Family businesses: between values and generations

As director and board member of M.M. Ispahani Ltd, a Bangladeshi-based family business celebrating its 200th anniversary in 2020, Iraj Ispahani knows the opportunities and risks of family businesses and their generational transition from childhood on.

Mr Ispahani, you are the 10^thgeneration of your family – how has your family achieved this longevity? Is there a secret ingredient?

I serve on the Group Board of the Ispahani Group in Bangladesh. Our main lines of business are tea, textiles, packaged foods and real estate. Our family is a bit older than our business. The family tree actually begins in 1595 and the business itself will celebrate 200 years in 2020. Yes we have achieved remarkable longevity in a part of the world which has faced considerable geopolitical challenges. It’s difficult to identify what the secret ingredient is, but as a family we have been resilient across generations. I do ask myself what this resilience is derived from. Some of it may simply be good fortune coupled with good risk management. I think taking a community first approach has played its part as has taking a values-based approach. Within our family we have always had very clear lines on what was acceptable or not, what was encouraged and what was not. In the absence of a written family constitution for many generations these informal rules provided us with a compass over the years. As children we were made aware of the responsibility that comes with the good fortune we have enjoyed and hence we’ve always wanted to make a difference to the communities we live and operate in.

You “escaped“ the family business for 25 years. Why so and what brought you back?

When I finished my master’s degree at Cambridge University I joined the JP Morgan bank management training programme in New York with my father’s blessing.  The advantage of being multi-generational is that you have several branches of the family which means the business succession doesn’t only depend on a few people. My grandfather and father also went to Cambridge but unlike me went back to the family business shortly after graduation. I think my father envisaged that I would only spend a few years in banking but I ended up spending almost 17 years at JP Morgan! After this I took some personal risk and helped found Cantos an online communications business during the dot com era of the early 2000’s. I am pleased to say that this business continues today.  In 2011, when my father fell terminally ill, I had to go back to Bangladesh to do my duty, to learn the business and find a way to contribute.

In your opinion, what are the key factors to managing a transition within a family business successfully?

Everyone involved needs an understanding of the values underpinning the family business. Sometimes these values have to be updated and redefined so successive generations feel their relevance or are at least are reminded of them.  You can base your strategic decisions on these values and use them to encourage the right behaviours. You have to keep in mind that family members may marry people from other parts of the world, next generation children are growing up and being educated in different environments, which means that their understanding of family values can be diluted or different.  Still, you have to try and ensure that everyone is singing from the same hymn sheet. Values may evolve and may change – not so long ago, the world was very hierarchical, today we have a much flatter more democratic structure which allows for more questioning. The younger generation are not as easily accepting of the approach of previous generations and must buy in to any planned transitions within a family enterprise.  Families who are clearer on their values, and whose governance frameworks embed and endorse these values, will be more successful in holding their family and business together. These values can then be shared consistently with customers and suppliers.

What challenges do family businesses face when they move between generations?

Clearly the need for professionalisation increases with each generation on the assumption that a business grows and becomes more complex. There are privately owned family businesses where the owners operate purely as well-informed shareholders and the business is led by a non-family CEO and executive leadership team.  In emerging markets family members are often expected to be involved more visibly particularly if the family name and business brand are synonymous.

Another challenge is if there is no succession in the business and no family member qualified to take over. In this case you have to identify external qualified professionals who will fit culturally with family owners. Not easy!  Therefore, it’s crucial to prepare the younger members of the family at an early stage to develop their potential. These transitions can be made less risky if you know how you get the best out of family members and they are trained and given clear roles and responsibilities.  Inevitably family members have varying degrees of competence, you may be blessed or may not, but you should always look after your family members and accept that external talent infusion may be the best thing for a business to thrive. Equally some family members may not be a good fit for the needs of the business and should be encouraged to realise their potential beyond the family firm before frustrations sets in!

So how did your family values become visible in your life?

During my childhood I became aware of two themes which the family supported namely primary and secondary education for girls and boys and eye health. My personal choice was to build on the charitable themes the family had pursued using my international network, partnerships and technology. I am committed to Seeing is Believing which is Standard Chartered Bank’s global community investment programme to tackle avoidable blindness. I have served as an External Member of the Advisory Board for a decade during which time Seeing is Believing has helped over 160 million people in 36 countries in Asia, Africa, the Middle East and Latin America tackle avoidable blindness and visual impairment. By partnering with the International Agency for the Prevention of Blindness (IAPB) and other leading international eye care organisations, Seeing is Believing has improved access to eye care in communities where help is most needed.

What are your concerns for the future generations?

One of our greatest challenges in emerging markets is increased urbanisation and preparing children today for their part in the workforce of the future – in Bangladesh alone 11 million people move annually to the cities. In Africa the decline in agricultural jobs is also fuelling this move to the cities. This is something which UNICEF, where I serve as an UNICEF Adviser in both the UK and Bangladesh, is addressing through its Generation Unlimited initiative by preparing young people to become productive citizens by connecting secondary-age education and training to employment and entrepreneurship.

In the UK I hope that more individuals will be confident to talk openly about their efforts to address social challenges.  In the age of social media scrutiny I believe it is more important than ever for action to be visible and hope that increasing numbers of wealth and business owners will speak up about their contribution to society. Business owners in the first instance create employment in their communities – this has to be recognised as a force for good. If you don’t communicate the good you do people will assume you don’t do anything.