More about family business

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· Difficulty in the managing a family business occurs when there is clash between family values (harmony, emotional, inward, continuity) and business values (profits, rational, outward, adapt, change)

· Managing transformation is not easy as the transformation is never on a single dimension. Both the family and the business undergo a series of transformation.

· It is the dynamics of family, business and ownership which influences the success of a business. Dynamics of family includes elements such as grand parenting, launching children and coupling. Dynamics of business includes elements such as start up, growth, professionalization, regeneration, etc. Dynamics of ownership includes elements such as cousin collaboration, sibling partnership, etc. In the intersection of these dynamics the family has to formulate its goals, objectives and long term plan.

· The portfolio planning in a family business is intersection of the family and firm resources that are available, risk aptitude of the family and the attractiveness of the new business on market size and feasibility.

· A family business enjoys not only tangible resources but there are numerous intangible resources that the family has built over a long period of time such as Emotional ownership, Trust among members, Social network across generations , Vision and values, Family reputation, Collective thinking, etc.

· Family businesses have transformed with changing society. Individuality has taken the core position because of several societal changes such as more number of nuclear families, increase in materialistic values, youth's need for freedom, the popularity of concept of living today, attractive opportunities for entrepreneurship / jobs etc.

· There are three dimensions of togetherness: Familial togetherness, economic and operational togetherness and trans- generational togetherness that define the bonding of the family.

· Trust, Integrity, Confidentiality, and capabilities shape the triangle of business stakeholders (family, management and board)
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Power and politics in a business

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It is important to evaluate and understand the structure of the family business and how was it developed. How is the relationship shared between various owners, what is the history of the business, how it evolved over period. It is critical to understand what keeps various elements of the business together; whether it is shared values or goals or shared business wealth. 

We should never remove the focus from the role of power and politics in an organization in ensuring effective decision making. We should learn how power can divert critical resources to accomplish specific goals. Now there can be variety of source of power. Depending on the context, the source of power can be
  • Knowledge gained by an individual over a period of time
  • Skills and the respect gathered
  • Social network that the individual has built

In family business the source of power can be authority exercised by the family member which often comes from seniority. Power is contingent upon a number of factors such as relative scarcity, criticality and uncertainty removal ability of person or sub units of organization. Politics is the tool that helps in exercising power to meet the objectives. At the places, where power is not clearly segregated, politics is a nuance. This is probably the reason why power is common in family business, while politics is common in non-family business.

Another strategy that is clearly very important is selecting the right people. The difficulties lie in change management process and how new policies would be adopted to align with the new strategy. The need is always to create a culture where everyone can call each other by name and there is mutual respect for everyone. The board plays the most crucial role in realizing this strategy. The owners should believe that professionalism demands that even outsiders can become owners of the company and be a part of the board. In contrast to the encroachment threat, non-family executives should welcomed by the open culture of the firm.
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Importance of constitution in a family business setting

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The importance of family governance in today's age is extremely critical. I myself have seen families drifting apart because of business conflict resulting due to poor set-up of constitutional rules. I have seen families fighting over compensation, ownership, inheritance and rights. It is often difficult to reach to a consensus and the impact is either division of business and/or loss of family love and relationship. Well the disputes can be settled through mutual discussions governed by unwritten constitutions, it is prudent to learn about the importance of family business governance.

One should be able to anticipate the problems that could arise with newer generations taking up the business which should prompt the business leader to draft and sign a constitution long before the possibility of any tension would emerge. The core of a constitution is in the fact that it is established in a collaborative fashion rather than dictated by the family leader. It is important to understand that with next generations taking control over business the issues like "Who would exercise the maximum control? How the roles and responsibilities would be defined?, etc" are bound to arise and it is in the benefit of the business that these are avoided with the help of tools like constitutions.  
  
