August 20, 2010

Challenges Confronting Family owned Mid-Size Companies

Recently I’ve had the chance of listening to an old hand senior person from a fast growing mid-size Company making an introductory presentation about the organization from two years old slides that had names of people who had left the company job too. You could understand the impact he would have made on the audience about the organization he represented. Surely he didn't realize the damage he would do to the reputation of the business.

Family owned mid-sized companies all over the globe have to transition through the trauma of resolving the dichotomy of performance v/s loyalty.  The reverberations of this tumult have long reached to our India but many of us did not give much importance to solving this strategic issue leading to grave consequences for many mid-sized companies.  The jury is still out & a final call has to be taken at the earliest to keep the monster of failure away from the land of new opportunities.

Our mid- sized companies owned by established  family run business houses look like a fascinating kaleidoscope that could be admired for their beauty & size but have no definite strategic pattern that could offer equilibrium and stability to keep them on the growth path for long. 

Indian economy and the business organizations are experiencing unprecedented period of continuous growth which is presenting them with new challenges. Indian business organizations have been used to the organic way of growth and slowdown cycle since a couple of generations. They have never anticipated such long period of continuous change, therefore they have no strategies to keep the organization in equilibrium state while keeping the foot firmly on the accelerator.

Strategic equilibrium, during the growth phase of an organization, is a state of arranging the available resources in a manner so as to provide support to the infusion of new talent & resources to build on the momentum.  Many companies in India have grown leaps & bound in the past decade & most of them have diversified into several unrelated areas presented by the Indian economy.  Such companies have had long periods of organic growth & stability. The fast paced growths into diverse businesses have presented a major challenge to their strategic core competencies that such business houses had acquired over the generations.

A leading auto components engineering company that was established two generations ago presents a happy picture of growth with on the job trained manpower vying for attention amidst a smattering of ambitious smart engineers. You have latest machines silently working alongside improvised technologies of the past.  We have long been known as the land of ‘Jugaad’. A Jugaad is a contraption that gives almost similar but low- grade-less-efficient output as the original equipment would produce.  This was working as long as the level of technology in the country was low & not exposed to the global competition.

Most large organizations have understood the message and overhauled old technologies with swanky new generation lines. But still there are some mid to large size organizations that refuses to go for complete change as they are bound more by their attitudes & tradition than lack of resources or competencies. Sooner such companies upgrade to next level of technology better it would be for them to keep pace with the constant changes in future. This would improve their efficiency & bottom line.

There are similar challenges facing the growing companies with regard to their HR policies & plans too. Small organizations that have grown over the years from small fledgling businesses with few closely knit group of people to large diverse teams, find themselves at the crossroads today in resolving the conflict between rewarding loyalties and recognizing trail blazing performance.  They are increasingly finding themselves straddling the piquant situation of striking a balance between rewarding the years of loyalty and recognizing the performance of the recently joined new age talented professionals.  My close encounters with some mid-size engineering & technology organizations reveal the true dimensions of this harrowing conflict.  Such conflict of interests in a traditional society like India has disastrous consequences for the enterprise thus scuttling its growth.

Corporate world today is replete with incidents of unwanted  show downs between long serving employees having ordinary education, low motivation or desire for growth & change, having  average performance and the new age professionally qualified people burning with zest for competitive growth & consequent change. Indian corporate is certainly going through the generational shift for the better, hence would require professionals with higher appetite for growth and an attitude for adjusting with high rate of change in the environment. The companies of the future would be those who develop robust systems geared to factor in ever present change in the environment.

Let us face it; India is competing with global firms therefore ‘Jugaad’ days would soon be over. The new age companies would require skilled qualified professional to run them.  In such a scenario the organizations would have no choice but to create systems & processes that could engage the tech savvy professionals to fuel the growth in a fiercely competitive world. The loyalty has to give way to performance because any assets that are not aligned to the growth principle would hurt the prospects of the company and make it noncompetitive. 

Gurinder S. Ahluwalia is a Strategic Marketing Consultant based out of Chandigarh India. guriahluwalia@gmail.com  9417723313

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