“We don’t inherit the world from our parents,
We borrow it from our children.”
Sioux Indians
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Centres of Family Business Learning
Harvard Business School
Babson Business School
IMD Business School
INSEAD Business School
Kellogg School of
Management
Stetson University School of
Business Administration
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Research
•
Families may fail to recognize that family business conflict results from a
lack of participation and limited opportunities for the family to constructively
explore individual differences related to values, goals and vision
–
T.Hubler, ‘The Ten Most prevalent obstacles to Family-Business Succession Planning’,
Family Business Review, XII(2)(1999) 117-21
•
Craig Aronoff and John L. Ward, based on their as family business
consultants, suggest that such family meetings teach communication skills,
encourage independence and build self-esteem
–
C.E.Aronoff and J.L.Ward, Family Meetings: How to Build a Stronger Family and a
Stronger Business (Marietta, GA: Business Owners Resources, 1992)
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Research
•
80% of the families have gone bankrupt, or have sold or acquired over the
past 50 years. Families business statistics offer a similar picture, with only 3
out of 10 family businesses surviving into the second generation, and only 1
out of 10 handed down to a third. The average life span of family firms (after
a successful start-up) is 24 years, which coincides with the average time the
founder is associated with the company.
–
Beckhard, R. and Dyer, W. (1983b). ‘Managing continuity in the family-owned
business,’ Organizational Dynamics, 12: 5-12.
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Family Constitutions
Global Families
Indian Families
Ford Motor Company
GMR Group
Marriott International
Dabur Group
Cargill
Murugappa Group
Perrier Mineral Water
Apollo Hospitals
Heineken Beer
Godrej
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The Family Business Opportunity
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India Tops in Family Feuds over Family Wealth
•
Forty percent of the globe's wealthy population have direct experience of
their family fortune leading to disputes, but the percentage is even higher in
India, where 61% of the rich have seen relationships deteriorate into feuds
over money, according to a new report. In contrast, 53% of respondents in
Singapore, 51% in Hong Kong have experienced family tension as a result
of wealth, as against just 11% in Qatar.
•
35% of global high net worth individuals do not have confidence in their
children to protect their inheritance.
Source: Barclays
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Continuity Planning
Medium Term
Business Strategy
Ownership and
Management
Succession
Estate, Investment
and Safety Net
Development of
NextGen
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Capitalism
v/s
Socialism
Business
Family
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Perspectives in Family Business Governance
FAMILY
Health, Prosperity,
Continuity role,
Communication,
Education, Values,
Goals
OWNERSHIP
Liquidity, Capital
Allocation, Assuring
Succession,
Strategic Direction,
Performance
BUSINESS
Operations,
Finance,
Employees,
Supplier and
Customer
Relationships
Source: Renato Tagiuri and John Davis
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Evolution of Business Families
Success
Requirements
Achilles’ Heels
The
Contradictions
Fundamental
Attitudes



I
II
III
Dominant
Owner-Manager
Sibling
Partnership
Cousin
Collaboration
(Controlling Owner)
(Oligopoly of Owners)
(Fragmented Ownership)
100% / 33%
16% / 8%
4% / 2%
Attract Competent heirs
Strategy and Management
Revitalization
Cultural and Capital
Adaptability
Let Go of Control
Teamwork Family
Leadership
Freedom, Voice,
Loyalty & Exit
Control of Family
Death of “Mom”
Lock-Ins
Individualism
Personal Control
Secrecy and Privacy
Stewardship

Collectivism
 Mutual Dependence
 Open and Equal Sharing
Trusteeship

Professionalism
 Voluntary Association
 Inequality Accepted
Social Purpose
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Decisions Partners Must Make
•
How shall we take decisions?
•
What will our code of conduct be?
•
What will our leadership model be? If a single CEO, who will that person
be?
•
How shall we accommodate the simultaneous goals of the family and the
business?
•
Who shall our advisors be? Who should be on our board of directors?
•
How will we make this business grow? What should our strategy be?
•
How will we communicate with non-family executives?
•
What policies will we put in place?
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Sample Policies
•
•
•
•
•
•
•
•
•
Rights and Obligations of
Individuals/Women/Non-Employed
Owners
Role of Family Members in the
Business
Employment/Compensation/
Performance Evaluation Policy
Family Fun/Bonding
Safety Net
Media Policy
Conflict of Interest
Family Education and Mentoring
Policy
Philanthropy
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Sample Processes
•
Managing Succession
•
Managing Differences
•
Constitution Review
•
Information /Reports
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Sample Structures
•
Family Council
•
Family Business Board
•
Independent Board
•
Non Business Family Forum
•
Family Safety Fund
•
Family Office for Investments
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Some Ownership Policies
•
Conditions for ownership and voting rights
•
Dispute resolution process
•
Dividends / Drawings
•
Redemption process
•
Business valuation methodology
•
Buy-sell agreement (shareholder’s agreement)
•
Rights and responsibilities of non-employed owners
•
Rules for travel and other major expenses
•
Addressing family member’s financial problems
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"There is a tide in the affairs of men.
Which taken at the flood, leads on to fortune;
Omitted, all the voyage of their life is bound
in shallows and in miseries.”
William Shakespeare
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Resources and Acknowledgement
•
Family Businesses: The Essentials, Leach, Peter, 2007
•
9 Elements of Family Business Success, Fishman, Allen E., 2009
•
Getting Along in Family Business: The Relationship Intelligence Handbook,
Hoover, Edwin A., Hoover, Colette Lombard, 1999
•
Perpetuating the Family Business, Ward, John L., 2004
•
Business Maharajas, Piramal, Gita, 1997
•
Family Meetings: How to Build a Stronger Family and a Stronger Business,
Craig E. Aronoff, Ph.D. and John L. Ward, Ph.D., 2002
•
Developing Family Business Policies: Your Guide to the Future, Craig E.
Aronoff, Ph.D. , Joseph H. Astrachan, Ph.D. and John L. Ward, Ph.D .,1998
•
Family Business Values: How to Assure a Legacy of Continuity and Success,
Craig E. Aronoff, Ph.D. and John L. Ward, Ph.D .,2001
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