Family business

Family business

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  CHAPTER FAMILY BUSINESS Presented By:Mr. Aasman AcharyaPresented By: Mr. Aasman Acharya
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  What is aFamily Business • High percentage of share capital owned by a family either jointly or individually. • Family members employed in the highest decision making posts • Expression of intention to maintain family involvement in the future. • A number of generations of the same family involved in management or ownership • Direct descendants of the founders have management or ownership control
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  Advantages of aFamily Biz • There is a long term orientation as the continuity of the firm is of great concern to the older generations. • The family culture is a source of great pride for family and non-family employees alike. • The family firm functions in a less bureaucratic manner and it is not impersonal in dealing with employees and customers. • Family firms have shown greater willingness to weather the bad times by ploughing back profits. • It is structured to impart training to younger members of the family.
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  Disadvantages • They mayhave a confusing structure where the role of many family members is not clearly defined. • The style of functioning may be autocratic or patriarchal. • Many of the younger generation may not be worthy of their position and role in the organization • There can be very strenuous succession battles • Sometimes family members can selfishly drain the finances from the company.
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  Roles of theFounder • Starting the business • Building the organization • Providing guidance and direction to employees and family members • Constructively involving family members in business • Planning for succession
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  The Next Generation •They know the business well. Ideally, they like or even love the nature of the business • They know themselves and their strengths and weaknesses • They have had the necessary outside experience and education • They want to lead and serve • They are guided responsibly by the previous generation, advisors and the board • They have good interpersonal relationships particularly with other family members in business
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  The Next Generation •They can count on competent non-family managers to complement their own skills • They have controlling ownership either directly or through allies • They have earned the respect of employees, suppliers, customers and other family members • Their skills and abilities fit the strategic needs of the company • They respect the past and focus their energies and resources on the future of the business and the family
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  Stepping Up • Anew entrant should have a track record that gives legitimacy to his ideas and his claims. • It pays to consult the older generation while making the plan. • Suggest a step by step approach. • If the plan is still not acceptable, accept that there may be something wrong with the plan.
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  Retaining Non-family Managers •Discuss career paths in the company and clearly state if top positions are not open for them. • Offer compensation and benefits that are at par with the others in the industry. • Involve non-family managers in top level decision making by getting them to be part of decision making teams with other owner- managers. • Set targets and use performance measures to build motivation. Achievement of targets provides significant motivation.
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  Retaining Non-family Managers •Emphasise the contribution of non-family managers in company meetings. • Treat family members like employees at work. It helps build a healthy atmosphere. • Involve non-family managers in succession planning. • Some senior non-family managers can be used as ‘bridge’ heads to smoothen the succession from one generation to another. • Periodically assess the motivation level of non-family managers and the working relationship between family members and non-family managers.
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  Succession Planning • Choosea successor • Grooming the successor • Planning • Early entry • Late entry
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  Advantages of EarlyEntry • The successor becomes familiar with the nature of the business • Gets a chance to develop relationships with other employees • Gets to know other business associates • Skills specifically required for the business can be acquired and developed • Good performance during employment will lead to credibility with employees and other stakeholders
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  Advantages of LateEntry • Success outside the firm establishes credibility • Best practices from other firms are brought into the family business • Business perspective of the successor is broad • The successor’s competence is judged with greater objectivity.
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  Best Practices inFamily Business • Communication • Independence • Shared Vision • Documentation • Conflict resolution