Stuck in Family Business?

Stuck in a rut? Not really.

Doing business with family members is not as bad as it seems, provided one is smart enough about it!

Every business has its own set of challenges. And things are a little trickier to deal with in a family business. Not only do conflicts, petty or huge, affect the overall market standing and success of the business, they also wreak havoc on a personal level. After all, it’s the family members that one is dealing with at the end of the day.

A recent study by Inc.com suggested that not even 30 per cent of family businesses are able to survive the second generation and quite sadly, only 10 per cent of them are able to break it through third. In a country such as India where there are exceptional examples such as Tatas, Birlas, Singhanias and even Ambanis for that matter, these global figures do sound a little bleak.

Reasons are many and vary from person to person. Many a time, the Gen Next gets scared of getting into family set ups and even if it does enter a family business, it feels stuck. Adding to this thought; let us take a look at three common sticky situations that arise in a family business and how can they be managed:

Firing a relative

This will probably never end well but if it needs to be done, it should be done. Here’s a small example—the great granddaughter of a really successful businessman once revealed how her family business was fractured in the 1940’s after one her uncles fired a sibling from the business. Even though the business didn’t survive (not because the relative was fired!), the rift in the family remains even today.

There’s no way one can assure that this step will not break a business or most importantly, a relationship. However before taking this big step, it is important clearly outline the performance expectation or KRAs. Establish a strong reporting mechanism to make sure that lack of performance results can be identified quickly and without any bias.

Ramsay-Hutcheson

Did you know celebrity chef Gordon Ramsay fired his own father-in-law/business partner Chris Hutcheson back in October 2010 for allegedly taking money from their business (Ramsay’s restaurant empire) to fuel extra-marital affairs? Yes! Hutcheson, then, sued Ramsay for “unfair dismissal and unpaid wages”. The family reached a settlement out of court recently.

When criticism can’t be avoided

No one likes to be criticized, let alone a family member who is a part of the business! In short, it bites harder than between usual employees. No matter how important it is, one should evade making a critical remark to close member who, by the way, isn’t expecting it. To avoid engaging in an insult-slinging match over grievances, it is important to make an effort for constructive criticism.

One should try to put it in a more professional context. What’s best is to bring a non-family member into the matter for a fresh, non-bias perspective. Putting across the issues on the table in a clear manner can ease things out. One doesn’t need to be rude or offensive. A simple, polite conversation around the problem will suffice to help the other person grab the hint.

Puma & Adidas

Founded in 1924 in Germany, Adolf and Rudolf Dassler’s Shoe Company was divided into two after tensions among the brothers arose during World War II. Stating different personalities as the reason, Rudolf went on to start Puma while Adolf formally registered Adidas in the year 1949. In fact, the rivalry between the two was so strong that it divided the town of Herzogenaurach, where their factories were situated, on opposite sides of the river!

Handshake agreements? No!

Just because one works with his or her family doesn’t mean that there’s no need to draw up a legal written agreement about the partnership or the capacity in which the family is running the business. Getting a legal contract in place is not a sign of “lack of trust”. In fact, a written agreement in any kind of business is essential to protect all parties involved, saves a lot of drama if things go awry!

Ambani Brothers

They are the world’s richest siblings but that didn’t stop them from disputing bitterly for years. What started in 2006 concluded four years later after they ended accords completed in January 2006 that stopped them from interfering in their business interests! While Mukesh now runs Reliance Industries, younger brother Anil leads the Anil Dhirubhai Ambani Group.

“ Never do business with friends or family ” —this is an old saying. Why? Because both the relationships involve emotions essential for anyone! When personal feelings take a negative route into business, it becomes difficult to not only run the show but also maintain relationships. Hence even if it’s an old, prosperous family business, it is important to keep matters strictly professional and draw a fine line between personal and work relationships.