Guidelines for Balancing the Family and the Business

Managing a family business requires managing of both, the family and the business. We must also take care of their impact on each other. The exercise can become tricky at times, if there are complexities involved on both the sides. Following guidelines may be helpful in achieving this delicate balance:

Separate the Business and the Family

• The family members’ share in profit may be equal, but it need not be the same in managing the business.
• Equality in ownership may not mean equality in powers or responsibilities in running the business.
• The business leadership and management responsibilities must be given on the basis of merit alone.

Develop a Culture of Transparency

• Any relationship survives only on trust. So does the relationships within a business family.
• Family members running a business must ensure complete transparency to reassure the other, non-working family members that their interests are safeguarded.
• All the transactions involving money must be very transparent and must be available for checking by anybody.
• An on-going and healthy dialog through a structured communication framework must be used to ensure transparency.

Implement a Robust Policy Framework

• Disputes arise due to misunderstanding, miscommunication, ego or unfulfilled aspirations.
• Also, mismanagement of wealth creates a lot of conflicts in family businesses.
• All this can be reduced by putting the appropriate policies in place.
• Money may start becoming an issue of contention among family members when things go either very right or very wrong in the business (i.e. when the business is doing very well or it is incurring heavy losses.)
• Entry into or exit from the business, evaluation, succession etc. must be governed by the policies.
• We must specify all the opportunities, benefits and facilities available to the family members along with their duties and commitments with terms and conditions.
• The policies must be fair to all. If everybody is treated equally as per the policy, it is easier to control the disputes and conflicts.

Manage Egos

• The family members must be explained not to link their personal ego with their position in the business.
• The needs of a business are different from those of a family. Ideally, the best person should run the business, regardless of whether he is from the family or is an outsider.
• Business interest should come first always, above and before anybody’s personal ego.

Provide Operational Freedom

• Interference or intervention of non-executive members in the business matters must be minimized.
• All should remember that business management by a remote control is dangerous.
• Those who manage the business should not be unnecessarily interrupted by those who don’t.

Evaluate Objectively

• Just like the other employees in the business, family members’ working in the business should also be evaluated on the basis of their performance.
• Equal number of working hours is not equal to equal work. Hard work should not be linked with the number of hours or days worked, but should be linked with the results produced.

Ensure Single-minded Leadership

• Successful businesses work on single-minded determination and ruthless execution.
• Sometimes, a business requires prompt decisions and actions. If the leader has to wait for consent from everybody in a group before taking every decision, that delay can prove to be very costly at times.
• Democracy is a good thing, but not for a business. In managing a family business, the priorities of the business challenges must be given the preference.
• Family council may set direction and policy, but one person must be given some clear authority to take the final decisions to execute daily affairs.
• This should be done only on the basis of the abilities and the results produced by the person.
• Seniority of age alone should not be considered while deciding power equations within the business. Merit should matter the most.

Promote Merit

• In some family businesses, some family members are brought in only because of their trustworthiness. They are otherwise useless. Such practices don’t help the business much, unless the person adds some real value to the business.
• Trust is not the only factor which should be considered while assigning business related responsibilities.
• Talent, abilities, attitude and emotional intelligence must be considered as well.
• In business, operations must be carried out equally regardless of whether they are managed by a family member or by a non-family professional.
• Some trustworthy child or relative may not be competent or may have negative attitude which may be damaging to the company. If we don’t accept such shortcomings from our professional employees, then we must not allow the same in our family members as well.
• Don’t let the business being affected by mediocrity, in any case.

Create Well-defined Career Paths for All

• The family must ensure aspirations of younger family members who are getting ready to enter the business. They need opportunity, guidance, support and encouragement.
• Along with that, it must also ensure alternative career plans for the retiring leaders. They have a wealth of experience and wisdom. They need activity, support and care.
• The family, through its businesses, must provide right opportunities to all, such that abilities and talents of all are used properly, constructively and most rewardingly.

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