Also, the role of board of directors as an agent is extremely critical to maintain professionalization in a family business. The formulation of board of directors is hence required to be done with great sensitivity. The board should not be under the complete control of the family else the purpose of the formation of the board stands defeated. The interference from the family have to be minimum for the board. On the other hand, the board is expected to maintain a balance in terms of accountability, supervision, and strategy formulation. However the fact is that this perfect board-family relationship is very difficult to find.


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Are you thinking to join your family business?

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Traditionally in a small scale or a medium scale family business, the family heir is expected to join the business soon after he sharpens his business acumen. He is often not expected to pursue any higher education as the 'on-ground' experience is given more weight over exposure to theoretical know-how. However in today's world of complex form of doing business, many of the families take the alternate route of "acquiring the knowledge first and then followed by applying the same to understand the latest trends and methodologies in the contextual industry".
In my view, both the paths hold their own importance although I am more of a supporter of the second path. In today's world where the competition is so high, it is important to stay ahead of all your competitors which mean that if your competitor is doing something innovative you have to respond by adopting a counter-measure that can actuate the most appropriate response. Higher education can bring in the required discipline in the business operations. It can help in executing innovative ideas to gain competitive advantage. From my point of view understanding the industry's modus operandi is very important and for that the plan of joining the family business can be postponed for some time.
Just to illustrate with an example, recently one of my uncle lost a huge chunk of business value because he was unable to track down the movements of the inventory from the warehouse to the main unit. While it was known to him that automation would bring in discipline to his business and would help him prevent the leaking, he lacked the practical experience of bringing about the change. An experience of modern inventory management of the industry would have helped him implement an enterprising solution with ease. My uncle could also have been more aware of the difference between continuous and periodic ordering policies.  Things would have been different if he had applied these widely used industry concepts.

Similarly for large scale family businesses there are innovative ways of doing things being tested in the industry every other day which can be applied to these business. An experience with a different business entity would only help dealing with the complex business reality. Additionally, the old businesses often fail to take steep path of growth and profit. Expansion becomes difficult when the age-old formula is continuous applied with minimum or no change. E.g. my father is in the wholesale business for almost 30+ years and he has never thought of venturing into retail space or he has never thought about vertical and horizontal integration of his current business.  
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Story of hope and optimism

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Today I will share one of my favorite stories of hope and optimism. I am sure there are not many who have heard the name of Chris Gardener. What if I say he is same Chris Gardener of "Pursuit of Happiness" which was played by Will Smith. Now if you haven't watched the movie, don't waste your time here - just close your browser, step out, buy DVD and watch it. But if you are not in a position to watch the movie, allow me to tell you the story of this person who fought against all hardships and ultimately emerged as a winner. Chris had a very humble upbringing but the way he penned down his 'rags to riches' story is truly inspiring. His family life was never stable. He had to face two breakups in his early adulthood. His career never really got its shape as he had to change his profession multiple times from being a research lab assistant to a medical practitioner to a salesman. After his breakup from second wife, he had to bear the complete responsibility of rearing his child as well. Homelessness only added to the hardship. In-spite of all these, he was determined by his ambitions of making big in life. His story started taking good shape when he accidentally met a stock broker getting out of a Ferrari which introduced him to the lucrative field of finance and stock-brokerage. He never have had any kind of professional training in that field but luckily there were companies in the market which used to offer unpaid internship to such candidates. Determined by his desire to make a career in that field, he put everything at stake. He decided that he would stop selling medical devices and give all the time for the internship. He succeeds in getting an internship opportunity at E.F. Hutton. I must say that bagging that internship must have not been easy. The movie depicts the same in a very dramatic manner. Chris Gardener enters the interview room in shady clothes and the interviewer asks him, "What would you say if a guy walks-in without a shirt on and I hired him?". He replies, "He must have had on some really nice pants". The room bursts into laughter and he is hired. Chris accepts the internship and works really hard. He spent most of his day in the office working late-hours. He learns the trick of the business in a month and eventually becomes the master of the trade. 

