In India it's the family while in the west it's business: Peter Leach, Deloitte

It took the financial crisis for the financial community to realise the resilience of family business, says Peter Leach. He talks to Sachin Dave about family businesses in India & how they are different


ET: In the post-Lehman world, have family run companies done better than publicly owned ones?

Peter Leach: Family enterprises have shown globally that they are a more resilient, robust and sustainable form of ownership… than banks, hedge funds and financial institutions. It took the financial crisis for the financial community to realise the resilience of family business as they were always treated as nepotistic and not serious about governance.

Especially in the emerging markets, family run businesses themselves are more than just family business. Some of these businesses are involved in infrastructure and they see themselves as institutions and nation builders.



ET: What are the main differences between a family run business in India and those in Europe and the US?

Peter Leach: In India, there is a cultural hierarchy that is much stronger because the word family (represents) a lot more than in the West. As a unit, the family creates stronger glue in India. One of the biggest differences between India and the West if you were to look at what is the glue — in India it’s the family while in the West it’s the business.

When a business is in transition, things become sensitive.



ET: What are these things, decisions?

Peter Leach: When a business is in transition, sometimes the decision-making process will slow down and that can be bad for the business because it creates some uncertainty. It can cause wobbles in the marketplace when the succession is not clear.

The lessons from the West include that succession should never be an event but it should be a process. You start doing succession planning when you don’t need to or when you think you don’t need to, otherwise it might be too late. You do it in an open and transparent way and you ensure that you have adequate facilitation, guidance and outside advice so that you look at all options.



ET: Do you see gender discrimination in Indian family run businesses when it comes to succession planning?

Peter Leach: I can name some very successful Indian ladies who have run fantastic businesses. So it’s not a question of ability but it’s a question of discrimination. I have a very simple view that if you discriminate on gender grounds in a family you will ultimately create conflicts. There are some common reasons why people are worried to nominate a woman as head of the business.

One is the fear that there would be a divorce. But the other fear is that the daughter would marry somebody who is in a competing business and information will flow. But at the end of the day, if you discriminate there would be aproblem. I am anti-discrimination. We try and take a holistic view with families we work with.



ET: Indian family leaders tend to leave succession planning till it’s too late. Is this changing?

Peter Leach: There are some families which are better at it than others. There are some Indian families which have done extremely well on succession planning and there are some Harvard case studies written about them. This is open to review.

But there is an issue in Indian family businesses where the patriarch doesn’t want to do it differently. The attitude is if it’s not broken why should I fix it, or I have been doing it for 30 years and nothing needs to change so on.



ET: What are the new governance structures emerging globally?

Peter Leach: Every family has to have its own structure but there is a clear necessity to delineate and differentiate between the family and the business. There should be bodies, committees forums or whatever you want to call them, where the family can sit and discuss things like family education, family holiday, family philanthropy and other nonfiscal things.

There have to be more people, and sometimes different people, involved in these forums — so you can involve spouses for family activities. There are a significant number of models around that are tried and tested in communities and countries which can work… It’s not cut and paste but about what is suitable for one family or another.

What you don’t (do is) pull a lever that would change everything overnight, because that wouldn’t work either.