SPJIMR’s CFBE co-hosts its 3rd SPGC Conversation Series | July 24th 2024
The SPGC Conversation Series for 2023-2024 was inaugurated by the Centre for Family Business and Entrepreneurship (CFBE) with a session on “Responsible Innovation Among Family Businesses and featured Prof. Alfredo De Massis and Mr. Harsh Mariwala in a discussion moderated by Prof. Tulsi Jayakumar. The second series focused on the “Internationalization of Family Firms” with keynote speakers Prof. Tanja Leppäaho, Prof. Sarah Jack, and Prof. Andrea Calabrò.
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00:00Mr. Prasad Kumar and Christina Cruz, a practitioner and a researcher and prolific
00:10author and academic respectively. You can put it on full screen now.
00:15Harsh, can we just, Joe, can we mute everyone?
00:30Do you need to put it on full screen share?
00:35Yeah. So the topic for the day is resilience among family firms. And just to take you through
00:40what is SPGC, what is STEP. Next slide. STEP stands for Successful Transgenerational
00:46Entrepreneurship Practices. And it is an initiative launched to explore entrepreneurship
00:52and entrepreneurial practices within family businesses. So here we have, I think at last
00:58count, how many were it? What was the number, Advita, about 40 plus? Yes. 40 plus schools
01:07across the world and business families who are engaged in research, teaching and practice-oriented
01:12activities to generate solutions that have immediate application for family leaders.
01:18So STEP and SPGC is proud for the kind of research that it does, for the best practice solutions that
01:26it offers to family businesses across the world and to try and perpetuate the legacy across
01:32generations. So today we are looking at the third edition of the STEP conversation series.
01:41Our first two series, Joe, if you can just change the slide.
01:49The first set of conversations that we had were with Alfredo Di Masi and Mr. Harsh Marivala,
01:56again a practitioner and an academic, and the topic was responsible innovation among family
02:02businesses. The second series, which we had in February of this year, was with Sarah Jack,
02:09Tanya Lipaho and Andrea Calibro. And the topic of this conversation was internationalization
02:16of family firms. Today's topic is resilience among family firms. And we have Mr. Prasad Kumar,
02:23who is our speaker for the day. If I'm looking at family firm resilience among,
02:32if I'm looking at family firm resilience, and we're talking about resilience in an age of
02:38turbulence and uncertainty, then why do we need to talk about it? After all, we are STEP.
02:45And what does STEP do? STEP looks at perpetrating legacy. It talks about transgenerational
02:51entrepreneurship. So how do we ensure that family firms sustain across generations in an era,
02:58which is characterized by uncertainty and turbulence? How does resilience play an
03:03important role there? And again, on a lighter note, what happens in Vegas doesn't remain in
03:10Vegas. So what happens in each of the three subsystems in a family business, ownership
03:18and business does not stay in any one of these subsystems. It percolates down to each of the
03:24other subsystems. And that is where we want to understand when we are talking about resilience,
03:30are we talking about resilience in the family? Are we talking about resilience in the business?
03:35Or are we talking about resilience as far as ownership or even the family business is concerned?
03:40So without much ado, let me just very briefly introduce the speakers to you for the day.
03:45Mr. Prasad Kumar is a practitioner. He has been associated with some of the big family business
03:51groups like the GMR group. He has been the chairman of RAXA, Homeland Security.
03:58He's also the founder of Human Endeavor Associates, which is a niche consultancy firm
04:03specializing in strategic advisory for owner and partner led companies, family businesses and
04:08corporates. He is also the founder of Parampara Family Business Institute and was also the vice
04:14chairman and managing director of this institute. Post retirement, he's now acting as an advisor
04:20and academic council member of this particular institute. As far as Christina is concerned,
04:30is a full professor of entrepreneurship and family business at IE University and is the director of
04:36the IE Center for Families and Business. I think the families and business is something which is
04:41very close to her heart. She is also serving as an associate editor of Family Business Review,
04:47which is the leading academic journal on family firm research. Her research is published in all
04:52the leading journals. I don't need to read you and go through all of these. She's been awarded
04:59the fellow of the Family Firm Institute and included in the 40 best business school professors
05:04under 40 by Poets and Quants in 2014. But more importantly, I think Christina has also brought
05:09to family firm literature, the term socio-emotional wealth, or at least kind of made it far more
05:16recognizable than what it was earlier. So welcome both of you. It's actually a pleasure and privilege
05:22to have you here on this platform. Can we just move on? Thank you. With the first set of questions,
05:34Mr. Kumar, we will need to mute everyone.
05:44Yeah. So Mr. Kumar, what has been your experience about family versus non-family firms
05:50and how they respond to adverse environments? Do you consider both family and non-family business
05:58firms to be equally resilient? So thank you, Pulsi. Pleasure and
06:04privilege to be contributing to the session. Very quickly, as a practitioner, I just need to
06:11take a minute. Most of my advisory practice lasts over several years, sometimes two decades
06:21with different families. It is not a transactional kind of engagement with families.
06:32Over the period, I have veered towards culture before structure kind of approach.
