Family business or Business family?

An ideal business family is the one who understand that the survival of the business is important for the survival of the family

Published: 13, Feb 2018

At Terentia, the endeavor is to provide clients with a robust and holistic estate and succession plan that will seamlessly transfer the legacy from one generation to another through a mix of the best global practices and traditional values. Each service is tailor-made using technology and research and dual control has been exercised over operational processes. Under Estate Planning, Terentia helps clients to draw up Wills, set up Trusts and helps in execution of the wills. In Business Succession Planning, Terentia helps the family to hold the business equity in a structured and controlled way and also create rules, processes and systems to help the family co-exist in harmony through an arrangement called Family Constitution. The family can manage the investible assets through Family Office.

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Shutterstock

Family Business or Business Family, sounds like an easy and generic line, but it has deeper meaning to it. We need to understand the correlation between the family and the business and how these systems work. In a family enterprise, all the assets and activities through which the lives of a family are connected includes business, property, investments, leisure assets, philanthropy, collections etc.  The Family enterprises are different because they involve families. They have an emotional-economic system, so relationship issues always influence governance, structure and strategies.

Normally when you think of a family it has certain core values. Family is normally secure and risk averse where as Business has inherent risks. Generally, Family is slow to adapt to changes whereas business is quick and in business change is constant. Family value system is build on conditional love, forgiveness, nurturing and saving whereas business values efficiency, productivity, profit, etc. Family is emotional, protective and secure whereas Business is practical, aggressive, and speculative in nature.

Incompatible systems
family
When the entrepreneur sets up the business he channelizes all his energies into business, the business becomes his extension. There is thin line which differentiates his personal assets and business assets. As the family grows more family members get added to the business and their dedication level is different from the entrepreneur. With the growth in business wealth the family wealth also grows. The entire family digs into the same business kitty for their personal spending also. When the management and the income distribution equilibrium gets disturbed the families face the heat. Personal differences, egos, aspirations take lead over the continuity of the business and that leads to disintegration.

So, the families need to understand the difference between family business and business family. A typical Family business system is when family puts their personal egos and aspirations ahead of the family and in turn ruins the business which eventually leads to disintegration of the businesses. For such families possession and personal agenda is more important. There are many examples of such Indian corporate houses like Dalmia, Singhania, Ambani, Modi etc.

An ideal business family is the one who understand that the survival of the business is important for the survival of the family. They do realise that if the business fails then the family’s future is also doomed. They Put the business interest ahead of the family and their personal egos or aspirations. They are happy to let go the management if they feel that the professional can manage the business better. One such good and successful example is Thermax Group. Today the group is lead by professionals and the promoters own the stake but they don’t interfere on the management of the business on a day to day basis.

If the family is wise enough to understand these challenges they need to work on it. They need to have a combination of structures, processes and policies in place which can help them to coexist together and live in harmony and also have enough family wealth which can help them grow and maintain their lifestyle. This does not mean that they need to live in the same house. They can live apart but still coexist in the business.

It is for you to decide whether you are a business family or family business.

-By Mr. Sandeep Nerlekar- Founder & CEO - ‎Terentia Consultancy Pvt. Ltd.

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