Family Business Advisory-Important Roles and Responsibilities

Just spend some time on the net gathering information about the world’s largest companies and you will be surprised to note that quite a few of them are family-owned and run. With their long term vision and the ability to create long term employment opportunities on a large scale, family run companies are major growth drivers of the country in which they operate or have branches. Apart from contributing to the overall GDP of a country, they also make unique contributions to the society through their support for philanthropic activities. One thing, however, to note here is that large family controlled business despite their recognition, prestige and global dominance not to mention their economic and societal significance have their own unique set of vulnerabilities.

There are myriad number of reasons that can drive a wedge between family members—investment decisions, expansion decisions, leadership appointment, major policy decisions, generational transitions, misappropriation of profits, etc are some major factors that could strain relationships in a family. This should not come as much of a surprise though as there is no reason to believe that entrepreneurial families will be, or should be, any less quarrelsome than any other average family. The major difference though between an average family dispute and an entrepreneurial family dispute is that in case of the later, it is not only the family that bears the brunt of the quarrel. Disputes within an entrepreneurial family can have far reaching consequences for people involved directly or indirectly with the business. Imagine a factory getting closed down owing to family dispute; envision how far-reaching effect it will have on the workers and their family.

Conflict arguably is the greatest destroyer of value in family firms, and for family owned corporations to sustain their progress and development across generations, conflict management is of paramount importance. Maintaining equilibrium between family values and business interest is critical though a difficult task. However, if it is accomplished successfully it can really allow a business to blossom offering handsome reward and return on investment in the process.

Family Business Advisory Service

Quality family business advisory service providers are well-versed with the art of family business management. They have the requisite expertise, knowledge and resources to help generations of family members successfully navigate the challenges of leadership, succession, and governance among other critical issues. Reputable service providers have accumulated invaluable experience assisting some of the most well-known family business in the world. They work closely with family members and owners to create an environment conducive to able decision making without any trace of conflict or friction.

Business and Family Governance Consulting

It is of utmost important to institute a governing framework that clearly demarcates business from owner and lay down clear guidelines for families and owners to amicably resolve any conflicts or issues that may crop up from time to time. This framework could take the shape of Advisory boards, Family Councils, Owners’ Councils, etc. Quality family business advisory service providers bring in their global knowledge and rich experience to help you define the proper framework of governance and define the responsibilities of these bodies. Taking into account the business structure and framework, the service provider will bring in competent independent directors and consultants to oversee the governing framework is followed in spirit and letter. Additionally, the family business advisory will also review these frameworks at regular interval to gauge their effectiveness and efficiency.

Founder and Next Generation Transitions of Family Business

Founder transition is a complex, emotional and challenging issue which every entrepreneurial family has to face at some point of time. The transition of leadership role from one generation to another also serves as an opportunity for the entrepreneurial family to reflect on its future growth strategies and ownership of the management structure. This is a critical issue which means that the family should make advance preparation for it so that the business continues to flourish. Next generation transition demands a proactive approach rather than ‘we will cross the bridge when we come to it ‘mentality.

Reputable service providers know their job well and as such render invaluable help in ensuring that the transition is completely glitch-free. This is done by an in-depth analysis of the existing talent within the family and what serves as their primary motivation. This is benchmarked against the talent of other family members as well as those from outside. Resources are analyzed based on their knowledge, talent, qualification, motivation, interest and aptitude and how much potential they possess to drive the business forward and help it achieve its founding objectives and principals.

This is of absolute critical importance as objectivity and meritocracy are vital in ensuring the long term success and growth of the business. It is an important responsibility of family business advisory to evaluate and assess next generation family leaders with the primary purpose of identifying the most fitting role for the family members and to develop concrete plans for their grooming so that the transition is as smooth as possible.

Family business succession

There is no denying the fact that succession is one of the thorniest issues in a family business. Getting it right is vital for the long term survival and prosperity of the business. It is of paramount importance that succession is not treated as an eventuality but advance preparation needs to be made for it. Best in class family business advisory service providers work closely with the key stakeholders to properly assess both internal and external resources. Moreover, understanding their aspirations is key to a seamless integration between ambitions of the members and their subsequent roles and responsibilities. For all it to happen, it is of paramount importance that there is a good fit between an individual’s value system and family values and the culture and tradition of the business. The intention is not to stifle creativity and independent thinking but building alignment across family members and the business.

Well-established family business advisory service providers enjoy long term relationship with their clients which is borne out of the service provider being responsive to their needs and their unwavering commitment to ensure the legacy and continuing success of your family business.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.