At the other side of spectrum is the manager mode, where power delegation is the norm, autonomy is encouraged across the ranks and ‘professionals’ are expected to take up the company’s vision as their own mission. But which of these two modes is likelier to keep talent together and create greater value for shareholders by boosting the business’s stock price?
Paul Graham, a co-founder of startup accelerator Y Combinator, wrote about the founder mode in a blog that asked if there was any need to shift into manager mode. Much of India Inc, however, may need to ask itself this: Did it ever really make the switch?
Remember, a large number of companies in India are family owned and run. As giving up control is often a difficult task for business owners, even if it only involves handing over charge to the next generation within the family, trusting an ‘outsider’ is a risk many find themselves unwilling to take.
In fact, this is precisely why chasms widen in many promoter-driven firms that hire ‘professionals’ with impressive bio-datas and experience, but then give them only enough authority to act as the firm’s representatives at networking or public-facing events—or to take on top roles as interim placeholders while younger members of the family are groomed for leadership.
According to a professor of organizational behaviour at one of the oldest Indian Institutes of India (IIM), while companies often send their leaders for executive MBA programmes, communication gaps persist between professionals and promoters.
“Senior executives say that despite all the training during the course, they are unable to implement their ideas. But when promoters are asked, they complain that professionals cannot come up with solutions.” It is an issue of ‘risk and trust’ that runs deep, the IIM professor noted.
The question of risk and trust can vary across the life-cycle of a business, but is perhaps most acute for startups, given the intensity of founders’ involvement.
A founder whose beverage startup is 6-7 years old said that it’s crucial for founders to know their strengths, weaknesses, opportunities and threats (and must do a so-called SWOT analysis of themselves).
“I am keen on problem solving, but I am not good at operational management. I have professionals, but I do not want them interfering with the vision I have for the firm. When to bring in external investors or when to exit is a call I will take,” said the Bengaluru-based founder.
A sense of chagrin is also felt by founders as much senior hires who work for them. In a startup, the founder’s mode is often impacted by venture capital and private equity players who have placed bets on the business but sometimes also like to dictate who should be assigned what managerial work .
If it cramps the founder’s decision-making space and is left struggling to keep control, s/he may opt for an exit strategy, but doing so without any acrimony is what fairytales are made of.
All this means managers in the Indian ecosystem have the precarious task of balancing the dreams of founders with the need to serve them a reality check now and then. Most professionals at senior levels are not new to such projects and have worked at startups or promoter-driven businesses before.
The working styles of promoters, irrespective of their stage of business, are found to be similar. But most are also aware that it is difficult to scale up operations without getting experts on board who can help take the enterprise and its business idea to the next level.
“Professionals tend to exit because their values are undermined or overruled by someone from the [owning family] who may not even have the relevant experience . We have seen this even in established businesses.
A successful firm does not mean they have done everything right ,” in the words of the IIM professor. The brunt of these mistakes has been borne by hired managers, in many cases, while the credit for successes is typically taken by founders.
And finally, there is a looming crisis in India Inc that has cranked up the bar on the founder-versus-manager mode debate. Many large family run businesses find that owner families are splitting up, their succession pool has shrunk to very few individuals, or that the family’s younger members do not want to join the business and take charge.
In such cases, professional managers have a far better chance of leaving a mark of their own legacy and be credited for it. Indeed, this prospect may be what motivates many professionals to work for family firms.
India Inc is a complex web of hierarchies, generations, investors and shareholders. Both founders and professionals have to adapt to the demands of value generation, and management styles may need to change accordingly. But it’s not as if only one style works and the other is sure to boomerang.
The author writes on workplaces and education at Mint.
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