06:44So some of what I say will indicate that preference in terms of associating with
06:52family businesses for whom I have become a family coach and so on and so forth. Just a quick overview.
06:58Now to come to your question, Pulsi, it is very difficult to generalize a broad…
07:03So I was saying it is still difficult to generalize across. I have consulted both
07:16with family and non-family. But overall, I would say family firms manage resilience
07:25better than non-family firms. This is a point of view. I do not have any
07:32academic research to support it because I am a boiler suit practitioner.
07:37But let me try taking a balcony view and looking at what I see. I think managing adversity requires
07:46concentrated ownership and concentrated ownership enables quick decisions and agility. You need to
07:54be quick to respond to that. Second, family businesses have skin in the game.
08:04Three, they have an entrepreneurial orientation which helps them deal with situations in a very
08:12creative manner. They have strong blood relationships which create the speed of trust
08:20and unconditional support. And most importantly, whenever I have engaged with family business in
08:26the center of a crisis, these blood relationships, one for all, all for one feeling is very crucial.
08:40The next point very quickly is that family firms are keen to hand over a stable business
08:45to the next generation and protect the next generation. And finally, family firms in my
08:54experience put reputation ahead of wealth, particularly when they are in the center of
09:01a crisis. Non-family firms, I have worked with several. They are large, matrixed,
09:08some are multinational, some Indian. The very nature of their structure, the process,
09:14the matrix, all of them, all of it makes it slower to respond.
09:22You need socialization of several constituencies. Second, distributed ownership also suggests that
09:30all stakeholders need to be on board and all this takes time. If they are listed,
09:37then short term responses to the capital market, what we call quarter by quarter responses.
09:45Also, I think individuals in non-family businesses are more distant,
09:50they are individualistic and they have a professional contract rather than what I
09:56call a psychological contract for the well-being of the firm. So, for these reasons, very quickly
10:02put, I gear towards believing that family firms manage resilience better than non-family firms.
10:15You're mute.
10:20Decided to put myself also in mute, Christina. Okay, no worries. So, a very interesting
10:25observation about reputational coming ahead of wealth. Christina, would you agree with that?
10:31Among family firms, reputation coming ahead of wealth, especially during a family, during a
10:37crisis, what do you think family firm resilience refers to? The context of the family business,
10:43what is resilience really? Does it refer to resilience within the firm or the family?
10:49What do you think it means? Okay, so thank you very much for the question and for inviting me
10:56to this talk. So, I was reflecting really about this question and I think we've seen kind of an
11:02evolution in family firm research regarding where to measure resilience and what does resilience
11:08mean in family firm context? And I think this evolution is also reflected to this idea of going
11:14from a focus on the firm to a bigger focus on the family, you know, which is going right now in the
11:21family business research. If you think about the first really review of resilience was 2011,
11:29Prisman and Chua did make this review on family firm resilience and they really talk about
11:35resilience as something that was occurring at the firm. Actually, what they talk is about
11:40these mechanisms that the family firms use to adapt to change, which is the definition of
11:47resilience that they were using. And then they identify some kind of mechanisms that the family
11:51firms were using like success in the strategies, attracting marital talent, creating family social
12:01capital, okay, all the things that our speaker Kumar was mentioning before. No, this kind of
12:09thing that from a practitioner's side he was mentioning, they were already there at the firm
12:14level. So, for many years it's been mostly at the firm level how the family firm was building
12:20mechanisms to overcome change and to adapt to change. But if you ask me what do I think and
12:28where the resilience of the family firm resides, I think it's really on the ownership. I mean,
12:33it's the concentrated ownership of the firm that really gives the firm the capability to be
12:38resilient. So, I think the resilience resides really on the family because as he mentioned
12:46before is this ability to have more skin on the game, it is a socio-emotional wealth that we may
12:52talk later, that makes the owners of the company resilient. So, I think it's really about
13:00more about how to be resilient in our organisation and what is the ownership role on that. And I think
13:07we're still there. So, I think there is a huge opportunity of research to really understand more
13:13how the owners build resilience in organisations. Absolutely, Cristina. So, I think you've touched
13:19briefly upon the socio-emotional wealth and we know that that is your forte and that's what
13:25Cristina is known for. So, if you could just shed some more light on what are the specific
13:31socio-emotional wealth considerations which impact the resilience of family firms.
13:38The SCW concept for some of our attendees here because we have some scholars in family business
13:44also, but there are some who are just in their first year. So, maybe you just want to briefly
13:49talk about that. Very happy to do so. So, thank you, Tulsi. So, as some of you know, I've been
13:57working in the past 25 years with this idea of the socio-emotional wealth in and basically what
14:03the socio-emotional wealth theory is about, it says that what makes family owners different from
14:08non-family owners is that the family owners, they have some affective value in the company
14:15and non-economic goals that they also want to get, which is as simple as that. This is the
14:21concept of socio-emotional wealth. So, when I'm owning a company, I not only want financial returns,
14:27I also want to get some non-economic social emotional wealth of the family.
14:34What is socio-emotional wealth about? It is about maintaining control. So, families really want to
14:39keep control of the companies. It is about maintaining family reputation. It is about
14:45ensuring long-term stakeholder relationship. It is about keeping the emotional attachment
14:51of the family between the family and within the company. And it's also about ensuring a legacy.
