Family Business Advising: The Indian Perspective

Family businesses have been the bedrock of industry and enterprise the world over, and India has been no exception. They have created significant wealth and many of these businesses have grown and sustained across generations.

Family businesses are placed in a unique situation wherein the dynamics of the relationships between the various stakeholders within and outside the family can hugely influence both the operation of the family and the business. Family business advising has now become a formal discipline the world over and there are various useful tools, techniques and practices that have evolved to deal with customer situations. This field is closely linked with the Private Wealth Business as wealthy families need to deal with the dynamics within as also the manner in which their business evolves per se and is influenced by the goings on within the family.

Most commercial enterprises in India have started out as family-owned or family-managed and a large proportion of them have stayed that way. A large part of the wealth creation in India has been due to the spirit of enterprise that has driven the growth of family businesses - in fact a majority of listed companies in India still continue to be family owned.

Some of the common core issues that we encounter with Indian families include lack of communication, inertia for the Controlling Owners/Patriarchs to make away, succession plans and limitations in terms of capabilities, professionalization of management, dealing with non-family stakeholders, next generation aspirations and conflict, as also their need for training/mentorship need to be navigated sensitively depending on each family's situation and background.

One of the other key trends has been intergenerational transfer of businesses and wealth, and monetization of family stakes as a lot of Family Owned Businesses come of age. This presents unique challenges in the life stage of Family Owned Enterprises and needs careful handling. This could potentially be a make or break situation for the family.

Each family comprises three interdependent subsystems: Ownership, Family and Business and each subsystem has its own peculiarities that need to be addressed stand-alone, as also in the manner in which it interfaces with the other two. More than anything else, it highlights the finite number of choices that each individual has systemically, which more or less remain the same over time and hence procrastination does not change the fundamental nature of the challenge.

What not to do - Important pointers when dealing with client situations

These are some of the key pointers, that I have now made a part of my client journal when I take on a new assignment and like to revisit them.

Family Business Advising is not about adviser's own experience - else, this may form an unreliable and biased framework for advising a family whose outlook on life will be different from yours.

Conflicts are inherent and natural in a family business context and more often than not, it is a function of the family business ownership structure rather individual temperament. Therefore, one must go beyond the labels of "difficult son/father" to delve into the root cause of such manifestations.

The author is a Director at Centrum Wealth Management (Family Offices).