Family_Business: Respecting the space between family and business

Family businesses, in themselves, bring with them a multitude of challenges and typical intricacies. Some of these concern-areas and pain points are themed around more on ‘family’ aspects than on ‘business’ aspects. For instance, issues arising out of branching out of family tree, dealignment of vision among the different generations of business leaders and alternate viewpoints about the theory of business are not uncommon. A family, at the end of the day, is a social unit and unsurprisingly, is prone to inherent tendencies. Quicker acknowledgment of conflicts leads to better quality of risk mitigation measures.

It is a an outrightly wronged belief that close-knit families are better off at managing businesses. Admiration in the living rooms may not always translate to success in board rooms. At times, the very fact that family members get along very well with each other draws out a bigger question mark on the governance aspects of the family business.

Business relationships have to be treated on a separate platter as compared to family dealings, even when the family-member happens to be a business executive in the family-led business. There should be a Family Business Charter in place, which articulates the roles and responsibilities of each family member, the metrics and yardsticks upon which his performance will be judged on and to whom will her functions be delegated, should a contingency arise. Such a mechanism creates a clear demarcation of functions to be performed, scaping out the casual confusion and clutter which may arise. Establishment of a formal Family Business Council, an institutionalised body aimed towards governing the family-led organisation effectively, is a time-tested method of ensuring the in-spirit infusion of administrative principles. The Family Business Council must also include some external advisors whose roles will be very similar to that of Independent Directors of listed companies. The external advisors can serve not only as domain experts but can double up as effective mediators, should such a need arise. The Family Business Council, inter-alia, can also address ownership-management conundrum, in a structured way.      

The business needs to be viewed as a separate entity and thus, family relationships must not influence business relations and vice-versa. The space between “family” and “business” has to be recognised and respected, or else there is a grave possibility of both business and family getting affected. Chinese walls are essential, not merely between living rooms and board rooms but also between the identities as a family-member and a business executive. History is a testimony to sour family relationships plunging the business to a downward spiral. The overlaps need to be minimised, if not completely eliminated.   

The induction of a new family member into the business must be backed by a sound rationale and merit, similar to how an independent Human Resources function operates. Entrance to the family business must be a matter of intersection of interest and abilities, and not merely a birthright. Checking anomalies at the door provides the best possible insurance against potential disputes.    

The separation of family and business from a family business, most importantly, increases the possibility of depiction of alternative perspectives and brings in a fresh perspective. The status quo gets challenged, and conventionalities are questioned for their current relevance, which furthers the impetus in family-run organisations. By empowering every business executive to have a voice, the organisation can mitigate group-think and yesmanship.

 A well-governed family business is more likely to be a more-functional family business. Governance parameters rank equally, if not higher, than the performance metrics. Well-defined structures are crucial factors for success.

The space between family and business in family_business must thus be sacrosanct.   

(This article was first published here)

(Author Urvish Paresh Mehta is an Arijit Singh devotee, life’s very own disciple, a perennial seeker of humour, a notoriously spiritual mortal, a treasurer of memories, an enthusiast for metaphors, a religious cricket fan, a keen admirer of the intricacies of the human mind with a penchant for pen, and amongst other things, a Chartered Accountant. He blogs at urvishmehta.tumblr.com and can be reached at [email protected])