14:58So, again, I'm happy to see that Professor Kumar, he identified all these things in the practice
15:05side. This is what we identify in the research side, that all of these things are very important
15:10for families. And I think socio-emotional wealth is everything about resilience. I mean, if you
15:15think about the theory of socio-emotional wealth, what the theory says is that the families are
15:20risk-averse because they want to preserve some of aspects of the socio-emotional wealth. So,
15:28families won't take risky decisions because they want to preserve control.
15:33They won't take risky decisions because they want to preserve their reputation.
15:37But whenever the socio-emotional wealth is jeopardised, and this is likely to happen
15:42in a turbulent environment, the family will take infinite risk to save their legacy.
15:49And this is what socio-emotional wealth is about. It's explaining why families are risk-averse and
15:54risk-seeking at the same time. So, going back to your reputational thing, I think families,
15:59we've seen families putting all the efforts to save a company. And we have a lot of evidence
16:07that shows that family friends behave more conservative during a steady time, but much
16:14more risky during crisis time. And this is because when they lose the company, they are
16:20not losing a bunch of assets. They are losing the entire socio-emotional wealth of the family.
16:26Absolutely, Cristina. I think that, again, is a very, very interesting insight.
16:30This preference reversal, again, kind of a theory which talks about more risky
16:36endeavours being taken up during a crisis, which is what is completely counterintuitive.
16:42I think there is a paper by Lipaho and Ritala also on the same. Yeah. So, Mr. Kumar,
16:50would you agree with the role of the socio-emotional wealth, which is basically
16:54the non-financial goals, being an important contributor to the resilience of family firms?
17:00As a practitioner, what do you attribute resilience of the family firms to? Is it
17:05the risk-taking or the risk-avoiding kind of a nature?
17:10Yeah. So, I completely agree. I could not agree more. And I speak from whatever experience I have
17:17had. As I said, I have had long associations with many families and I have actually sat
17:23with them, alongside them from one crisis, at least three crisis or two crisis per family.
17:33I mean, that kind of thing, some black swan, some supply chain, indebtedness, cash flow,
17:45government policy, regulation, demonetization, a whole host of stuff like that. I have had the
17:53fortune of being the ringside friend to them. So, from that experience, what I did before this
18:00session was to talk to some of my family people, family business people. I asked them, tell me how,
18:09reflecting back on what we did, what do you think were some of the key aspects of managing
18:14resilience? So, I expected them to tell me about broken business models, lack of digitization,
18:24poor cut-level decisions, overreaching, financial mismanagement, and so on and so forth.
18:30And I was surprised that I did not hear any of that. What I heard was teamwork,
18:40no shame, no blame culture, when the resilience, you know, adversity hits you,
18:48strong alignment and affinity amongst owners and family members, cohesion, spouses and family
18:56support. So, the kind of support that spouses gave the business owners and managers was incredible,
19:06reputation I have talked about, ahead of wealth, all for one, one for all culture,
19:12stewardship, we have to leave something better for our next generation,
19:16celebrating small wins, buying time, dowsing one fire at a time, keeping the entire system
19:27informed of what is happening, accepting reality, being inclusive, a common vision and a purpose.
19:38So, this is what I heard. And this is going, in most of what I say, this is going to be a central
19:45sort of keynote of what I want to share. So, I completely agree. I couldn't, I mean,
19:53it's all there. And just one more quick point, you know, we write constitutions,
19:58and we don't just write constitution, we develop the family and constitution is one vehicle.
20:02So, I picked up some, you know, we do what is your business purpose? Why are you in business?
20:07Etc, etc. What are your family values and business values? So, very quickly, a sample of purpose,
20:14institution and perpetuity, entrepreneurial organizations, entrepreneurship, innovation,
20:21a global business that contributes to society, some ownership, create and preserve wealth,
20:29legacy, which we want to pass on to the next generation. These are all purposes. Let me look
20:36at values, trust and faith, health and well-being, celebrating differences, spirituality,
20:44adaptability, reputation, interdependence, support, mutual growth, etc, deliver the promise,
20:52social, etc, etc. So, you get a sense of, and these are all participatively arrived at when we,
20:58you know, build and curate the constitution. So, these are just some data points or some
21:05experiential points to support what Dr. Krishna is saying.
21:11Thank you, sir. But this is very, very interesting. And what we would like to also understand from a
21:17practitioner perspective is, I think, at the end of the day, if you if you don't measure it,
21:23you really don't know whether it exists or not. So, as a practitioner, with so many years of
21:28experience working with all kinds of family firms, how do you think that academics could use
21:35or even build some of these metrics to measure resilience? How would you measure resilience?
21:40Yeah, so it's very difficult. I don't have any quantitative measures. I have only experience.
21:47But I have, again, sitting in the balcony and this session has allowed me to do that.
21:54So, for instance, the time taken from idea to implementation is one sort of metric.
22:05What a criteria that occurs to me. What is the speed of implementation?
