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he 78-year-old patriarch of a family business mentioned every time I met him that he would retire and relinquish from all responsibilities "at the earliest" or "very soon" or even "next month." This has been going on for the past five years. He is very energetic and enthusiastic about the family business that he built up over half a century; he wakes up at 4:30 a.m., does yoga, and goes to work at 8:30 a.m. even now for a 10-hour grind. His four children go much later. The patriarch does not have any hobby and is a workaholic. Another case: In a large cousin consortium where there was no retirement age, it was difficult to have an agreement on retirement of the directors. This was so in spite of the fact that the top of the leadership was overcrowded with three cousins in the 60+ age category, two handling the same function, while the next-generation members were knocking at the door. They did not know what to do to accommodate the young generation, and continue to coordinate across several family members, while remaining profitable. During my exploration to diagnose the various challenges they faced, it soon became clear that they were resisting retirement for three reasons. One, they would not have anything else to do post retirement; two, V To Redefine Role but Never Retire! Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. To Redefi ne Role but Never Retire! | 85 they would feel very uncomfortable and restless without knowing anything about the happenings in the company; and three, they would not have any steady income and perks since their dividend income would be quite small. You need to know that they were all provided with fairly liberal executive perks. There are different reasons for people to not retire, but in almost all cases, there is one thing in common. Retirement is a dreadful thought for most people who are close to the fixed or perceived age of retirement, particularly for those who retire from their positions of power and authority without any clear idea about how they would spend the rest of their lives. This is nothing new. Leadership change has always been contentious for a variety of reasons since time immemorial. Dynasties across the world have failed to survive beyond a few generations for want of smooth retirement and succession policies and practices. Emperors have imprisoned their fathers. Princes have effected coups to capture power. Family business is no exception. This is so in spite of the knowledge every leader has about the need for effecting smooth change in leadership. THE CHALLENGE OF RETIREMENT It does not matter whether you are retiring yourself or not, but helping others manage their retirement is a challenge to everybody else. This is because people around the person retiring have a role to play to make the transition smooth and enjoyable. The ecosystem for retirement consists of the cheerleaders of this relay race in family business. Let us understand why it is a challenge and what possible approaches can facilitate successful retirement. Fundamentally, retirement and succession are two sides of the same coin and without the incumbent vacating the leader's seat, there cannot be any question of succession. (We will discuss challenges related to succession in the next chapter.) The key question then is the clarity the leader and the family have about the timing and process of his retirement. It is easier for effecting retirement of family members other than the leader. Why? Very often, leaders Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. 86 | THE 10 COMMANDMENTS FOR FAMILY BUSINESS do not realize that they themselves have to push for their retirement because of the 'kingly' powers possessed by them. Neither the board (even if there is one effective) nor the family would have the courage or mind to ask the leader in good health to step down, often because of the command and control the person has over the others. In organizations with centralized authority, there will also be the question of indispensability looming large. Besides, explicitly pushing for a retirement deadline is often perceived as the end of the productive life of an individual. Retirement means 'tired', with a 're' indicating again, and again! The message is loud and clear: "You are very tired, and so it is time for you to move out and allow other 'untired' or smarter people to move in." This is indeed a disastrous message or thought for someone who has always bubbled with curiosity, enthusiasm, excitement, and what not throughout the life. This is particularly so when the person has reasonably good health. (Mind you, nobody thinks that they would ever die, especially when their health is fine, and there are far too many people around who are 'more eligible' to go.) So, we have a peculiar situation where the leader thinks highly of his relevance and capabilities. Hence, there is no real retirement of leaders in most family businesses, particularly when the business leadership has the powers to amend any policy! In the absence of any such policy, making any family member retire will not be easy. That is why most companies have one set of retirement age for nonfamily employees and 'no' upper age limit for family employees. We have witnessed several leaders of highly reputed publicly held companies moving the retirement goal post from 60 to 65 to 70 and beyond to accommodate their personal aspirations. If such decisions are approved by 'independent directors' of repute, we can imagine the situation in a family-controlled organization. They tend to give an impression that the business would collapse without them. They are like lizards that think that the ceiling does not come down because they are supporting it! Hence, the fundamental challenge in retirement is the recognition by the individuals at the top of the need for a change of the operating head concerned. Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. To Redefi ne Role but Never Retire! | 87 In other words, the onus is on the leader to set standards of behavior. After all, nobody is indispensable in this world! "I am any time available for my son for consultation but I do not offer any advice on my own" should be the mantra. It seems then that such a leader has a clear road map for the future. WHO TO STEP IN? Another challenge is the difficulty in choosing the best leader among the potential successors. Why? Because most often, there is nothing like a set of accepted criteria nor a clear leader acceptable to all. The leader and the rest of the family tend to avoid the matter as it may raise unpleasant questions. You are in a dilemma about following emotions when you know very well that logic should prevail. For instance, siblings/cousins may not agree on a common candidate other than themselves as each of them considers himself/herself the smartest. The eldest may be actually less competent than the younger siblings, but the family does not want to upset him and his wife, and bear the perceived embarrassment of explaining to the social network why he was not given the mantle despite, by virtue of being the eldest, being the most experienced. The issue may be between a son and daughter and the fear of the son-in-law indirectly controlling the business. There are also instances of huge differences of opinion, values, and strategies between the current leadership and the next generation. In some other instances, and this is a growing segment, the next generation is not inclined to enter the same business, or work under the existing leader, all creating a different kind of challenge. Yet another concern is the extent of trust the incumbent has in the capabilities of the potential successor ("After all, I am the best anytime!"). In all these situations, decision dilemmas may lead to eternal procrastination of the retirement of the incumbent with disastrous consequences. Leaders in good physical health often take this as an excuse too to cling on! Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. 88 | THE 10 COMMANDMENTS FOR FAMILY BUSINESS QUEST FOR IDENTITY Sometimes, a more critical challenge is in finding answers to questions such as 'How do I use my time if I retire? I have no other interest!'. As one grows old, the ability to take risk and flexibility naturally decline, and so it is not normally easy for a person with enormous powers on hand to vacate the reassured seat and explore new avenues. It is almost impossible for a person with proven track record in one area to start exploration and experimentation in a new area that may not always prove to be so successful. This may be a perception in most cases and not a reality, but people do not want to take chances. Everyone has the fear of failure in different degrees. This is particularly so for those who have spent a lifetime in a single business. Besides, in most cases, people do not realize or recognize their declining relevance in a changing society. Business leadership offers power to not only spend but also determine the destiny of the different elements (and stakeholders) of the business. Many will be afraid of disappearing into oblivion, and would somehow like to cling on to their current position. They do not often remember that they have the responsibility to hand over their 'business child' to someone to take care. As mentioned, they do not visualize their end at any time unless ill health hits them really hard. In other words, they have to facilitate change in leadership and stability of the organization that they have built or helped to manage. As long as some element of insecurity of power and control remains in their minds, business leaders seldom give up their position voluntarily; they follow the path that most politicians follow and convince themselves that they are doing so for the benefit of others! THE WAY OUT Philosophy has always urged people to respect the realities of the different stages of life from a dependent childhood to probable repetition of the same in old age. You grow to become irrelevant Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. To Redefi ne Role but Never Retire! | 89 or less relevant in most cases. To make people accept this as true, Indian philosophy has defined the five major stages in life as childhood, adolescence, married life, retirement, and monkhood for all human beings. We have no escape from them even if we pretend that these do not exist nor affect us. The characteristics of our body and mind undergo changes as we automatically and naturally move from one stage to another as we age, always subsequently. Hence, it is important and beneficial for people to voluntarily move into the retirement and monkhood stages as they age. In the five-generation-old Murugappa group, there has never been any ambiguity about retirement of family members from their positions in the company. Mr M. V. Subbiah, ex-Chairman of the group, who is credited with laying the foundation for the current surge in performance, did not even think of continuing beyond 65 years because, in a personal meeting, he said