The thing that inspires me the most in this story is the way he struggled through the life and still manages to come out victorious. We all pass through this phase but the way we overcome it truly defines us. What we really need to do is look up and challenge our-self to the limits. The look up campaign of Housing.com (https://housing.com/lookup) shares similar spirit
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Start of a new life

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In India your career starts with your decision on what subject you are taking after completing your secondary education. The decision is a tough nut as your whole career path is dependent upon one crucial decision. In most of the cases, the choice is between commerce and science, at least in my experience. I went through the same dilemma as both choices fit my understanding of a good career or lets say I had no clue what I wanted to do in life. After considering all pros and cons and interests and fit, I ultimately reached to the conclusion that engineering is what I would like to do and so physics, chemistry and maths are going to be my friends for the next few years. You can say that it was the start of a new life, at least in poetic sense. 

The plan was to study hard for the next two years, appear for Joint Entrance Examination, get the best rank, study in the best college of India and then take it forward. The road ahead was dependent upon how well can I score in JEE which meant that I had to perfect each and every concepts of basic physics, chemistry and mathematics. I clearly remember the way I had to manage between school, tuition, travel and self study. The right amount of balance was critical as a day had only 24 hours. I would not call myself a very intelligent guy and so the only way to excel was to plan better and study harder.  I did study very hard. The common routine was something like this- rise up early, travel, go to school, travel back, open books, study, travel to tuition, home again, study, sleep. And the best part about that routine was that I use to enjoy it thoroughly. I admit that I uses to love those Irodov's physics problems. Solving those were nothing less than some sort of accomplishment. I always used to be proud of my mathematical skills, though I was more addict to calculus than the arithmetical topics. I remember how I used to avoid family functions and meetups so that I can concentrate on my studies. I remember how I used to avoid watching TV or playing video games which is not easy for a teenager. Fortunately, social networking sites had not evolved so much that time. 

The two years of hard-work did pay off. Needless to say I was among the top JEE rankers. When I look back I think those two years of focus was more important than anything else which paved my path. Indeed the start of a new life got defined by that phase of my life. When I read stories about https://housing.com/, I could connect with the way they are venturing into a new phase and the kind of sacrifices they are making in their journey. A sneak peak into behind the scenes of their marketing journey:

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Building our business #together

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This is a story that dates back to the good old college times. The times when I made some friends for life. The times when the whole life revolved around them. Our source of happiness was nothing but the feeling of togetherness generated during the random sessions of mindless chatter and giggles. For the professors, we were nothing but a bunch of morons who were destroying their career by bunking classes. According to them we wasted few engineering seats which could have been offered to people who really craved for it. But nothing happens for no reason. I think the almighty had his own plans that he kept us going. It was one of those drunken nights when we started speaking out our mind. "We are wasting our life and not doing anything productive", said Karan. The comment sparked the attention of everyone. After few minutes into the discussion, we finalized that we all should channelize our time and resources in setting up a business. We agreed that we can succeed only if we leverage this bonding to establish a business. Further discussions revealed that creating fun was our greatest strength and may be our only strength. We had the skills which can transform a monotonous party into a happening one. We were famous in the campus for throwing and organizing the best parties. This was our Eureka moment when we decided that we should form a party-planner group. 

The target group of our was the age group 15-25, mainly college going people. We realized that 25% of the city population falls in that range and that the opportunity is really big as party planning business is not really organized. We discussed the pros and cons of the business model whether we can really take it off. One major concern was that the target group likes to organize parties on their own and they usually don't have much funds in their kitty to spend. We realized that it would be difficult to convince sophomores and college going students to spend, whatever little they have, for a professional party-planner's services. But we somehow convinced our-self that we should at least give it a try. We did start that business and in an year we organized around 37 parties which was not a bad number. We did manage to make good money but after an year or so we decided to call it a day, Although we separated after we closed the business, I can't forget the times that we spent together. I cherish each and every moment we toiled to transform a difficult business plan into a successful one.

That is my story of togetherness. Similar stories are shared by many start-ups today which really inspires me. One such story is of https://housing.com/. Number of start-ups have only increased in the recent years and I am sure we will hear many such similar stories.   
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