’s knowledge and skill gaps are identified and steps taken to rectify them through formal learning, informal job shadowing, and mentoring. The person can also gain on-the-job experience by working in various roles in the company. At the end of it, if he/she can’t fit into the role, the company should be open to looking for an outsider who is a good fit.
This doesn’t mean the end of the road for the family members. Separating ownership and management control is the most preferred solution in such cases—the family members become a custodian of family wealth while the job of running the business is left to competent, professional outsiders.
Several companies have followed this win-win model successfully. After all, the lottery of birth principle has become irrelevant in a world where the business complexities have increased beyond imagination.