Why family businesses fail at succession – stubborn seniors, ‘helicopter landings’

The importance of planned succession as a precursor for growth and building a lasting institution cannot be overstated in a family business. Successfully passing the baton to the next generation is a goal for many family business leaders. It can also be a sound business move if the right steps are taken. Quite often it does not happen that way and is therefore a huge challenge for many family businesses in India. There are various reasons why business groups fail to succeed in succession planning. For one, members of the senior generation refuse to let go even when formal family codes and family constitutions stipulate retirement ages.

There are also situations when there are conflicts with regard to the vision and implementation of business strategies and plans. Second, a key concern is how non-family personnel will receive a family successor. Perceptions of capabilities and nepotism in succession can undermine non-family employee commitment to the business and their continued participation in the firm. Non-family employees also often sense that family members have less accountability or responsibility than they do. Large differentiation in compensation between the younger generation members of the family and professionals sometimes demotivates the latter group.

Further, family firms should also demand more from aspiring successors. Longer hours and tougher assignments during the transition process can inspire confidence among non-family employees in the dedication of the successor. This can help reassure employees that a family successor is the right person for the job. The potential successor’s success is further enhanced if a non-family leader can train and develop them. Here again, the role of advisors becomes important.

Finally, the process of succession in family groups is often not transparent and is implemented without enough time and preparation. This also creates mistrust and conflicts within organizations. To overcome the above limitations and challenges, there are some best practices that family businesses can create and foster. These include: ensuring that there is no ‘helicopter landing’, instilling family values, fostering humility and family togetherness, and learning from the past.

Sandu Pharmaceuticals: No ‘Helicopter Landing’

‘Helicopter landing’ is an informal term used in business communication, especially in a family business context. It refers to a situation where next-generation family members join the group at senior positions, to which they would normally not be entitled. Just as a helicopter lands vertically, these young family members are literally dropped from above. This is not a perfect setting and does not promote meritocracy. Mumbai-based Sandu Pharmaceuticals defied this trend and inducted young family members through a proper succession-planning exercise. The youngsters had to prove themselves outside before taking on more complex and leadership roles within the company. Gargi Sandu, fourth-generation and eldest daughter of Shashank Sandu, graduated from Pune’s Symbiosis Law School in 2018.

A corporate lawyer, she joined the iconic Mumbai-based law firm Kanga & Co. and worked as an understudy to the firm’s senior partner, Preeti Mehta. After working there for about thirty months, she joined the legal department of Sandu Pharma with the department’s non-family professional as her boss. Gargi says it was not an easy process. One of the main challenges she faced when she joined the family business in 2020, was working with the people there and getting to understand where they were coming from and for them to understand her perspective. ‘Coming from the law firm, I was used to a fastpaced work culture. It was different here and was something I struggled with in the beginning,’ she recalls.

‘Additionally, as you know, while it is always good to deal with the family because they are very understanding, but at the same time, it gets a little difficult working with them because there are people who are stuck with certain processes or ideologies. I came from a point of view that when you need to take quick decisions on growth and scale, it should be done so with an entrepreneurial mindset of flexibility and alacrity. But at Sandu, there are many layers of decision-making.’

When she joined in 2020, the world was in the midst of the pandemic and there were many tight timelines with the additional pressure of a limited workforce. And since Sandu operated in the pharmaceutical domain, there was greater market demand for its products. In this environment, Gargi had a certain set of expectations of how sales could be met. But she had to give up on some of her expectations because many of professionals at Sandu had been working there for decades and were almost like family members; their opinion overruled her viewpoint. Similarly, she had many ideas on how the company’s presence on social media could be enhanced.

Being a family member she thought that everyone would promptly get on board to execute all these ideas. Then she realized there was a process to be followed. That was the first thing that was explained to her. She could have great ideas but there was a process to be followed. Sometimes she would go to her father in frustration, who would tell her that there was a past instance when something had gone wrong in the execution of a similar idea. The roots of this value system and its philosophy of humility go back to Gargi’s grandfather, to whom she was very close. Some of these nuggets of wisdom from her grandfather included ‘money saved is money gained’ and ‘health is wealth’. Accordingly, when Gargi stayed as a student at the Symbiosis hostel for five years, she would switch off the fans and air-conditioners if there was no one in the room.

Despite coming from a privileged background, while working in Kanga & Co. in Mumbai, she commuted by bus or train with her colleagues. Says Gargi, ‘That daily fortyfive-minute bus ride was such a great interaction to build close relationships and friendships, which is something that I will hold on to for the rest of my life.’ Gargi’s younger brother Virajeet also joined Sandu at a level in consonance with his age and experience. Prior to joining the family business, he worked in the risk-advisory division of the Big Four audit and consulting firm, Deloitte, in Mumbai. There, he was under the tutelage of one of the partners who specialized in the banking and mutual-fund sectors. After a few years, Virajeet joined Sandu.

Like Gargi, he too had no ‘helicopter landing’. He practiced and incorporated system integration in Sandu, which was something he had learnt at Deloitte. Says Virajeet, ‘In Sandu it is still an unfinished task. We are in the process of understanding every single segment of the business that the system is going to run through. Being a very traditionally set business we did have a few automated processes at our manufacturing unit, at the distribution centres. But the problem is that we were partly system-driven in particular departments, which made it even more challenging to integrate three to four departments together.’ How did the Sandu family learn and inculcate best practices in the group? One way was the learnings at family business conferences at ISB, Hyderabad, which were attended by both Gargi and Virajeet.

The other way that learnings came to the younger generation, interestingly through a counter-intuitive practice, was by not mixing professional and personal life and keeping home relationships separate. Although the jury is still out on whether this is a good practice or not, at Sandu’s they live by it. Virajeet, for example, calls his father Baba at home and Shashank Sir at work. Additionally, at the dinner table they never talk about business affairs. The Sandus believe that this distinction between personal and professional is important as it helps in professionalization and transparent succession planning. Being a family member does not grant that youngster any entitlement. He or she has to earn their stripes by merit. The source of these best practices stems from the classes that both Gargi and Virajeet learnt at ISB.