Earlier this week, I was invited by Parliament as an expert witness on a corporate bankruptcy case involving a large retail family business called Wilko, which was founded in 1930 and then grew and grew. However, in the last decade, competition increased and the management was not agile enough, eventually going bankrupt with 12,000 staff losing their jobs. The question the British Parliament was exploring was what went wrong, and why was change not initiated much earlier?
This was a third and fourth generation business and it is never easy to make new generations work hard and be decisive and prudent when times call for it. Also, the external world is changing over time and new markets and skills are required with new competitors too.
There are good examples of later generations expanding and growing the business they inherited with new ideas and skills. Here there is an ability to retain the core values and founding wisdom and the family loyalty that goes with it. In the case of Wilko, the family had cashed in, apart from Lisa Wilkinson – a granddaughter who became the new Chair.
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It was hired managers running the Board and delegation may not always lead to transition and effective management. The skin in the game that was the hallmark and success of the founding family had become diluted.
I was quizzed about the role of the auditors by MPs on the House of Commons Business and Trade Committee, which scrutinises the work on the ministry. I explained that the auditors could see this but decided not to pass their judgment in a timely way. One long-standing auditor PwC resigned after the firm made a big loss, and the next auditor (EY) warned at a very late stage, and that too half-heartedly, in my view. Auditors compromised their independence and duty to protect the public interest.
Families will be challenged by competition and market transformations over time. How they adapt and cope requires values, unity, professionalism and integrity. Dharma helps but is not a guarantee. Leadership is key to the transition. We all need to be agile and not take legacy and traditions for granted.
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Professor Atul K. Shah [@atulkshah] teaches and writes about Indian wisdom on business, culture and community at various UK universities and is a renowned international author, speaker and broadcaster.