Longevity for family businesses

About a year ago, a bitter feud broke out between two siblings for control of the industrial empire founded by their father who had died two years earlier. It was played out extensively in the media, with the audience treated to new twists and turns every other week for nearly six months till it was amicably, if grudgingly, settled with outside intervention. The general feeling in the public mind was that had the father settled the question of succession/division in his lifetime, much bitterness could have been avoided.

This precisely is the theme of the book under review""Don't Leave it to the Children by Alan Crosbie. It looks at the question of survival of family businesses, most of which do not survive past the first generation. Barely 6 per cent of them last to the third. Yet family businesses are vitally important to the economy of any country, comprising 70 to 80 per cent of total businesses. The author has the benefit of an insider's view, as he is the fifth generation of the original founder, Thomas Crosbie, who set up a newspaper business in Cork, Ireland, more than 150 years ago. Although he self-deprecatingly observes that the business held together all those years through luck, convenient death and male chauvinism, it is obvious that he himself was well groomed for the job when he took charge in 1993 while still in his 30s. After he finished school, he was sent out to work in various small newspapers in the US and Australia. He started his career in his family newspaper, The Cork Examiner, selling space. When he took over in 1993, the business was in decline, but he turned it around in two years and made it into a national newspaper, The Irish Examiner, with growing prestige and an array of other media activities.

He has studied family businesses both in his home country and abroad, mainly in the US and in Europe. This book therefore captures his observations on many businesses of different types, their struggles, their successes and some in terminal decline. After a meandering and gossipy passage through the earlier chapters, he gets down to discussing the various factors that affect business survival across generations. Essentially, these boil down to succession decisions being taken more on rational than emotional considerations.

One compelling story is that of Gucci. Guccio Gucci, an Italian craftsman, first worked as a waiter in a prestigious hotel in London for 10 years, where he noticed that the luggage used by the wealthy patrons was of poor quality. He then went back to Italy and set up a leather goods business. His designs soon captured the attention of the rich and famous and he achieved international fame. He had two sons, Aldo and Rodolpho. Aldo was industrious and took keen interest in the business. Rodolpho liked the easy life and hardly showed any interest. Yet Gucci left them equal shares. Aldo had three sons; Rodolpho only one, Maurizio, who had an extravagant lifestyle. The cousins did not get on well but Maurizio prevailed because he had the larger share. Aldo's sons, out of desperation, sold out to a venture capital firm, which soon found that it couldn't tame Rodolpho. So they bought him out.

The numerous case narrations present a veritable buffet of solutions for possible succession problems. The main point that emerges from these is that each generation must plan for succession well in advance, with proper communication to all the parties concerned, and put in place adequate systems for the change of guard. The author also recommends that the CEO of the family business must not treat it as a lifetime job. In his own case, although he is around 50 now, he has decided to retire at a predetermined age and ask the board to look for a successor outside the family. He has four young children and has decided that if any of them wants to be the CEO at a later stage, he or she will have to acquire suitable experience and compete with other professionals.

This book would be of considerable interest to family businesses in India, whether small, medium or large, who seek to ensure their survival through generations. A noteworthy feature that has been increasingly in evidence in recent years is the number of female inheritors who have been eminently successful in managing their businesses.

---

DON'T LEAVE IT TO THE CHILDREN

Alan Crosbie
Corpus Collossum
Price: Rs 195; Pages: 191