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It runs in the family business

It runs in the family business
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First Published: Sun, Dec 06 2009. 10 18 PM IST

 Shifting roles: It isn’t easy to assess the pitfalls in a family business.
Shifting roles: It isn’t easy to assess the pitfalls in a family business.
Updated: Sun, Dec 06 2009. 10 18 PM IST
Last week, I had lunch at Mumbai’s Frangipani with a long-standing business associate. Seventeen years at a multinational services firm, a good track record and reputation, penthouse and Pajero, global trotter…the works. Over Frangi house salad, we spent much time discussing the state of the world, economy, industry. Eventually, we got around to the “what next” question.
Today, much as he enjoys his job, global appetite for growth remains limited for his firm. Between bites, eyes gleaming, he confessed he had been flirting actively with a suitor. A long-time associate, an Indian promoter, had been brainstorming about a business he was building, and after much covert courting and running around trees, he had asked: Will thou run with me?
So, will he?
As we slice the crispy pizza, he says he likes this prince, but wonders if he should be kissing other frogs before settling down. He likes the opportunity, the chemistry is there, the money is decent and the equity kicker is interesting. But...it’s a family-owned business. Taking forward the princess and frog metaphor, he’s worked in a multinational company (MNC) all his life—would he be able to adjust in a “joint family”? Would the “in-laws” interfere? Would he be treated with respect and allowed to be his own person? Would he have to “tend home”, or would he have a “say” in the family business? Would he get more than the odd bauble thrown his way at the whim of the lord and master?
Shifting roles: It isn’t easy to assess the pitfalls in a family business.
We walk through this from the other side. The world is his oyster, but India is where he wants to be. Clearly, MNCs do provide ample opportunity, learning and wealth, but about 80% of firms worldwide, and a large number of India’s leading businesses, are still family owned. And they have come into their own.
They are better organized, structured and run professionally, and have developed an appetite for growth. Owner-managers with clarity of vision have the ability to ratify decisions quickly and take calculated risks to build on long-term opportunities. Indian family-owned businesses (IFOBs) have embarked recently on local and global expansion that has created tremendous opportunities for professional learning and wealth creation for professionals. Pay scales are now very competitive, often with significant equity kickers. Key managers often have greater proximity to the axis of power and the opportunity to participate in group strategy at the apex level. And while there is often the larger “family” to manage, there is usually one clear boss who calls the shots. Our “bride” currently reports to three bosses at his MNC.
Over freshly brewed coffee, we agreed that the offer was worth assessing. While he was comfortable with the level of governance and professionalism of his suitor, many professionals do not quite know how to assess the pitfalls—and there are many—at other firms, particularly the mid-sized, emerging groups which often struggle with internal family and empowerment issues. After a brief discussion on various corporate governance scandals, we agreed that as in any marriage proposal, my lunch-mate would have to look more closely at his suitor to find answers. At the base level, was he comfortable with the strategic direction, role rewards and reporting clarity? Was there a dividing line between family issues and professional issues? Was there a clarity of roles of family members? A track record of integrating professional managers? A clear plan for grooming the next generation of the family? And how did our “bride” fit into this? What were the group’s business and management practices? Use of professional advisers? Quality of their boards? Colour of their money? Transparency? Reputation? Delegation or abdication?
Some notes were jotted down on the BlackBerry—much homework for my lunch companion.
Most importantly, I added, our “bride” needed to look deep within and ask: Was he ready to take the plunge? This was a whole new dynamic. Was he willing to manage a different level of complexity, adapt to a new work culture and a more entrepreneurial style of working? Each business house has a different DNA. Would this be the one where he could live happily ever after?
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First Published: Sun, Dec 06 2009. 10 18 PM IST