22:11Because crisis cannot, I mean, you can't wait and, you know,
22:16pontificate or whatever when a crisis hits you. Second, organize the families which have
22:21written a constitution or have a sense of governance. Governance, as you know,
22:27helps separate the family hat from the business hat and the ownership hat and all that goes with
22:32it. Single leadership, two in a box, three in a box doesn't work. You need a single leader,
22:41my experience, single leadership with moral, strong, structural, you know,
22:49authority. A culture which is low on entitlement and high on enterprise.
22:56A family which has a portfolio of businesses rather than one business
23:02the way they allocate capital to these businesses in terms of risk profiles and,
23:09most importantly, no emotional attachment to any asset. Pruning the factory and pruning
23:15the business portfolio from time to time. These are some of the things that would,
23:21from my point of view, be some top level ways of looking at the ability or the capability to manage
23:32adversity. So, I don't have any metric but these are just some learnings I have.
23:39Great, great, sir. Thank you so much. Christina, how do you think we measure
23:43resilience within the family business context and what methodologies can we
23:49develop in order to better measure the impact of SEW on family firm resilience?
23:55Okay, so to answer to the first question, I will go back to the general literature on resilience and
24:02I mean, it's not easy to measure, okay. So, as we know, this is a very blurred concept and it's,
24:07I mean, we know what it is, it's the ability to adapt to change but then there is also the debate
24:12is the ability to absorb change. It is a passive or an active reaction. So, when we are not sure
24:18about the concept, it is very difficult also to decide how we're going to measure the concept. So,
24:24what I see as a quantitative researcher, there is a way to measure this resilience at different
24:30levels. So, basically, what we do is a set of attitudes or actions that are separate from the
24:38individual that are involved in the firm. So, as I said, it seems that it's a detachment of
24:42the literature between what the firm does and what the individual do. And this is a big problem in
24:48family firms because I don't think we can separate like that because the imprinting of the family in
24:53the organization is really high. But if you see many of the papers on resilience of family firms,
24:59what they do is to say, okay, we're going to take firm level measures and we're going to see
25:05how they change. So, for instance, firm size or employees or any kind of strategic actions
25:11before and after a crisis. And this is what they do. It's an indirect way to see, okay,
25:19do family firms preserve employment or not? Do family firms involve more in fixed assets during
25:26a crisis or not? And then if they do higher than a non-family, we identify that also as a measure of
25:33organizational resilience. And the other way to measure that is really about thinking about
25:41individual actions. What are the best practices that the family firms are using to overcome the
25:47resilience of the organization? So, if we go to the general management literature, they try to
25:54correlate characteristics of the CEOs with strategic change. So, I mean, depending on your
25:59professional background, your education, your experience, how much you promote change or not,
26:07okay? When we go to the family firm, as Mr. Kumar was saying, there are also some studies that start
26:14to see what are the governance changes, succession planning, whatever has been done, especially during
26:20the COVID crisis. I mean, for those of you who are students that are maybe starting to do thesis
26:27or research on resilience, you will see that it is an explosion of papers to understand the
26:35behavior of the family firm during the COVID crisis. And we have observed several things that family
26:40firms have done to become more resilient. So, probably they have, for instance, for me, I'm
26:46conducting a study with a Mexican student in which we measure the crisis, and then we measure
26:55social and emotional wealth, and then we measure pre-crisis activities and post-crisis activities.
27:00And then we see, for instance, that the COVID, and I don't know, Mr. Kumar, if you have observed that,
27:06has sped the succession planning, okay? So, the next generation has been integrated in the company
27:15faster as a result of the crisis. And I think this is very fascinating because we're talking
27:21with the next gen, many of them said, I didn't plan to join, but because of the crisis, finally,
27:27I had to join. And I think this is a very interesting area for research, how this next
27:32generation that many people say that they are not interested in anything, that they don't care about
27:37the family business, whatever, they really care. And with a period of real crisis, they have been
27:44incorporated into the company, okay? So, I think this is very interesting.
27:48Regarding the specific of social and emotional wealth, and again, for those of you who are
27:52trying to do research, I mean, the problem with social and emotional wealth and resilience is that
27:57we are dealing with two very difficult constructs, okay? We are not still sure about how to measure
28:04social and emotional wealth, so measuring how to link to resilience is a huge thing, okay?
28:10So, my advice would be, maybe if you are doing a survey, use this case of social and emotional
28:15wealth that are already validated and try to link that to some specific resilience concepts, like
28:23the direct or indirect. Or, and this is something that I more and more, after 25 years as a
28:30quantitative scholar, now I became a super fan of the qualitative thing. So, maybe it's to go there
28:36and ask, really, the families, what do they mean by resilience, how they are practicing resilience,
28:42and try to come up with new constructs, really, to understand what resilience is for family
28:47organizations. Yeah, Christina. So, somewhere, I think the human capital and the social capital
28:55that families possess are going to be very, very important in terms of just measuring and how do
29:01those, what is the impact of the crisis on the social capital? Like you said, quantitatively,
29:08you go around measuring what were the number of employees before and after or during the crisis,
29:15right? And the word crisis itself can be interpreted in multiple ways. As Mr. Kumar said,
29:21in India, we've been facing a whole set of different kinds of crises completely,
29:25some which are more financial in nature, then there are geopolitical concerns, and of course,
29:30the Black Swan events. Right, great. But are there any specific cultural traits that are
29:37particularly beneficial or detrimental to resilience and family firms? And how do you
29:43look at context? How do you look at the institutional theory in particular, in terms of resilience?
