Managing family in business

Salil Bhandari of JHI member firm Bhandari Gupta & Associates, New Delhi, India, presents a case study on his experience of advising a family business

For the last two years, I have been working with a client, Kumar, on restructuring and scaling up the family business. Kumar is the head of the family business and the second eldest of five brothers, all of whom have a financial interest in the companies. One day our client called sounding very upset – when we met he told me that his family issues were becoming a big impediment in implementing the growth plan of the business. He related a couple of incidents, including squabbles between brothers that had started to move into their personal lives. Fortunately, the brothers had not as yet started to involve their wives and children, but he was not sure how long this would last. Specifically, Kumar wanted to reduce conflicts, as there were deep differences regarding utilisation of funds in the business, unequal sharing of responsibility, cash flow management, wealth management, estate issues and so on. His younger brothers had even started to avoid discussing business issues with him.

I agreed to look into these issues and set up a meeting with all the brothers and their wives. In the meeting I presented case studies of families working together in business, the issues they faced like succession, differential remuneration, retirement of older generation and handling conflicts. Initially there was restraint, but soon all got involved and started sharing experiences and giving suggestions. I proposed to meet each of them individually on a one to one basis and closed the meeting.

Approach

As agreed, we started meeting the family members in one-on-one meetings. Initially there was doubt, suspicion, cynicism, hesitancy and pessimism regarding the outcome. “Can this person be trusted?” ran foremost in the mind.

I therefore patiently initiated the dialogue. Few were forthcoming to say what they wanted to without any inhibition. Most took a while to open out, but soon realised that this was an opportunity to resolve conflicts not just with others in the family, but also within them. It was quite a revelation by the time we finished. All family members were able to express their experiences within the family and also to outline what their expectations were.

The way forward

The first task was to build consensus on the goals:

• Promotion of both business and family health and wealth
• Organisational development, change management and facilitation of family forums
• Set up opportunities for the family to work together, providing an environment for the group to blossom
• Family and business leadership to develop succession plan, governance and organisational modules

After many rounds of discussion, we achieved consensus within the family to do the following:

• To set up a family council, and to draw up its memorandum and rules. The youngest brother, Sanjeev, was made the Co-ordinator.
• To draw up business plans for the group and each business
• To make an estate and financial plan for members addressing the insecurities of income in old age, demise of male members etc.
• To put in place an ownership and succession plan – including the process to pass the business to the next generation, daughters’ interests and so on
• To set up systems for family meetings, plans and policies, to address future conflicts and also to make all the above happen

Specific time targets were set as it was necessary for all parties to see small successes in moving forward.

Present position

Each of the five brothers has taken responsibility for one of the identified areas above, the business plans have been frozen and the family council has been set up. I am working with each of them individually as well as with the family to resolve different view points arising. The initial success in this endeavour has been the family’s participation, together with a positive attitude in moving forward, towards the ultimate goal of achieving a successful and harmonious business outcome.

Conclusion

Generally, problems do not lie only within the context of the business. However, the business, as the most powerful, public and important thing the family has done, tends to become the focal point of any dispute.

In order to unravel a family conflict – to create effective boundaries between family feelings and business imperatives, to heal wounds arising from dashed expectations and to plan to resolve future conflicts before they erupt – the family must come together as a whole.

Conflicts are normal, and issues would never get highlighted if conflicting viewpoints did not arise. Many factors, including individual insecurities or human needs, are the causes of difference but a successful family can convert this into an opportunity to build upon. The art and science is in the process of managing this opportunity to the advantage of all within the family.

For more information, please contact Salil Bhandari: bga@bgjhi.com or tel +91-11-262-13-608.