How to prepare for the right heir to take over your business

My daughter is better suited to taking over my business than my son. How do I manage the process?

Subroto Bagchi

[Image by Gerd Altmann under Creative Commons]

I am the father of two kids: a 30-year-old son and a daughter who is in her late 20s. I own a large established business that I built with my own hands. I'm nearing 60. And I've been thinking about how to transition the business to the next generation. I've groomed them both for more than five years. Here's my dilemma: I'm now sure that my son simply isn't cut out for running the business. Yet he assumes that he will inherit the reins. On the other hand, my daughter clearly has the chops. She has the maturity and the instinct to lead the business. This isn't an easy decision for my wife and my son to accept. How do I break the news to them?

First of all, I marvel at your forward thinking and the rare, but right view on the succession issue. What amazes me is the fact that you gave both the children a chance for five long years and figured out in the process, in whose hands the business, in this case your third child, would have the best future. The worthwhile thing to note here is the fact that any succession plan, whether in a family-owned business or in a professionally managed company, is not an easy game. It is fraught with, not rational but, emotional issues and their consequent risks. But headlines first: you have time on your side! At 60, you would have a good runway ahead to settle things. Imagine the plight of those who must struggle with such existential dilemma when hit by a crisis. Let us now dwell on your path ahead.

You have a competent successor and you have confidence in her. My congratulations to you for not suffering the gender, and the seniority bias that most Indian patriarchs have difficulty shunning. The issue for us now is to manage the transition. For this, we need to budget for fear, uncertainty and doubt (the FUD factor) but move with confidence and at a measured pace.

In the days ahead, as you have rightly recognized, the biggest hump will be in “socializing” the choice you have made in your mind.

Begin the process in an unsaid manner, in subtle signals. Take your daughter with you to key trade shows, let her be the hostess for the all-important customer dinner, ask her to negotiate the joint venture you are planning in Brazil, send her to the Advanced Management Program in Harvard, make her chair the Audit Committee. In short, start notifying the precedence without notifying.

If your son is smart, he will note the signs and raise the issue at some stage. At that time, don’t dance around the matter. Be candid.

On your part, make a set of fabulous offers to him—a new line of attractive business he wants to start and needs venture funding from you, be the head of the proposed JV and relocate to Brazil, become the vice-chairman of the board of your company, whatever. Get creative. Ask him for ideas as well.

But here is a word of abundant caution: before you have that father-son talk, take your daughter aside and ask her if she would like to take over the business. Don’t take her willingness for granted. She could just turn it down. If she says no and stays firm on that course, you have to make alternative choices. It is one thing to be great at the tasks assigned so far and quite another for her to take on what can be a lifelong responsibility and potential disenchantment with her dear bhaiya on whose wrist the rakhi is still shining.

Now that you have an incompetent son and an unwilling daughter, you need a plan B. This could well mean you explore the idea of separating ownership from management. Many owner-driven companies in India are beginning to do just that.

This process could begin with moving both children to your board with some oversight powers, attaching them to the notion of managing family wealth and detaching them from day-to-day responsibility of running the business. If this is where the path leads, it pays to go with a travel guide; ask for advice from a good wealth management firm that has been there and done that. Chosen well (please do reference checks), they may add more value than make your money double. The good ones have a 360 degree view of transition and that includes managing the human side of things.

In case your daughter says yes, you must now socialize the thought process with your wife even before you speak to your son. Take her on a pilgrimage, not a holiday; after the calming experience, share your thoughts about the future of the business that both of you have built with blood, sweat and tears. There, instead of presenting the succession plan as a finality, please put all the pros and cons in front of her. Ask her for decisional options and listen to her—there may be new ideas that could open up, thanks to her! You might have presumed things until now.

In case she freaks out, let it be. She may begin to cool down as days go by, she may see sense.

Or, she may simply see the idea as short changing her ladla son, who is unjustifiably perceived as incompetent by the harsh father who was always that when it came to the beta—unreasonable expectations since he was a little boy, unjust or even cruel. But just because of that possible reaction from your wife, for heaven’s sake, please don’t surprise her with your plan. Don’t say to her, “Nandini, maine kah diyana. Bas”. Try taking her along. Don’t rush things.

On a very serious note, in the event of a spousal dissent, you may like mediation by the long standing family chartered accountant, the revered spiritual guru of the family or a wise elder you and your wife have always trusted.  

In summary, the starting point is, send out subtle messages that there may be a change of guard and nothing should be taken as granted, do obtain your daughter’s consent, please socialize the transition with your wife and then, have the reasoned conversation with your son. But budget for emotional strife in the days to come. In such times, draw solace from the fact that mankind’s history suggests, the worthiest thrones often have tears and even blood stains on them somewhere. So, don’t fret.

Now here is one thing you never told me while presenting the data on your children: is your daughter married? If she is, as much as you admire her competence, please do a due diligence on your son-in-law. Ascertain the possibility of that gentleman’s shadow falling on your business in ways that may be detrimental. In Bengali, there is a saying: “Jom, Jamai, Bhagne, tin noy apne”. The Lord of death, your son-in-law and your sister’s son, but know they are not truly your own and beware! 

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About the author

Subroto Bagchi
Subroto Bagchi


Odisha Skill Development Authority

Subroto Bagchi is chairman, the Odisha Skill Development Authority.

In 1999, he co-founded Mindtree, one of India’s most admired software services companies. He now serves as the non-executive director of the Mindtree board of directors.

He started as the Chief Operating Officer at Mindtree after its inception. Soon Mindtree was hit by the global economic slowdown and then the events of 9/11. Many early-stage companies collapsed during this time and Bagchi moved to the US and helped the leadership team stay together through the difficult years.

During this time, he articulated a new positioning for Mindtree as the best mid-sized company from India, which later became a reality.

Between 1999 and 2007, as the COO, he was instrumental in articulating Mindtree’s mission, vision and values. He led leadership development, marketing and knowledge management initiatives that differentiated the company from the very beginning. Mindtree’s distinctive physical locations reflect his thought leadership. He is also the face of the company’s outreach beyond business. In 2007, he was part of the apex team that led Mindtree from an idea to IPO.

Post-IPO, Bagchi took on the role of Gardener at Mindtree. In this new role, he focused full-time on the Top-100 leaders at Mindtree to expand their leadership capacity beyond the founding team. In 2010, he was appointed vice chairman to the Board. On April 1, 2012, he assumed the office of Chairman.

Bagchi is a member of the Governing Council of the Software Technology Parks of India. He is a well-known writer, having penned a number of widely read books and columns for newspapers and magazines. In 2011, he has been acclaimed as India’s No.1 bestselling business author.

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