How Family Business Leaders Should Make Tough Decisions

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In the Harvard Business Review of February 2009, Donald Sull wrote about the two essential characteristics of great entrepreneurs in family businesses, Agility and Absorption. Agility was characterised as “Floating like a butterfly and stinging like a bee” whereas Absorption was described as “Taking a licking and still keep kicking”. Sull then applied these characteristics to two boxing legends of yesteryear. George Foreman was the reigning heavyweight champion. He was a giant of a man. He had ABSORPTION. Challenging him was Mohammad Ali, a man with great AGILITY. It was the fight of the decade, held in Zaire in Africa, with the whole world focused on what was labeled as “Rumble in the Jungle”. The prize for the winner was USD 10 million, a very large sum in those days.

Entrepreneurial leaders and their decisions

Entrepreneurs, unfortunately, cannot be like boxers, focused on Agility OR Absorption. They need to have BOTH these qualities. They need to float like butterflies and sting like bees AND take a licking, yet keep kicking. These qualities distinguished the founders of path breaking companies known worldwide – FedEX, Walt Disney, IBM, Siemens, Merck, Johnson and Johnson and many others. Besides these two qualities that served as the foundation, they surely had other qualities which were essential to their business – technical ability for Ford, creative ability for Walt Disney, software savvy for Gates, and the list goes on.

Can this combination of 2+ always be transferred genetically? Can the Founder ensure that the next generation has the 2+, a necessity to carry on the work that has been done by the founder of the enterprise? It is for the founder to be ruthlessly clinical in assessing whether any of his children meet the criteria. This is not easy. It requires great courage to say, YES. It requires even greater courage to say, NO.

It is this “greater courage” that made me a great admirer of Lord Leverhume, the founder of Unilever, who started with Sunlight soap, to build today’s giant FMCG company, which is known worldwide. I remember him for the huge placard that he had facing his desk, which said: “Management consists of doing simple things; doing them regularly and never forgetting to do them.” He always abided by this principle that helped him immensely.

Lord Leverhume also decided that after his retirement, the company would be managed by “professionals” and not by his sons. He assured his sons that they will inherit the shares, and the company will do much better (and so will they) if it is managed by the professional managers he had identified. It would not be surprising if the present Lord Leverhume, who is undoubtedly a wealthy man, does not even know what the present turnover of Unilever worldwide is!

In family business, these are tough decisions to be made, requiring one to be cold and clinical with one’s own kith and kin. While this may be unpleasant, it is a necessity. To the two essentials for entrepreneurs must be added the third – fair judgment. It is for the good of the organisation and the whole team, rather than, only for the good of the individual and his immediate family.

If all three essentials are present, it is the best combination that a family business can have. And these family businesses are truly blessed!