Can the Family that does Business Together, Stay Together?


By

Prof Parimal Merchant
Principal Advisor
Asian Institute of Family Managed Business
 


Family businesses change with time. So do families. And it is important to expect change, and be prepared for it. To take all the family members along, to have mutual respect and understanding, and accommodate each others' ambitions and aspirations. Let me try to explain this through a story.

There were two brothers who started a business. We pick up this story at the beginning, when the sense of enterprise, of shared ownership and the bonds of brotherhood were the strongest. The two brothers were Suraj, 24, an engineer and Chander, 22, who was a commerce graduate. If, at this time, the two were asked their opinions about each other,  this is what Chander would have had to say: My elder brother is a tech genius, and when we do site visits he merely has to look at a problem once before coming up with the correct solution. All our clients are very impressed with him and we keep getting repeat business. Suraj, too has only good things to say about Chander: I would say he is a commercial mastermind. If something is to be sold at Rs. 100, while I would barely manage to get Rs. 50 for it, he manages to sell it for Rs. 150! All in all, it was a mutual admiration society. But then, this was only the beginning.

The Brotherly Bond Cracks

Now, let us move forward 10 years. Now Suraj is 34 years old, and has a son who is 8. Chander is 32, and has a daughter, aged one. When asked the same question now, the brothers are slightly more circumspect. Chander thinks that Suraj is still an excellent technician, but he lacks understanding about commercial realities. And being realistic is as important in business as it is in life. He gives an example: suppose we have 2 inch stock lying with us, he will go and recommend 2.5 inch to a client. Now there is not much difference in the two sizes, it would have made hardly any difference to the client but we would have saved a lot of money. But no, he will recommend the 2.5 inch, so that we not only are unable to use up our old stocks, but we have to produce fresh supplies! Suraj, too, has complaints about his younger brother. He feels Chander is grumbling too much about a few rupees here and there, he does not understand that we are in a technical business, if we compromise on technical aspects our reputation in the market will suffer and we will soon start losing clients. So at this stage the mutual appreciation has lessened to an extent, but at least both brothers accept each other for who they are.

As Business Grows, Family Grows Apart

Going forward a further ten years, when Suraj is 44, his son is 18, and Chander is 42 with an 11 year-old daughter. Now, we find Chander really impatient with his brother, frustrated with his apparent lack of commercial savvy: It is so difficult to work with him now! Every decision he makes is a financial disaster! The business is afloat only because of me, and I have to carry the complete load while he remains lost in his own world of technical diagrams and equations.

Suraj is equally bitter: Chander wants to do everything himself, meet clients, manage accounts, oversee material procurement, and then he complains about overwork! I have been relegated to the production line. And what is my fault? That I want our product to be the highest quality possible? That I want to give our clients the best? Isn't that the prerequisite for a successful business? And what is more, Chander is so obsessed with his profit margin that he never takes risks, never agrees with me on ways to expand into new product lines and grow the business. How long can we afford to be stuck with the same machinery and same old ways of working when our competitors are modernising?

The two brothers have now started to live apart along with their families, and meet only in the office. They hardly talk to each other anymore unless they have to. If things are so bad now, what will they be like a further ten years down the line? We will soon find out:

The Breaking Point

Suraj is now 54, and his son is 28 years old, with a masters in engineering like his father. Suraj's primary concern at this point is inducting his son into the business, and preparing him to take over eventually. Chander is 52, and he has started thinking about getting his 21-year old daughter married off and settled. Workwise, Chander says now that Suraj's son works with us, things are even worse. He made his son an engineer, and now there are two people who I have to constantly argue with! Both live in their textbooks, and have no understanding that business runs not on text books, but on account books in which you constantly need to show profit! Chander finds it impossible to work with them anymore and wants to separate. Suraj is equally resentful of his younger brother. He says Chander never appreciated me, and I somehow tolerated it. But now, he completely ignores what my son contributes to the company and that is something I just cannot take! He also thinks dividing up the business is the only option left for the two brothers.

So we see, sometimes doing business with your own bhai is as fraught with tension and pitfalls as doing business with the bhais of the underworld variety! But seriously, what we have just seen is the life cycle of a typical family business. We hardly find two siblings who are of similar nature and temperament, but the very nature of a family business is that people with varying aptitudes, differing ambitions and incompatible outlook often have to work together. This is not to say family members are inherently incapable of being good co-workers. In fact, when the different abilities and disparate natures of members of a family complement each other, it makes for a great team. Some people are good planners, others are good at implementation. Some are creative, others are good at making friends. Some like to stay in one place, others like to travel. In the right mix, this can be perfect for the family business.

But as life goes on, mutual appreciation can change to mere acceptance of one another, and this can often degenerate into resentment. Does this mean one or the other is at fault? No. This is just the normal course of life. We are not the same people at all stages of life, our ambitions, our interests, our expectations and responsibilities keep changing. In the case above, what was a horizontal relationship between two brothers, changed to a vertical relationship, where each was more concerned with his son or his daughter respectively.

Are Family Businesses Doomed to Break Apart?

So this brings us to the question, are such families doomed? Is separation and break-up inevitable in every generation of a family business? Or, could something be done so things do not eventually come to this pass? These days, there is talk of family constitutions, counseling and even get-togethers where different generations meet and talk out their differences. But will these work for everyone? There are no easy answers. This is, after all, one of the most important challenges of family businesses, and has been since the dawn of trade. Every business family has to seek out and work on a solution that is right for them, if they want to continue momentum for their business, and togetherness for their family. Managing business is important, but in a family business, managing the family is also equally important. And plans have to be made long before this situation can even arise, rather than trying to do damage control when the situation is already out of hand. Unfortunately, many successful business families ignore this aspect when the going is good, and wake up when it is too late. Good family practices should be a part of good business practices. It is not that a family that does business together necessarily stays together. Rather, a family that stays together, does better business together.
 


Prof Parimal Merchant
Principal Advisor
Asian Institute of Family Managed Business
 

Source: E-mail May 3, 2016

          

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