LAHORE: Recently a research company AllWorld Network, founded by few Harvard Business School professors, compiled a list of the hundred fast growing companies in Pakistan. To me, the list seems fragile and whistling sustainability, expansion, and transition challenges. My feeling stems from the history showing that most Pakistani companies have found it difficult to maintain momentum.
The country does not have many shining 50 to 60 year old private companies, which have sustained exemplary growth patterns. It is also evident from the fact that mean of the Pakistan 100 is 11 years only – mode might give an even less number. Perhaps our business community and policymakers have overlooked few key outside-the-core-business factors that have direct implications with sustaining organisational growth over decades and centuries.
Experience from the countries of our region specifically, the world in general, indicates that professionalism in business governance and the constructive influence of management schools on the industry correlate positively with the sustained growth, to say the least. Unfortunately both appear to be overlooked here.
On professionalism front, the ownership and governance shared by the same individuals/families place Pakistani companies in a different context as compared to their more professionally managed multinational counterparts. What happens is as follows. In early years, entrepreneurial individuals start businesses and head most functional areas: strategy, marketing, product development, delivery, and so on. As the business grows beyond a certain extent it demands breaking various organisational silos. The foremost among them in a family-owned business is sharing of authority, which stretches the ownership mindset.
This is the key phase where many family businesses struggle, when they wish to sustain growth. This is a dilemmatic situation if the family business has not developed formal process of delegation of power and accountability checks. They have to make a choice between empowering professional managers, which are many a time not available in the family, at strategic level or stick with the marginal growth in a family-owned and managed business. Unfortunately, a significant number of companies in Pakistan grow fast until they reach this first stage and then either become stagnant or step down.
Those that have the guts of crossing the chasm of becoming professionally managed family-owned companies have to go through another test. The transition of ownership to the next generation of the family. Let’s keep those out of this note who did not choose to professionalise. Although the transition of ownership might appear easy to the already professionalised firms but many family-owned group companies lose synergies. The organisations that do not reach at an appropriately acceptable ownership and management contract among the next generation family members, brothers or cousins, split into individual companies. The individual companies usually reach back nearly at the same stage in terms of a firm life cycle from where the paternal entrepreneur had started.
The other out-of-core-business factor that in my view has bashed the sustained growth in Pakistani companies is the lack of professional management skills and research based understanding. What happens to the fast growth of young companies can be explained partially as follows. Usually entrepreneurial entrant joins the market place with a small business opportunity and a competitive advantage. During early years, the entrant competes with small incumbents or enjoys quasi-monopoly in fortunate cases. As the business and market size grow, if they grow, the latter attracts the interest of larger and more professionally managed companies – in worst case, multinational companies. As a result either the young company comes at direct competition with large companies or vice versa in a subtle but profound way. Now the basis of competition becomes the managerial competence. This is the area where many Pakistani companies lack and as a result lose the growth path. 31% of Pakistan 100 are already facing lack of qualified managers, the above research shows.
In conclusion, it appears that the Pakistan 100 will be tested like their predecessors on professionalism repeatedly over the coming decades. They will have to professionalise to sustain their growth. Professionalism requires effective initiatives and commitment from Pakistan 100 as well as management institution in the professional development of Pakistani companies. Perhaps, the young Pakistan 100 can learn something from their relatively older fellows on the list. As a Pakistani I wish them the best of luck with growing over decades and centuries by transcending the sustainability over generations.
A PhD Management candidate at LUMS who follows national and international politics actively.
Published in The Express Tribune, August 6th, 2012.