29:50So, I do think, I mean, we all know how important it is to conduct,
29:59to contextualize family firm research, not only in resilience, but in anything. So,
30:03I think there's been many calls in the last year or so about to do more research on
30:08how context affects family firm heterogeneity, family firm behavior. So, of course, I think
30:14there is. So, I'm doing now some qualitative and quantitative projects in, for instance,
30:21Latin America, which it seems to be a very difficult, a very different institutional
30:26environment compared to Europe, where it's the buka, you know, the buka environment, it's
30:32much more prevalent, okay? And I think, of course, there is context matter. So, I'm thinking about
30:39now there is this study of Luis Gómez-Mejia in 2022 about family control and employment
30:47security in family firms. And this study, for instance, which is done in international 33
30:52countries. So, it shows that family control firms, on average, they offer, they are less
31:00reluctant to reduce their workforce compared to the non-family, okay? And this effect is
31:06much more prevalent in contexts characterized by high political risk. So, I think what this
31:14research is showing us is that the resilience of the family firms sometimes is highly evident
31:19in contexts where the institutional context is weaker, okay? And this is one of the things. So,
31:24for me, this is why the family sometimes use self as a substitute of institutional institutions,
31:31and they are offering employee more protections where the institution cannot give that to them.
31:37The second thing that I also observe, and maybe we can discuss this later, is that in this
31:42different context, Latin America, or in contexts where social networks and social capital,
31:49as Tulsi was mentioning, the resilience is also very dependent on the network of the founder
31:54or of the family. And that is very important. So, whenever there is a crisis, the founder can just
32:00take the phone and talk with any politicians, whatever, and then it's easier, no? And it's
32:04very important to work with network, which I did not observe when I did research in Europe. I mean,
32:10at least not that much, no? And I also think that this is interesting, but at the same time,
32:15it's also a problem because it complicates a little bit succession. Because the founder
32:20centrality is so high that then to build resilience in the next period of the organization without
32:27that strong founder centrality, I think it could be a real problem. Okay? This is one of the
32:35examples, no? But in which I observed that culture for sure matters a lot. But of course, it's also
32:42in terms of values, the importance of reputation is going to be different in different countries.
32:46So, I do think there are many, many aspects of culture that affect resilience.
32:51Absolutely. Absolutely. Mr. Kumar, what is the role of culture of innovation
32:57in building such resilience? Yeah. So, I think innovation is only
33:02getting the foot in the door. I mean, it's a threshold requirement from my point of view.
33:08There are other, I don't know whether they fit into culture per se, but there are some points
33:14I think are important. For instance, I think I'd like to take over from where Christina left.
33:22Harvesting multiple networks to create value is of great value. That is one. The founders
33:30mentality, you know, succession is actually institutionalizing the charisma of the founder.
33:36So, I'm just not talking founder, I'm talking founders mentality, enables years to the ground
33:42and a frontline pulse. So, this is something that comes very, very easily.
33:48One thing that family firms do is they develop what I call institutional members
33:55amongst their non-family professionals. Members who will stay even when there is blood on the
34:02street. Members who believe that organization interests come before their interests. So,
34:08they have a clutch of institutional members. I'm not speaking just loyalty, but institutional
34:14members, which a major source of strength to them when they get to this thing. Advisory boards,
34:24setting up advisory boards, getting external independent advisors. I think I mentioned this
34:30before, one of the major achilles heels in managing adversity is emotional attachment
34:38to a particular asset or a business when you can actually divest and release cash.
34:45Reinvesting, at least in India, reinvesting all surplus in the business,
34:50not having a robust dividend policy, not creating a war chest, all of this came up in COVID.
34:56So, now people have started giving dividend legitimately to themselves and building a war
35:02chest. Spirituality, I mean, I found that families which have a certain spiritual
35:11traditions, that spiritual strength is very important. Ego-neutral culture, very important.
35:19Spirituality and ego-neutral are two sides of the same coin. And I'd like to bring to
35:25the notice that I use something called, something that Paul Stoltz has written,
35:31on adversity quotient. So, today I train many, many family members and owners
35:40on increasing their adversity quotient. There are some families who don't have a thick skin
35:47and every small thing worries them, they spend sleepless nights. So, how can they get more
35:55how can they increase their adversity quotient? I found this to be extremely useful and I'm
36:03very thankful to Paul Stoltz and his idea on adversity quotient. There's a survey,
36:09you can profile yourself and a lot of coaching can help you get there.
36:15So, I think these are some of the points I'd like to make in addition to innovation as being a
36:23a part of the aspect of resilience. Sure. I think I'm going to try and wrap up with
36:31one final question and then we open it to the audience for some more questions.
