What It Takes To Run a Family Business An inherited business is not only about looking back at what is valued from a family point of view, but also about looking forward at what motivates families to continue to build on the legacy

When it comes to family businesses, legacy is the connective tissue which binds the core purpose of the business – the values and achievements– accumulated across generations. The next gen of any legacy family business can make-or-break the heirloom. To ensure a smooth functioning of the business, it is imperative to have a transformative induction plan in advance coupled with role clarity, accountability trackers, quarterly dialogues, industry leader mentorship and external work experience.

"To truly nurture the next generation, we must plant the seeds of knowledge and passion early, allowing them to blossom into capable stewards of the legacy. They should be imparted the necessary skills to successfully integrate into the family business ecosystem. The current generation must be clear about the roles the next gen will play, whether they will be owner-managers, owner-strategists, or owner-investors, setting clear expectations and empowering them at the right time. Resources and capabilities should be gradually scaled-up in the system accordingly to support the next gen," said Dr. Tatwamasi Dixit, chairman at Family Business Research International Centre (FABRIC)

An inherited business is not only about looking back at what is valued from a family point of view, but also about looking forward at what motivates families to continue to build on that value through future generations. "There is no cookie cutter framework, as the process is unique to every family business and depends on family and business composition. However, if the next gen has different passion, it's equally important to support their individual paths while allowing them to continue as owner-investors in the family enterprise," the chairman said, explaining about the family value chain.

The next gen: not an easy inheritance

While sustaining the family legacy is a weighty obligation for younger generations, it is important for them to understand their responsibilities. The pragmatic nature of family business and its long-term prosperity are closely connected with the emotive underpinnings of the family's legacy. Decoding this emotional aspect, Dixit shared, "Often post the succession, there are multiple challenges surrounding the decision. The founders are often plagued by thoughts of losing identity & control, loss of power and centrality. Furthermore, the next gen also faces doubts of stakeholders as most have high trust and reputation on the founder and the previous generation. It is difficult for the next generation to enjoy that kind of trust from the beginning of the induction, it takes time."

Proving one's worth in a family business can be incredibly challenging due to the complex blend of personal and professional relationships. Unlike non-family enterprises, family businesses often have established expectations, legacy pressures and potential inherent biases. The younger generation usually finds it challenging to be heard and be accepted. "Deciding early on whether to join the family business can significantly aid in building a solid foundation. It is not a prerequisite for success, but it certainly helps. Gaining 2-3 years of external corporate experience is highly recommended, as it provides valuable insights and fresh perspectives. A deep understanding of the business's history, values, and strategic goals is vital in preparation. Building strong relationships and mutual professional respect with family members and employees fosters trust and collaboration," said Varun Puri, MD, Green Power International.

In an earlier conversation with Entrepreneur India, Amudha Ranganathan, director e-comm and special projects CavinKare India, had explained the scenarios involved in proving one's merit, "From a very young age, our parenting was full of values, ethics, insights into how business was approached, and guidance on what actions to take. CK Ranganathan, my father, laid the foundation for CavinKare and established a rigorous benchmark for us, this provided a strong grounding for us during the period. When you're a young child, you might not grasp the context, however, once you enter the workforce, periodically, you reflect on the guidance. We were able to distinctly resonate with how it relates to us, why it was said then, and how we should apply it in our business practices."

Effective communication is key to maintaining operational continuity and clarity, and one should not avoid difficult conversations with family members. Family business success requires professional competence, emotional intelligence, and a genuine commitment to the enterprise's long-term vision. Balancing these elements can help one discover their niche and contribute significantly to the business's growth and sustainability. To distinguish oneself, respecting the traditions set by senior generations while introducing innovative ideas is crucial.

Although there may be various points of views among different generations as to how to manage the business, there is one thing that remains constant: the desire to maintain and grow the business and the family's legacy. However, different working styles of the current generation and that of the previous one often come in conflict. "Sometimes the purpose of the previous gen and the next gen is not aligned. Lack of competence and a flamboyant attitude of the next gen with a consumer mindset instead of a contributor mindset, often leads to contention. With regards to values and purpose, they need to be on the same page to ensure growth."

Building trust amongst different shareholders

In Indian family businesses, building trust with these stakeholder groups: Family, customers, public (which includes financial partners/banks) and employees remains a cornerstone for thriving in the Indian family business landscape. Family firms are now readily accepting professionals on board, increased participation and involvement is encouraged across all levels.

Whenever, it comes to the connection between ownership and management, the coexistence should be harmonious, the management needs to embrace the pioneering and innovative spirit that the founding generation embodied. "The only way harmony will continue is if both parties are in an inclusive journey, it's called a parallel planning process (PPP). If there's a collaboration, there won't be conflict of interest. Promoters should not treat the professionals as servitor, they have to treat them as partners," Dixit said. The parallel planning process requires a commitment to have on-going conversations, to document decisions and to measure the alignment of goals.

According to PwC's 11th family Business Survey, dealing with conflict has never been easy for family businesses. It's part of an ongoing struggle many have with establishing strong family governance structures. The conflict resolution mechanisms to deal with family disputes was at 13 per cent globally and 19 per cent in India. Only 65 per cent of global and 63 per cent Indian family business leaders say that they have formal governance structures in place. This includes shareholder agreements, family constitutions and protocols, and even wills.

Explaining the potential benefit of an independent board director, adviser, or the council, Dixit said, "They bring in an unbiased view on table and provide a safe space. They can mediate and facilitate conversations and help in resolving deadlocks. It is important to have an independent person, who can either be inducted as a director or as an adviser or a facilitator. It's basically a trusted adviser whom everybody is ready to believe."