Passing On The Business Baton

A smooth generational transition is not just desirable, it is a mandate by the Securities and Exchange Board of India.

- Prateek Pant

Succession planning among corporates in India is a passionate debate today, thanks to several interrelated developments in recent times.

The recent regulatory compulsion by the Securities and Exchange Board of India (Regulation 17(4)) requires Indian corporates to formally discuss succession plans at the board level. Thus, bringing about transparency and creating an actionable plan, which will eventually boost investor sentiment.

Among family owned businesses, though many heirs have had reasonable transitions, there do exist a few legendary surnames who had their share of tentative moments. While being part of a successful family business is hugely advantageous for its financial prowess and management exposure, the change management can be equally demanding. An iconic founder (and a parent) can refuse to change the ways of doing business or to undertake a diversification. Heirs, on the other hand, may shudder at the idea of succeeding incredibly successful parents.

However, surveys by management consultancies continue to highlight succession planning across Indian corporates as a weak point or low priority, even as few incidents of succession planning going astray validate the fact that the entire process needs to be better planned and implemented well. There are no cast-iron ways in succession planning or how seniors could induct their next generation into the business once they come of age. Some common practices in which prominent families have initiated Gen-X into the business are highlighted below:

Global education: a key ingredient