36:35So, Kristina, what do you see as future research areas at the cusp of SEW and resilience among
36:42family firms? I think the latest paper was 2024, Yilmaz and all of you, you've already
36:48published something, but what future do we look at? So, I mean, I think, as I mentioned at the
36:57beginning, that there is still a lot of room for research, which is more focused on the family
37:02as a unit of analysis and not much on the firm. So, I think we now know, as Mr. Kumar was saying
37:10at the beginning, that maybe family firms are more resilient in crisis period, whatever. So,
37:15this is something that empirical research has shown, but we are still missing a little bit about
37:20the mechanism. So, Mr. Kumar listed them very well from the practice, but from the academic
37:27point of view, I don't think we are still much clear about which of the mechanisms that family
37:32firms use to build strong resilience. So, we talk about social capital, governance, accession,
37:37but which are the exact mechanisms? I think this is still a thing. So, at the organisational
37:45level, I think there is also a role to really try to understand the type of strategies that
37:50the firms are going to use to respond to resilience. So, it is about innovation,
37:55it is about reinforcement, it is about preservation, it is about selling. How do the
38:01different family firms combine the different strategic actions that you can take to overcome
38:07a crisis time or to adapt to change? So, do family firms use innovation or exiting or all of them
38:13together? I think this is also ambidexterity, also not this explore, explore, this also could
38:18be a thing. And of course, we need to understand more about the role of non-economic goals. How do
38:24non-economic goals moderate all these things? So, are firms which are more innovative and have
38:30strong values and goals, they became even more innovative during a crisis time or these strong
38:38family goals make them a bit more conservative? No, I think there is also this moderated effect.
38:43It is still not well understood and I think it will be interesting to further investigate that.
38:48A second line of research that I think would be very interesting is moving beyond the firm
38:53and I think Mr Kumat also mentioned that and I totally agree, is to go beyond the firm boundaries.
38:59Okay, if we are going to move to the family, we need to understand not only how the family
39:03firm is resilient but the entire family ecosystem, this entrepreneurial galaxy of the family.
39:10It is not only about the family firm but also the family office, the family foundation,
39:14the family private equity fund or whatever. So, how the family do the capital deployment among
39:21the different units to build resilience? I think this is something we know nothing about
39:26and I think it will be for me a fascinating topic of research, going beyond that and see
39:32if there is, I mean, when they try to adapt to change, do the family put all the resources in
39:36the family or they stop reinvesting in the family and they took more to the family office?
39:41How does CSR activities are affected when there is a crisis? Do they continue for the reputation?
39:46Do they stop? Do they do more through the foundation? So, I think these are questions
39:50that we don't know much about and the third one that I'm really interested in and I think
39:56it's also a topic to explore is the role of next generation. So, as I said, at the
40:03practitioner level and at the academic level, I observe both, a higher engagement of the next
40:08gen when the crisis came. So, I think now that we have some time now after the COVID thing,
40:14it would be nice to see those next gens that really went into the family business for
40:19a more commitment, probably how they're doing, if they think that was a good idea and probably
40:24we're going to learn a lot about succession in family friends. I think analysing transitions
40:29during resilience, I think it's also an interesting topic to explore. There are many,
40:35but just to summarise, I think there could be three that could open new lines of research for
40:40people who are interested in these topics. I think that's a lovely set of questions that
40:46one could work on, Christina. Personally, I think the third topic that you spoke of is something
40:51which I would be very keen to work on as well, which is the next gen and Gen Z in particular
40:57and how their mental state might be very different from that of the founder and how have
41:02they coped up and how would they cope up because the adversity quotient may or may not be that high.
41:08So, absolutely great. Mr. Kumar, last words on your advice to researchers and students of family
41:14firms who are assembled here today, how can they help in building family firms which are the most
41:19prevalent forms of organisation worldwide into more resilient organisations? Well, I don't know
41:25about last word, but I think as a practitioner, not much attention has been given to how family
41:35business advisors can intervene. What do they do to intervene in a family system?
41:42What are the various ways in which they intervene? So, this is one area of
41:48help that family advisors, I believe, are very useful and many families are now
41:57seeking the help of advisors. So, in that context, what are the kind of interventions,
42:02how do they partner with families and how do they bring out this piece of resilience? This is one.
42:10Second, rather than wait for the adversity, how do we prepare family firms
42:20to meet adversity? One is to look at the family in the midst of adversity and understand resilience
42:27and the other is to prepare them and that could be a long haul preparation.
42:33And I think you need to work at the individual level, you need to work at the
42:40nuclear family level, you need to work at the community of the family, all of them,
42:47any weak link there, I am using it in a metaphorical sense, can make the resilience
42:56unstable. So, if one nuclear family is despondent and two other nuclear families are gung-ho,
43:07the despondency pulls the energy down and they get focused with that rather than the adversity.
43:13So, this is the second one in terms of how do you prepare them. And the third one,
43:19again NextGen, I have had a lot of trouble with NextGen, I like, I mean, I work with,
43:26you know, you work there. The sense of entitlement because they have not created any value directly
43:35is a big subject. So, how do you build a sense of enterprise in them, however,
43:44however, in small bits it may come, preparing them for moving away from entitlement to
43:52enterprise? I do not know whether these are research worthy topics, but these are some
43:58concerns I have. Sure, I think some of them would be very, very interesting to take up
44:04in terms of theoretical frameworks and Christina, I am sure that the people who are here listening
44:10would want to work on some of these topics as well. Yeah, sure, I was taking notes. So,
44:14very interesting. Yes, we have Professor Chitra Singla from IIM Ahmedabad and she
44:20has raised her hand. So, Chitra, please go ahead if you want to share your screen.
