Classical evidence: Family businesses exist globally, constituting majority of world business. They cover the largest size in terms of ownership and family management, contributing effectively to the GDP. These family owned – family-controlled businesses, usually termed as family businesses (FB) are unique in their framework due to their peculiar features such as family based long-term commitment, family bonding, loyalty towards customers and employees, social identity, risk taking capability, decision making, respect for generations and family culture.
The contribution of family businesses to wealth creation, wealth preservation and wealth distribution in nation is commendable. Their unique approach of looking at their businesses over generations and as an investment for the future, ensuring a long-term perspective with respect to decision making, provides stability to the economy. Yet they are possessed with undercurrents, hindering their stability and growth, frequenting as to what could be the possible reasons? Founders and CEOs family firms have you thought why this occurrence of conflicts and have you attempted diagnostics?
High rates of failure are frequented among family businesses. These failure rates are likely to be a result of their limited resources, inexperienced management, non-competence-based management, lack of financial stability. Thus, these closely held family businesses suffer from gratification significantly leading to higher mortality rates compared to larger businesses. They encounter problems arising from family conflicts, emotional issues, sibling rivalry, autocratic paternalistic cultures, nepotism, confusing organisation, rigidity in innovation and succession, as well as resistance to change. Succession planning is probably the biggest challenge rather the most ignored context. Sibling rivalry or chemistry between family partnership is one major reason. Dear founders cum CEOs have you thought of these, and can you add few more unique to your business?
In lieu of this the current big question, the patterns with incumbent founders cum CEOs of family business(es) were captured during personal interviews with an attempt to draw in evidence to above, steering few scenarios that must be explored in the interest of the family and business.
The pivot to the discussions were that the interest of preserving family-ness and the business must prevail. Hence, alternatives must be generated protecting both interests amicably and allowing the latent potential of each incumbent to be explored and used effectively towards the growth of the business.
Evidence of early signs of conflicts
We (interviewee and author) drew attention to signals, strong (visible) and weak (invisible) in context to business and family. There were few fascinatingly common ones across the family business(es) cohorts.
- Lack of vision and defined goal.
- Responsibility of incumbents and members of family not clearly defined.
- Working in isolation.
- Stress is evident due to absence of chemistry.
- Negative growth of business.
- Family intervention does not yield results.
- Perennial problem is undefined.
- Un-defined silence between partners.
- Disjointed family and business.
- Fatigue in both family relationship and business.
- Whispers in the form of division of business with some mediation.
- Patriarch impacted.
- Missing alignment between the families.
- No casual meetings between the family members.
- Subsequent generations meet only during social and family gatherings.
- No participation of partners in resolving the family and business matters.
- Spouses do not interact.
- Dis-jointed family.
- Possibility of a hidden competition.
- Possibility of ego.
Core issues – reasons of conflict
While there may be several reasons pivot to the family, business and family business, the major ones that evinced were around the following:
- Ownership structure
- Complex holding
- No clarity on the future of business
- Working in isolation with no transparency
- Business and family commitments in doldrums
- No visible signs on passing the baton to the next generation
The big question is hence, how do we go forward? The questions are plenty and with each, branch like trying to extinguish a bush fire, only to aggravate it further. Interesting and complex!
Some visible and invisible roots to the conflicts were the main cause as pointed below:
- In the absence of clarity in vision and defined goals, how to build further?
- How to integrate shared values?
- When and how to dilute visible and invisible rivalry between siblings?
- Examining the rigidity of incumbents and drawing boundaries.
- Identifying and mitigating resistance to change.
- How to enhance the chemistry between family members?
- Analysing the reasons for isolation by members and creating a forum for discussions.
- When to seek intervention by patriarch?
Each point is sensitive mandating a much deeper discussion in generating alternatives. Have you by now riddled to carry the queries forward?
Business is undergoing a sensitive journey, compounded by key challenges with the event of unlimited opportunities and hyper competition. In context to a volatile, uncertain, complex, and ambiguous business world (VUCA) each business needs an alignment with market.
Hence, it is pertinent to rethink the future of family business and respond to generating insights on the following:
- What kind of family business has been until now?
- What kind of business do they want to be?
- Hence, how do they reach there?
Intermediating by external agencies is not always a good option, though self-styled consultants claim to having assisted in resolving and pocketing handsome rewards with their quick solutions that may not be everlasting. Ideal is an amicable interjection between the family members and qualified professionals who can think for the future of business and table a strategic thinking having scenarios supported by foresight. Long live family and business!
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