Leadership crisis causes family businesses to fail under 2nd, 3rd generations

Family-owned businesses in Bangladesh hardly last into the second and third generations owing to a lack of proper leadership, while in many countries, such as Japan, the fourth generation is continuing their family businesses efficiently.  

The failure of a family business under the leadership of the second or third generation is a loss not only to the family concerned but also to the country as a whole.

The observations were made in a webinar entitled "Sustainability strategy for family business" arranged by the Chattogram Chamber of Commerce and Industry (CCCI) on Thursday night.

Businesspeople and experts who participated in the virtual discussion opined that family businesses should have a roadmap if they want to achieve sustainability. The longevity of a family business also greatly depends on who are coming into it from the second or third generation, they added.

Moderated by Prof Syed Farhat Anwar, director of Institution of Business Administration (IBA) at Dhaka University, the webinar was addressed, among others, by Mahbubul Alam, president of the CCCI; Mirza Salman Ispahani, chairman of MM Ispahani Ltd; Munawar Misbah Moin, group director of Rahimafrooz; Mamun Rashid, managing partner of PwC Bangladesh; and Shams Zaman, head of corporate & investment banking, Citibank N.A Bangladesh.

The webinar was implemented by Bangladesh Centre for Excellence, The Business Standard was its media partner. 

Mahbabul Alam in his welcome speech said it is very important to talk about the sustainable strategy for family business, especially pre-and post-Liberation War of Bangladesh.

Most of the business groups and companies in Chattogram take inspiration from Ispahani Group as it has been going on for two centuries, he said, adding, "But due to lack of proper leadership, the second and third generations are losing their family businesses."

"The country is making fast progress under the leadership of Prime Minister Sheikh Hasina. To sustain the growth, I think this is high time we nursed the leadership skills of our third generation," he maintained.

"Some family businesses like Ispahani, AK Khan and Elias Group are doing good business for a long time but are facing difficulties at some point nowadays. We have to figure out the problems," the CCCI president continued.

Expecting that Chattogram will be the business hub for the country within a couple of years, thanks to the establishment of the Bangabandhu Economic Zone, Mahbubul Alam said, "Local and foreign investors are keen to invest in the economic zone. So, if we fail to produce good leadership, the development will collapse."

Mirza Salman Ispahani said, "To run a family business one has to learn the business from the trash in the first place." 

"Everyone cannot be an executive in a family business but can be a stakeholder. So, you have to have a roadmap.

"It is also very important to know who are coming into the business. It is very risky to sit in a position without knowing what to do."

He also suggested that one needs to understand the profession first, rather than owning a business or running a business. "If there is a conflict in the business or family, it will fail," he further added.

Munawar Misbah Moin of Rahimafrooz said one of the basic constitutions for the family business is three key elements – shareholders, the family and the business.

"Someone who owns the business has the ability to balance the three elements like managing ownership is all about government and managing business is all about entrepreneurship. When you have the organisation and the family aligned, conflicts are mitigated."

Mamun Rashid, managing partner of PwC Bangladesh, said, "PWC global family survey shows that innovation and digitalisation are two most challenges family businesses are facing nowadays.

"Digitalization and technology have become a game changer and some families also define knowledge economy and business economy by this."

"You need to apply a holistic approach to navigate the digital transformation journey. Perspectives need to extend beyond the technical and innovation aspects to cover related issues such as finding the right talents who live the digital transmission and embed it to business including innovation," he added.     

Shams Zaman of Citibank NA Bangladesh said the financial structures of businesses vary family to family. They also depend on management, track record and succession plan, he added.

"In Bangladesh, we started with the first generation. We saw the second generation getting involved and some of the families also put their third generation in the assistant managing level and allowed them to groom them and sit on the board," he said.