44:27First of all, thank you Tulsi for arranging this. Wonderful to hear Mr. Prasad and Professor
44:33Christina. Professor Christina, we refer to your work all the way and Mr. Prasad,
44:41we have not really crossed paths, but once we had tried to reach you through Aditya from
44:46Private Access for a family business conference we were doing at IIMA pre-COVID, you were busy
44:52or occupied somewhere else. I do not know if you remember. I am so sorry. No, no, I am sure we will
44:57get more chances to interact with you. So, my question is specifically for you, Mr. Prasad.
45:03Since you work with the Indian family businesses and their top management and the topic of today's
45:10adversity and resilience, so I was just curious to know that do you think at the time of adversity
45:18the family members who are involved in the board or the top management are somehow change their
45:26attitude towards the non-family members of the board and the top management and
45:31prefer to listen to their advice more often as compared to good days? Any thoughts on that?
45:38Yeah, in fact, I have a very strange answer to this. We all talk of participation involving
45:51CEOs and others in this crisis, but two very senior family founders and senior people
46:00told me that when they reviewed the mistakes they had made which led to the crisis,
46:07all decisions where they allowed the CEO to make the decision
46:13contributed to risk. I was completely flattened. All decisions that had come to the group holding
46:21board did not have that risk. Crisis was not contributed by decisions made by the group
46:29holding board. The crisis was contributed by delegating to CEOs who took those decisions
46:36or did not keep the group holding board involved. A very, very strange one.
46:41Were these professional CEOs in family business? Professional CEOs,
46:48the decisions, the group holding board let them in the classical sense of management
46:54take those decisions and they appraised each of those decisions which led up to the crisis
47:01as having been sourced there. So, I do not know how to respond to this even now I am sort of
47:08taking it in, but that is one. Second, I want to say that there are two variables
47:16as far as shareholders are concerned, top management. One is alignment and the other
47:22is affinity. Alignment into affinity is cohesion. Shareholder risk is terminal
47:30in my experience. Business risks can be managed. So, if you focus just on alignment and affinity
47:39of the few shareholders, I think you have actually crossed the first hump
47:45in terms of managing not only crisis, but also the smooth
47:51envisioning and leadership of the business. So, I do not know whether I have answered your question
47:55Chitra, maybe I have gone beyond the limit of your question.
47:58No, no, no. I think I got your point, but I was just curious to know that I understand they end
48:05up delegating it to professional CEOs, but professional CEOs are less to be seen, more of
48:11them are still the family CEOs, right? No, these are not non-family CEOs,
48:15I am talking of non-family CEOs. But you have seen in a family business
48:19where the family CEO is there and the crisis or a big adversity happens and suddenly
48:26the non-family board members get importance that all their views matter now.
48:32Yes, absolutely. Absolutely, they do. Thank you.
48:35And thank God for it. Yeah. Thank you. Thank you.
48:40It is actually a kind of counterintuitive, Chitra, because I am not sure whether there
48:46would be more close huddling of the family members rather than trying to get independent
48:53voices during a crisis. So, I am not so sure, but could be interesting.
48:57We did some analysis, the paper is under review and actually we found that when there are good
49:03days, there is more cohesion in the family, when there are bad days, suddenly the outsiders become
49:09the close buddies. Because then, yeah. If I may give a quick example, very quickly,
49:16I won't take too much time. So, there was an advisory board we set up, very, very eminent
49:22people and the family was going, was heading, hurtling towards the crisis and the advisory
49:31council said and they were in infrastructure, okay, heavy investments. So, they said change
49:39your strategy to asset light and asset right, not asset heavy. So, which meant recycling their
49:49portfolio and getting out of heavy investment. So, this shift, had it not been for that advisory
49:58council, this entire change of direction would not have taken place, which averted a major crisis.
50:04Thank you. So, Chitra, I just want to add one small point, okay, and this is again anecdotal
50:10when I have been speaking to family businesses across. There is one family business in Jodhpur
50:14that I was interacting with, 78 family members staying together in Jodhpur. And the patriarch,
50:23he was telling me, an old man, he was speaking to me and he says, during bad times, people stay
50:30together, stick together. And it's during good times that they kind of scatter away. So, I would
50:40We are not talking about family as a unit. We are talking about people involved in the family. Yeah,
50:46but I get your point. Yeah, I understand. I also have, I'm writing a case, it's a case study,
50:52teaching case study, but I think it's super interesting also as a family that went through
50:57a huge crisis. And we interview many of the employees of the company, whatever, and they
51:03always said that we did not leave the company because the family was always there. And I mean,
51:09we saw that the family really believed that we were going to overcome the crisis. And the
51:13interesting thing is that when we interviewed the family, they were, I mean, they were so scared.
