Nepotism: a scourge or a boon?
Nepotism, to my surprise is a term many do not hold in their vocabulary. It means ‘when someone gives favouritism to a relative without necessarily basing it on their abilities or merit’. Nepotism in some sense is very natural, it’s human, we are just primates after all. But does ‘natural’ make it right?
Certainly, at the level of a small business where the father expects his children to join the family firm seems benign enough, but at the corporate level where millions (sometimes billions) of pounds are involved and where hundreds (sometimes thousands) of lives effected it becomes a contentious issue. The Indian culture to a large extent is highly nepotistic. One just need look at Indian politics to know the grotesque truth of it. But, even in business we find to a large extent the same issue.
Now, I know when I write this in a paper read predominately by Indians who, as I have said, are nepotistic, I am putting my head above the parapet and well in danger of having it chopped off. My intention is not controversy but introspection. The Indian community needs to seriously look at itself and iron out wrinkles in its culture if it is to make the next great leap up. Nepotism in my view is a major wrinkle.
I have known large (Indian) firms which have revenues of £300m or more, who were built by the ‘old man’ who was seriously gifted at what he did. He had it all — charisma, risk appetite, intelligence, strength, guile, and leadership. He built an empire and brings his children into it. Seldom does the old man think about if his children have the qualities that he possessed. Seldom does he think if his kids have had the nurturing to handle a £300m business with thousands of staff. Like the primates that we are, filial love overwhelms us: “I built this for my children”. I have heard these words many times from owners just as we are about to acquire his business and pump serious money into it, when we tell him that “we don’t want his kids, and no they can’t be shareholders”. If they aren’t up to the standard, then they simply are surplus to requirement.
If we want to build wealth for our children then we better had couple that with the right training, the right attitude, leadership traits and so on. But of course, this isn’t possible, no matter how many degrees you pay for; no matter how many ‘experiences’ you have bought. Science tells us that serendipity has far more influence on how things turn out than we can possibly comprehend. So, what to do?
Nepotism is the residue of our tribal past where blood and kin mattered. The Indian culture on the whole has flourished over the last 70 years and family businesses pooling together has certainly been a wonderful boon for the community. It continues to be for the small business owner. But in order to reach the next step one must let go of the step before. For businesses that have grown significantly, those that are on revenues above £50m, one has to consider seriously to what extent is nepotism driving them, and is it right?
When nepotism goes wrong, we get Rahul Gandhi.
One-way to tackle nepotism while taking care of your bloodline and kin is to professionalise your business. When the old man is ready to pass on the baton, it should go to the most competent and deserving. Professionalise the board. Give them equity (make them purchase it). Then give your bloodline equity (vested not matured), and then put them through their paces over a number of years. If they are as talented as the old man, then their equity matures, if not, it gets rescinded and put in a trust where they can never touch it. There are many ways to do this, an experienced lawyer and tax adviser will know what to do. That’s the easy bit.
The hard bit is ones of psychology.
