Next to just 10 large Companies listed in the Maldives Stock Exchange there are large amount large scale businesses run in the form of limited liability Companies and partnerships that are run by either the first or second generation of families at present. There seems a dearth for transformation of many of these business for both the business stability and growth. The Country too will achieve economic stability if there are number of large corporates backed by strong strategic and professional management best practices. Though professionalization process may be painful to some of the family members, there is no doubt it will benefit all stakeholders of the business for multiple reasons.
Business Transformation involves primarily changing the mindsets in addition to systems and procedures and a whole Culture Change. Though there are enough number of past and ongoing researches on this topic of reasons for failures of family owned businesses this article is purely from a practical experience with ground knowledge.
Identifying the right Change Agent (CA)
This will be the most challenging task for many large scale entrepreneurs as they are fully confident of how to run the business with the past experience of building it from scratch may be. However, they need the support of a professional to convert them into Corporate setup. A person with that level of exposure and knowledge in strategic management only could do that. A person with following key qualities would be vital for the job;
- Trustworthy with professional background
- Proven track record of professional experience in large corporates at senior management level
- Strategic thinking and a fair knowledge in all business segments
- Passion for change management with the right blend of leadership qualities for people friendliness and system and procedures.
- Sharing the Vision
Sharing the vision openly and setting some milestones with the CA and the Chairman/Board will help both parties to be aligned directionally. Some entrepreneurs have the dream of taking the Companies or group to the stock exchange and making it a PLC, while some may not want it as matter of principles. Further, some may want their family members to take over the business with the professional set-up and some may have different plans. Therefore, it would pretty useful to share the vision of the Chairman/Board with the CA and seek understanding between each other.
- Setting the Stage
It is the duty of the Board or the Chairman or the major shareholder who initiates the change to set the stage appropriate for the change process. It is vital to separate the family emotions from professional decision making process. Further, the agreement among the family members who may be directors or occupying senior positions in the Company to comply with the proposed and once agreed change of procedures.
- Set the path clear with a balanced freedom of operation
Agreement on the modus of operandi and the compensation with a clear link to the achievement of the set goals will set the path clear. Some may want the CA to be the CEO of the Company/group while some may appoint as Consultants. Depending on the scale and the complexity of the business operation and the CA’s capacity to manage the business operation, the Key Responsibility Areas (KRA’s) could be agreed upon. It is vital that the CA to be fully knowledgeable of the level of authority in the business operation. Sometimes, eventually the CA will gain more power in the process due to the relationship and building up on the influencing capacity. However, the roles and responsibilities agreed upon between the CA and the Board/Chairman, there has to be balance in the freedom of operation and the level of authority to build confidence among all stakeholders of the business.
- Continuous review and open feedback
While agreeing on the KRA’s it is crucial to agree on a review process as well. Based on the agreed timeline of the contract, a continuous review process and open feedback will help both parties to assess the progress and re-align or take measures if requires.
It is fundamental that there is open communication between the ownership and the CA at all times throughout the process of change in order to understand the purposes and implications behind the proposed changes. This will avoid the miscommunications directly and indirectly that may arise during any changes especially affects relationships, traditions and etc.
Editor’s Note: Mr. M. Fawas Farook is a regular opinion writer to Maldives Business Review with valuable insight towards Islamic Compliance Financing and Islamic Banking. He is also well versed and educated on business and technical consultancy and analysis.