Category Archives: family business

Enduring Sibling Business partnerships.

Working with a sibling can be an exciting or nerve-racking experience depending on the pairing.  Unlike other working relationships where the boundaries often start and end at the office itself, working with sibling is an omnipotent journey. One has to cherish and sustain the relationships not just at office, but at home and even on holidays and social events. From my limited personal experience and observation of businesses where siblings work together, I have gleaned six principles that are keys to sustaining a sibling led business.

  • Define shared purpose:

Commit to a shared purpose and actively seeking common ground is keys to sibling business. Singling must have clarity of the purpose of their coming together and what business ownership means to each of them. Sibling businesses success requires siblings to focus on something larger than their individual focus. A superordinate focus makes it easier for siblings to accommodate loss of autonomy and collaboration rent each of them pays to drive the priorities and concerns of the business.

  • Choose to play strength

Sibling businesses thrive when siblings complement each other and each plays to their strength. Someone could be strong with numbers and other with people or sales. Recognizing that perspective may be different from different functional view improves acceptance and tolerance of each other’s differences and avoid being judgemental. Zones of work for each allows room for specialization and space for “law of minimum distance” that is key to each sibling enjoying their value addition. Check your ego, and realize what is best for the business.

  • Set expectations ahead of time

Clarity of who does what and how would decision happen is important to eliminate ambiguity and blame game. Successful business relationships have explicit business rules regarding who will fill what areas, how responsibilities are delegated and who is accountable to whom?. It is also important to define what kind of performance review will happen and who owns the outcomes?.

  • Communicate frequently and openly

Communication is key to all relationships and sibling relations more so. Some siblings may prefer informal 10 minutes stand-up meetings each day, while others may hold weekly lunch meetings. Contrary to expectations, do not expect your siblings to read your mind. For partnerships to work let go of these assumptions and communicate clearly and openly, just as you would with a non-family business associate. Express feelings, ideas, disagreement openly in a respectful and consistent method. Frequent, open communications and good listening skills cement the fissures and keep the sibling relationships strong.

  • Make participative decisions

For sibling business relationships to stay together, all strategic decisions including investments, on boarding relatives in business, diversification or partnerships must be thoroughly thrashed out collectively.  Sibling businesses can also use extended platforms such as family court to keep away undue influence, improve transparency and collaboration.  For large sibling business, a good approach is to have sibling code of conduct. This is a formal document that clearly details how exceptions will be handled, what financial information and decisions will be shared, relatives in business and succession.

  • Clear compensation policies

An area that derails most sibling partnership is compensation. While as kids the siblings may have got same allowances, their compensation in business must be based on job performance. It helps to have a clear compensation policy to avoid unpleasant situations in future. It is possible to equal profit bonuses while salaries may differ across siblings, so that people do not feel exploited and underpaid.

Dr TR Madan Mohan

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Successor Selection in family business

Family business continuity depends upon clear demarcation of rights, expectations and responsibilities of family members and their extended relations. Succession is a key factor that can lead to odious conflict if the selection is not felt fair by all members. A wrong selection can jeopardize the very sustenance of the business itself.  Successor selection in a single owner business or cousins consortia the criteria remain same.  Successor candidate for a family business must possess:

  • No vacillation of taking charge
  • Alignment with personal dream
  • Strong family (sibling) ties
  • Strong leadership skills,
  • Drive to scale

Not all progeny would be interested in working for family business. Identify who is interested and committed irrespective of gender and on tradition of first born. Incoming family member must be clear in owning the role and responsibility. They must exhibit “strong skin in the game” orientation in all areas including planning, execution, feedback and improvements related to the new role. If there are any signs of ambivalence, then family elders and family board must search somewhere else within the family or alternately bring in professionals to run the business while family oversees the business and family interests.

 

It is important the family business forms a part of personal dream of the successor or at least allows her to anchor to explore personal dreams. If the alignment between personal dream and the family business are weak, the succession may not yield significant results. Higher alignment would ensure the successor brings more passion and commitment to growth and transformation of the family business.

Family business successor must not only be adept at managing business, but must be able preserve and nurture family ties.  Successor should have an ability to delineate family and business rituals, positions and carry family branches and interests in all fairness. In family businesses with well entrenched non-family professionals, the successor must be able to build rapport, influence and advocate required changes to set the business to next level. The successor must be capable of leading other family members on investment. Successors who exhibit a strong player-coach orientation perform better as they can collaborate and lead within and across teams.

Successor in family business must bring strong leadership skills. The successor must be comfortable in exercising leadership alone, review and critique associates wherever necessary. Successor should be able to show tact and respect to family and non-family associates who may be involved in the business, and yet direct them to reach the desired goal.   Successor must exhibit a high dose of candor and sense of urgency, especially for anything related to bad news. Successor must be evaluated for their team building, ability to tap talent and instill a culture of excellence.

Family business succession is not just about leading existing business, but also a stage to move to next level of expansion. The expansion may come from scaling up production or entering new markets or scaling out to build competencies and capabilities to seek out opportunities in other areas and realize the growth potential. Successor in a family business must have the drive to obtain inputs every quarter, validate these inputs and act on them to realize the goal.

While family elders and board may have high access and knowledge of a successor as an individual, whenever contenders exist ask for a business plan from each. The family elders and family board must check whether their approach clearly captures the business and family dynamics, dreams and action agenda.  Once a successor is selected family elders and the board must establish the business parameters, discussed and communicated the same across multiple interest groups to buy the succession plan well in advance. Once a future leader is identified, start mentoring the person through on-the job exposure and empower him to learn and implement changes. If the family prefers to expose the successor to learn the ropes in outside business, create alternate investments that may not blow a big hole in the family books, but de-risks existing business from transition. Succession plan must detail how the first 3 quarter of induction and transition happen. Identify respected non-family mentors who would take the new ward under their umbrage and fill in “implicit knowledge”. Do not burden the successor with constant reminder on results, instead focus on outcomes. Obsession with results can induce an undue pressure on the successor and induce her/him to focus on short term gains. Remember succession is an opportunity to rewire your business. As John F Kennedy rightly said, “The time to repair the roof is when the sun is shining bright”.  Thinking strategically about the selection process enhances the quality of successor and the survival of the family business into next centenary.

Dr TR Madan Mohan

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