that his grandfather, the founder, according to his uncle, had laid the rule that 65 was the retirement age for the family members. Accordingly, his uncle and his brothers had all done it before him. Behavioral scientists have found that 'adaptability' is a major challenge to manage as one grows older. There are two dimensions to it: one, mental preparedness to change, and two, actual change. People who are aware of the need for retirement in the interest of continuity of the organization and smooth transfer of leadership would (and should) understand the challenges they would face when they have to adapt to changed circumstances. They will speak to others who either have gone through that phase or have knowledge about it. They will get the required awareness, and decide the set of activities they would pursue after moving out of the current engagement. In essence, they build the mental stamina to change. The second part of implementation is simple. It is a question of defining the process and timing. Managing retirement is found to be one of the most critical factors that determine continuity and growth of any family business. All businesses have a life cycle, like any living organism, except that the stage of decline can be perennially postponed in the case of a business if the critical competitive capabilities are constantly Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. 90 | THE 10 COMMANDMENTS FOR FAMILY BUSINESS ascertained and provided. The basic message of this analogy is that a business leader has to constantly adapt and remain mentally and physically fit to maintain business competitiveness. This is not always easy, but impossible beyond a point, particularly when the complexities of management and related challenges change as the business grows. In other words, since human capabilities for execution and strategizing change as one gets older, there is a need to introduce fresh and adequately capable talent to rejuvenate the top management pool. RELAY RACE Both the persons retiring and succeeding have great responsibility to ensure that the transition is smooth. There has to be clarity about the responsibilities being transferred now and those to be transferred later. The retiring leader should not be interfering in activities already passed over. Of course, this is possible only when there is clarity about what all things one does consciously and otherwise. For instance, many leaders have tendencies to ask for information, seek explanation, give advice, and sometimes instruct in areas where they are not supposed to interfere. You ask them about any such instance, and they will always deny it or find some or other excuse, as we have seen in a case in an earlier chapter. Let us look at a completely different case. The Chairman of well-known IT company has redefined his role by moving out of day-to-day management completely. He is deeply involved in the industry association activities. He said, "I have a clear plan to move out of the company completely by the time I turn 65." Leadership change involving retirement of the existing and succession by another is similar to a relay race (see Exhibit 5.1). In a relay race, different athletes run different laps depending on their individual capabilities and relative competitiveness. The whole race of four laps cannot be completed by one runner, particularly in the context of a business that does not have any definite end; everybody assumes that to be eternal. Hence, it is the responsibility Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. To Redefi ne Role but Never Retire! | 91 of the person running the lap currently to hand over the baton to the next person. This will happen smoothly only if both the runners have confidence in each other's abilities and have the determination to win the race together and not just any single lap. In the process, the possibility of the current runner holding on to the baton even after the successor runner has held on to it should be ruled out. This will be smooth only if there is adequate preparation of the timing, roles to be played by both, and the process of role changing. In the organizational context, this requires the leader to not interfere once his responsibilities have been passed over to the successor. The need for mental preparedness to adapt is crucial. Template 5.1, given at the end of this chapter, can be used as a planner for ensuring smooth retirement. Yet another dimension to remember is the choice of the next runner and the criteria for selection, as discussed in the next chapter. The above argument is based on the assumption that the family has a clear purpose of existence for the firm. So long as the goal is to build a business that continuously contributes to the family's and society's wealth, there is an implicit need to replenish its success capabilities. This also means that disregarding the eventual fate of the business leader, there is an independent identity of existence for the business. The role of the leader is to facilitate its successful sustenance. A number of the problems faced by family businesses can be managed if business leaders realize that the business is different from the persons who have set it up and managed it. Exhibit 5.1 Managing the Relay Race Baton Change Not Easy to Execute Do homework (Who? Which lap? Why?) Timing of detachment to be clear to the runners Process (and confidence) of detachment detailed out Speed of transition decided Exit role and what next considered Goal congruence agreed upon SOURCE: Author. Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. 92 | THE 10 COMMANDMENTS FOR FAMILY BUSINESS This is what B. K. Jhawar, who built up Usha Martin Limited with his brother, did as he neared the retirement age. As explained in the case on Krishi Gram Vikas Kendra (KGVK) later in this book, he and his brother moved out of their operational and strategic responsibilities gradually while increasingly spending more and more time in KGVK. In the process, they successfully inducted their sons into leadership positions in business. They had groomed the children over a long period, which included relevant education and training. The Jhawar brothers continue to be on the board of the company in emeritus status. FIGHTING THE FEAR OF THE UNKNOWN However, this is not easy for most people because of the uncertainties involved about the future challenges and their ability to achieve their goals. As mentioned earlier, the fear of the unknown is much greater as one gets old. Family business leaders and those who will be leaders tomorrow should start preparing for their subsequent stage of life early on, say, latest by the age of 55, assuming that all family executives would retire at the age of 60 or 65 or so. This is what Mr M. V. Subbiah, referred to earlier, did when he prepared for his retirement as the Chairman of Murugappa group. He not only left the board at the age of 65 after comprehensively strengthening the board and the group's operations, but also went away for a year to the Kellogg School of Management, USA, as a Fellow. He might have wanted to be away from the scene, having completed the responsibilities of its transformation and passed over the baton to the next runner. The Murugappa group has gone from strength to strength since then, and Mr Subbiah has moved on to play several other roles including the Chairman of the National Skills Commission of the Government of India for five years from 2008. Families that make policies for their members' involvement and departure, and strictly adhere to them, will always find retirement not difficult. Decisions on such matters should be made through a process of consultation. Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. To Redefi ne Role but Never Retire! | 93 ROLE OF A MONK IN THE MODERN AGE Retiring people should try to redefine their possible role in business, family, and society, and think beyond their routine. This will enable them to show more flexibility towards other activities. This could range from pursuing other interests, even peripheral, such as reading, travelling, and teaching, that they could not do earlier, to developing interest in quasi-business activities such as those of industry associations, educational institutions, or government policy-making bodies. Families also have to be more sympathetic towards both the material and emotional needs of older people. For instance, it is unrealistic to assume that someone who has never asked others for meeting their monetary needs would now start asking others for their routine expenses. In the multi-cousin family business referred to earlier, the process of retirement could finally take effect when it was decided that the company or a family trust would continue to pay the retiring directors the same emoluments including perks till the end of their life. This decision gave them the confidence to discuss the matter and the process in detail. Family members should ensure that the person retiring is well settled with a set of new activities. It will be foolhardy to think that a person who used to spend 10-12 hours at work would be able to start sitting back quietly at home from one fine morning, that too without any anxieties about the goings on in the business. They should receive regular summary reports and occasional briefing on the business; they should be available for consultation, but they should not dictate. Families may find Template 5.2, given at the end of this chapter, as a guide to accomplish the goal of leader retirement. In essence, human capabilities slow down gradually as one gets old and it is very difficult for an entrepreneur or leader to realize this and also accept that as the truth unless there is a major health problem. Such people normally have enormous ambition and insatiable appetite for growth and success and recognition. Basically, they always need challenges that keep them busy. As the individuals go up on the overall need hierarchy curve, there should Ramachandran, Kavil. The 10 Commandments for Family Business, SAGE Publications India Pvt, Ltd., 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/isblrc/detail.action?docID=1956745. Created from isblrc on 2023-01-11 04:08:49. Copyright 2015. SAGE Publications India Pvt, Ltd.. All rights reserved. 94 | THE 10 COMMANDMENTS FOR FAMILY BUSINESS be opportunities to accomplish and demonstrate these to the people around them. Hence, creating and developing an opportunity to express oneself is crucial for effecting retirement. Building on the Indian philosophical principle of performing one's duty with full dedication but with the preparedness to move on to undertake other responsibilities, any leader should identify and move on to do new jobs. Retirement is an unpleasant word for those who never get tired of work. Actually, such people should be only redefining their roles and never retiring. They have only one retirement that is the final retirement from this life! That realization alone will enable them to balance emotion and reason in deciding on such matters that affect them personally