Challenges in Family Run Businesses by Aubrey Rebello
Advancing insights from 1st piece written Dec 12, 2016 from
In India about 70 percent of businesses are family managed, wherein the Family is actively involved in the day-to-day affairs of the business.
Family run businesses in India have always been very successful and some of their key traits include:
Agility,
Lean Structure,
Cost effectiveness, and
Loyalty
However, family managed organisations face difficulties in managing growth!
Working with family managed organisations as a Mentor and Coach, combined with my Executive roles in professionally managed companies, I would like to share some of my learnings and insights here.
Management model needs to grow along with the Business
At startup, when a Business is small, Owners do everything.
As the Business grows, change calibration is minimal and the hands-on approach continues. Individual Manager roles and responsibilities are not clear or clarified. This leads to following challenges:
Every Manager working in a Family-owned Business, likes to approach the Owners for all activities. The result is that Managers rarely collaborate or work as a team.
The Managers may also have an agenda to “show” how they contribute to the Business. Each manager is competing for the Owners’ attention. This leads to poor team performance. The Owner is often bogged down into handing mundane activities that the team is well capable to handle.
Another area of improvement is multi-party Family involvement. When 2 or 3 Family members are involved in Business, which is often after the Business grows, the work situation can get complicated. Areas of responsibility need to be demarcated between Family members and different operating styles respected.
For professionalism and growth management to become part of the culture within family-run business, the Owner needs to delegate and adhere to the lines of responsibility.
Managers should work as per responsibilities delegated to them, and each Manager should be accountable for his/her actions. They should work as a Team.
Spend time Leading and Growing, not just Managing
Some Owners believe that by controlling the cash outflow, they can control the Business better.
This results in all payments, large and small, being made only after Owner sign off. Owners can inefficiently spend a lot of time in clearing low category vouchers.
All such routine work should be delegated to Managers. Control over Business can be better exercised through daily / weekly/ monthly MIS and regular reviews.
The time saved can be used productively for moving towards more Growth, Diversification and Profitability.
A good rule of thumb:
Owners should spend 40% of their time, ‘Managing’ their Business
60% of the time should be spent ‘Leading’ their Business. Spend time on understanding new opportunities, watching trends and meeting customers. Be outward focused.
Extra care and awareness are required in family businesses
Family managed organizations have business challenges like any other business.
Some of the additional challenges peculiar to them are:
Issues of relationships and emotions.
Personal agendas that may not be overtly shared.
Individual aspirations, sharing of wealth, succession, and favouritism.
As they say, ‘Family business can fail not because of business but because of family!'
Often the next-generation enters the Business, with a silver spoon. Sometimes they even can have a sense of entitlement and performance is ‘secondary’. Family members of the second generation involved in Business need to demonstrate their passion to perform.
It would be best if Children are first asked to work for a few years, outside the Business, in other Companies. This work experience (without entitlement), will serve them well.
Often the generation gap, also brings about differences on how to run the Business. The Patriarch has his own ‘proven’ ways. Next generation has its own views, valid but untested.
If children are very competent, the clash is even more severe. Often the patriarch still feels the children still need to grow up and understand. In contrast, Children feel that the parent is living in a world that has now changed. Elements of both sides of the argument are valid!
A difference of approach is also required when working in a family business, whether it is between Father and Son, between Siblings, the involvement of their Spouses etc., which is also quite common.
An open mindset is required on all sides. Often, an experienced and outside Consultant with no ‘axe to grind’ is a good Catalyst and arbiter to resolve such differences and move ahead.
In my work I have been fortunate to have Coached several individuals from different families; acted as a Mentor to some families and evolved strategies and way forwards to overcome business challenges, family emotions, succession and wealth distribution issues.
Appropriately managing multiple boundaries with all the competing agendas
As an independent Mentor and Coach, this is where I add value when I enter the family-run business.
First, as the Coach, trust needs to be built with the main stakeholders. These people, both independently and collectively, have run their businesses for a long time, and the coach must show their credibility and have a good and proven business acumen otherwise they will not be very accepting of the coach.
The 4 most important skills which the coach needs in various strengths and combinations are:
Business acumen
Listening skills
A deep understanding of people
Tact to handle conflicts
This coaching ‘cluster’ of skills is typically put to the test when there is a need to build consensus. Sometimes this requires talking separately to individuals and opening lines of communication which may be closed. Furthermore, you must resolve issues without leaving bad feelings, because the family is still together, and bad feelings and resentment can easily get multiplied through alternative lines of communication.
External professionals, after a hard day’s work go back to their families.
Family-owned businesses do not have such distinct compartments. Family relations and emotions are constant and a big factor in the running of the business. Through one on one Coaching Conversations I make each Family Member realize that disputes & issues they face in their family business is not abnormal. They will often need to subjugate their own ambitions & interests if it is for the greater good of the family business.
Professional Corporate life at senior level is tough, often mired in Office Politics and Individual Greed. Resolving this is often more difficult than in family run businesses. To resolve issues, Corporates often need long presentations or meetings, as decision making is slow. There is also a reluctance to take hard decisions due to power politics.
Families can resolve these issues faster, as the authority level is clear, and there is the element of love, affection and forgiveness.
Through mentoring, I provide an independent view to the family that is unbiased, unemotional, and acceptable to All.
I enjoy my Work:
It fulfils my aim of being able to Maximise a Family’s Wealth and keep everyone satisfied even when their personal agendas may not be fully addressed.
I also get to Interact closely with highly Talented and Successful Owners, who have greatly Contributed to our Country's Wealth.
As days pass, I am treated not just as a Mentor but a Family Member & that to me is the greatest reward!
To connect with Aubrey Rebello
Aubrey brings to the table over 40 years of rich & varied Corporate Experience as CEO, Director, and Business Head with Tatas & Bayer.
Aubrey has strategised & managed a major merger, was CEO of a large NBFC, & Profit Centre Head of a large Business. In all his assignments he has rapidly scaled up revenues & profits. In many areas he has also built up Structures & Processes from scratch.
Post retirement Aubrey continues as an Advisor to a Tata Company. Aubrey is also an Executive Coach to several Indian & Foreign Corporates He is also an expert in Family managed Businesses serving as a Business Consultant & Mentor to Business Families. Having had Leadership Roles in different work Areas & Industries Aubrey’s expertise is in Financial Services , Automobile Industry, Mergers & Integration , Materials Management , & Learning & Development .
Aubrey is an Engineer from IIT Bombay & a First Rank Gold Medallist MBA from IIM Ahmedabad. He is also a Certified Executive Coach - International Coach Federation & NEWS Switzerland. He has several hundred hours of coaching experience at the MD & CXO levels.