The majority of the businesses in the world are family owned. These family-owned businesses contribute significantly to the GDP of their respective nations. Hard work, the spirit of entrepreneurship, keeping family first, focus on customer relationship management, etc. are some of the fundamental drivers of the success of the family businesses.

The family-owned businesses have major strengths as compared to other businesses. Multiple skills due to several family members available in the family, and mutual trust compound for business growth.

As the family grows, so do the complexities. The same applies to business – the larger it becomes, the more complex it gets.

Therefore, on the flip side, employment of the family members in the business, generation transition issues, succession, internal family conflicts, wealth management, etc. pose a major threat to the survival, continuity, and expansion of these family businesses.

Statistically, only 30% of family businesses are able to pass on the baton successfully to the next generation. Just 10% of the family-owned businesses move on to the third generation.

Making Family Businesses last for Generations, is both an art and a science. It’s not complex, but much-needed discipline and paradigm shift are needed on part of the family members.

WHY SHOULD FAMILY-OWNED BUSINESSES SURVIVE FOR GENERATIONS?

It is an absolute must for family-owned businesses to survive for the following reasons:

• To build a legacy, the vision, hard work, and entrepreneurial risk of the founder should be carried forward for generations
• The prosperity of any nation, lies in the hands of the family-owned businesses which have struggled and transformed from scratch into business empires
• To generate employment opportunities for millions of citizens
• Family-owned businesses add great value to the economic value chain of the business sector(s) they operate in
• Top-of-Mind Awareness (brand recall) for their products is extremely high, resulting in great business growth
• Multigenerational family businesses easily expand globally due to available human resources and command good market share in both domestic as well as international markets
• They are highly profitable as compared to other businesses
• Families are able to generate huge wealth

ANALYTICAL TOOLS & TECHNIQUES FOR ANALYSING FAMILY BUSINESSES

Family business cases are challenging to analyze as they are wrapped around the 3 key dimensions: family, the business, and the ownership.

It is important to understand the dilemmas and paradoxes faced by the family businesses in minute detail, before looking out for solutions. The tools help in understanding the prevailing situations in the family and the business.

The tools are useful for families in business and advisors to family businesses, as they deal with complex issues arising from family conflict and business issues in family-owned businesses. Tools focusing on studying the family business as a whole are separate from those which are family-focused and business–focused.

A. Tools for Analyzing the Family Business in Totality:

Tools focusing on the family business system in entirety, help in understanding the history of the business, business vision, and role of key stakeholders.

The key tools for analyzing the family business in totality are:

1. Davis’s 3 Circle Model:

   In this tool, the total family business system is shown as 3 overlapping circles of family members, management, and ownership. This fundamental tool helps to understand the current roles and perspectives of all the key internal stakeholders in the family-owned business

2. 3 Axes – based on 3 Circles:

   In this tool, each circle is converted into a horizontal axis and evaluates its stages over the journey of the family business

3. Entry-Exit Policy:

   The entry and exit of the family members into the 3 circles are not defined. This tool helps set up the criteria so that the family members are aware and can prepare themselves well in advance

   
4. Performance:

   This tool aids the Family Business in deciding their business goals of growth, profitability, and family goals of harmony, togetherness, etc. by prioritizing or balancing business or family

B. Tools for Analyzing the Family in The Family Business

1. Family Genogram:

   This tool is a visual representation of the family tree with entries, exits, and the relationships between the various members

C. Tools for Analyzing the Business in The Family Business

1. Organization Structure:

   This tool aids in preparing the business organogram, representing the various family members and employees in the business, their designations, reporting, and their owners if any

2. Succession:

   Succession tool helps understand and set up criteria for the exit, succession planning, and next-generation focus and commitment to the business

3. Market Share through Innovation:

   It helps to expand the business market share through innovations and venturing into blue oceans

10 CRITICAL ISSUES FACED BY FAMILY BUSINESSES

The Family Business Analytical Tools and Techniques help understand the challenges faced by the family, business, and ownership from different perspectives.

Upon analysis, it has been found that Family businesses face the following common challenges:

1. Lack of a clear and aligned vision
2. Roles and responsibilities of family members are not well-defined causing overlapping of work
3. Family first or Business first, is always a challenge, procrastinating the decision making
4. Little or no communication between the family members, resulting in assumptions of situations, which are far from reality
5. Family and businesses leadership are not understood, defined and or even agreed upon
6. Lack of a conflict resolution process, leading to endless disputes, court proceedings, and embarrassment for family members due to dirty linen being washed in public
7. Education and exposure of family members are never on the discussion table, resulting in human resource capacity issues
8. Entry and exit of the family members, in/from the business, are never specified
9. Succession is never discussed, planned, or even thought of, leaving a high probability of a vacuum, in case of a sudden need
10. Dividend policies and wealth management are at the whims and fancies of the family leader or controller which create a lot of dissatisfaction and bitterness

STEPS FOR ADDRESSING THE CHALLENGES IN FAMILY BUSINESSES

The family members should:

1. Meet, discuss, and understand the need for Family togetherness
2. Hire a Family Business Coach and Life Coach (Family Business Advisors) who can work in total synchronization to align the business and the family
3. Make a clear distinction between Family, Business, and Ownership by defining the roles, responsibilities, and boundaries
4. Have mutual trust and compassion for each other
5. Understand that entry and exit in the business, without any egos, are mandatory requirements of life and business
6. Have the freedom to communicate their concerns and expectations clearly without fear and prejudice
7. Be ready to adapt to new technology, developments, and business requirements
8. Understand that competence should be given precedence, rather than relationships and emotions