51:20They did not trust that they were going to be able to make it, but the father told them to the
51:24poor siblings, okay, even if you don't believe in that, we have to go outside and tell our employees
51:30we're going to make it. Okay, so it was this combination of faith in whatever that make the
51:36family really resilient and trust in the family. So, I think this is very important. And going back
51:42to your discussion, in the research we are doing with the Mexican families, what we observe is that
51:49right after the crisis, I mean, the family delegate less. So, which could be linked to
51:56what you were saying, you know, that they delegated maybe too much to the professionals,
51:59they realised that it was not working, and then the family decided to took the reins. So,
52:04the degree of delegation after the crisis was lower. So, yeah, family went back to control
52:10the company again, after some delegation of saying, oof, this is not been working as we thought it was.
52:17Yeah, we have a young scholar from Delhi, Yashaswi. Yashaswi, please go ahead.
52:23Thank you so much, ma'am. So, since we are talking a lot about next generation, and both the
52:31members have mentioned that next gen is a way forward for the research. So, I have a small
52:37question that, what do you think that the role of knowledge sharing among incumbent and
52:43successor generation, and how family dynamics affect this in order to ensure the business
52:48continuity across generations? Is that to Professor Christina? But I think anyone can answer that.
52:57All right. Mr. Kumari, you want to start?
53:00Actually, I didn't. Yashaswi, sorry, I didn't understand.
53:04Knowledge sharing between the senior and the next generation,
53:07how does that contribute to resilience is what she asked.
53:11Yeah. Yeah, I'm thinking as I'm speaking right now, because I don't have a bad answer to that.
53:18Certainly, I think coaching, knowledge sharing, practically working with next gen,
53:28these are all ways in which self-confidence increases, whether it is directly linked to
53:36resilience, or even running, managing and building the business, it could be for both.
53:44And wherever I have noticed that the next gen shadow the senior generation, and just hang around
53:52and see what they do, attend meetings, and ask questions before and after the meeting. All that
53:59is very, very powerful way of acculturation, if I may call it that, beyond just knowledge sharing.
54:07So, yes, it is clearly a great strength, and far more seamless transition,
54:16a transition which has a dialogue, as events are occurring, as board meetings are occurring,
54:22as they're touring the factory, as they're meeting dealers, all of that, and this is nothing new. So,
54:28that osmotic learning, that acculturation is immeasurably useful.
54:36Yeah, yeah. So, I think I totally agree in that it is very important to share knowledge with the
54:44next generation about the company, and the more I work with next gen MBAs, master's students,
54:50and all the families I work with, sometimes I'm shocked of getting to know people that are in
54:55their 30s, and they don't know anything about the family farm yet, or they just know a few,
55:01okay? And I also wonder, what are they waiting? I mean, what is this family waiting to really tell
55:06them about how much? Now that I'm working with many family offices, I see that many families
55:11are really scared of talking to the next generation about wealth, and I think it should be the
55:16opposite. I mean, we should educate the next gen about the purpose of wealth, because the later
55:21we do that, the more dangerous it's going to be for them to become responsible owners. So,
55:26I don't think we have research about that yet, but I think it's so common sense,
55:30and I observe so much in practice, that it's a definite yes, okay? We need to share knowledge,
55:36because the only way to engage the next gen is to have a common purpose, and there is no way you're
55:42going to have a common purpose if you don't know anything, or if you just know a little about what
55:46your family business has, and what your family has in terms of wealth, okay? So, I also think
55:51it should be on stages, so I understand a kid with 15 doesn't need to know everything,
55:58okay? But, I mean, we do know a lot of courses and education at IE about how to educate the
56:04next generation in the concept of wealth, which I think is a very important thing.
56:11Yes, ma'am. The research has also briefly discussed about early involvement of next
56:17gen in businesses, so indeed. Sure, thanks. Thank you all so much. I think we've run out of time.
56:25We have our Dean, Dr. Varun Nagraj with us. Varun, would you like to come in for a couple
56:31of quick comments or questions? Anything from you? No, I mean, you know, nothing specific.
56:39I wanted to thank Step and Christina, you know, and everybody who's attended today
56:47for participating in this valuable initiative. Nothing more than that, Tulsi. Thanks to everybody.
56:51Thanks, Varun, and thank you all so much. I think this is the third and the final conversation
56:57series being hosted by SPJMR. It's been indeed lovely to be involved with Step and to be hosting
57:06the series for Step on behalf of Step. So, thank you all so much, and we hope to catch you. Christina,
57:12we're also doing a research presentation series every two months, and we've had a host of people.
57:18I think the next one is going to be Jeremy. Jeremy is going to be presenting his research
57:23sometime in September, if I'm not mistaken. Jeremy, if you're there,
57:28you can just give a loud shout out. Yeah, so hope to have more people joining the research
57:35presentation series. Thank you all so much. Thank you, Tulsi. Wonderful, sir, having you,
57:42and thanks, Christina, for everything. Thank you so much. Thanks. Thank you, Tulsi. Thank you,
57:46Step. Thank you very much, everyone. Thank you, everyone, for joining. Bye. Bye. Bye. Thank you
57:53all. Bye.