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FAMILY BUSINESS
 AND STRUCTURES
                   Rajendran Ananda Krishnan




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SYLLABUS
 Importance of family business
 Types, History
 Responsibilities and rights of shareholders of a
  family business,
 Succession in family business,
 Pitfalls of the family business,
 strategies for improving the capability of family
  business,
 Improving family business performance



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DEFINITIONS
 Family business is a corporation that is entirely owned
  and managed by members of a single family.
 Family firm is a corporation that is entirely owned by
  members of single family. It is also known as company
  owned, controlled and operated by members of one or
  several families.
 Family business is one in which one or more members
  of one or more families have ownership, interest and
  significant commitment towards business.




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CHARACTERISTICS OF FAMILY BUSINESS
 Family business are ideal in nature as they are
  loyal to the principles of the founder and thus ensure
  uniformity in their operations.
 Succession is one           important decision which
  determines future effectiveness in terms of company
  operation.
 family business comprises of family members in
  business operations ensuring effective utilization of
  in house talent in family.
 Single minded dedication of family members ensures
  survival of family business through toughest times.


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 Effectiveness and existence of family business is
  determined depending on understanding persisting
  within the family.
 Family business may be comprised of one or more
  then one family in business operations.
 Family members who are not contributing or not
  involved in business are part of business.
 Family business values are reflection of values
  possessed and followed by family members.
 Members of family have legal control over business.




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IMPORTANCE OF FAMILY BUSINESS
 Contributing to economic development : family
  business play crucial role in economic development
  of most of the countries. Retail sector, small scale
  industry, and service sector are owned by family
  business.
 Spirit of entrepreneurship : family business as
  contributes towards development and has been
  successful in country like India it paves way to
  various families to initiate and bring up new ventures
  in country.
 Philanthropy : family business in India along with
  their development have also concentrated towards
  welfare of general public by investing on hospitals,
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 Trust Lowers transaction cost : partnership and
  other forms of business involving outsiders usually
  leads to conflict in long run. In case of family
  business as all the parties in family are affected by
  loss incurred in company do not involve any sought
  of conflict and difference in point of view arises they
  try and solve it internally in the family ensuring
  business is not affected by the same.
 Small, nimble and quick to react : as managing
  team size in family business is small compare to
  other form of business decision making process
  involves less period of time which helps to take
  timely decision.
 Information as source of advantage : as family
  business is private firm it is not required to take
  decision in accordance with pressure from other
  sources and strategies of business need not be
  revealed to outsiders of business.
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TYPES OF FAMILY BUSINESS

                 Family owned
                   business




                 Family owned
                 and managed                      Family
                   business                      business


                 Family owned
                    and led
                   business


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TYPES OF FAMILY BUSINESS
 Family owned business : is a profit organization were
  number of voting shares, but not necessarily majority of
  shares are owned by members of single extended family but
  significantly influenced by other members of family.
 Family owned and managed business : is a profit
  organization were number of voting shares, but not
  necessarily majority of shares are owned by members of
  single extended family but significantly influenced by other
  members of family. In this business has active participation by
  one family member in the top management of company so that
  one or more family members have ultimate management
  control.




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 Family    owned and led company : is a profit
 organization were number of voting shares, but not
 necessarily majority of shares are owned by members of
 single extended family but significantly influenced by
 other members of family. In this business has active
 participation by one family member in the top
 management of company so that one or more family
 members have ultimate management control. But in this
 method one member has major influence on business
 activities who in charge of regulating activities of
 business and members of family business.




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3 CIRCLE MODEL OF FAMILY BUSINESS




                                       Ownership




                                 Family            Business




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3 CIRCLE OF FAMILY BUSINESS
 Business system : comprises of start up,
  expansion, formalization and maturity of business.
 Family system : young business family, entering
  business family, working together etc.
 Ownership system : controlling owner, sibling
  partnership, cousin consortium.




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GOVERNANCE OF FAMILY BUSINESS
 There are three components to governance of family
  business :
1.Perodic assemblies of family
2. Family council meeting : if the size of the family is
  small in size than members of family can meet on
  frequent basis, when the operation of the family business
  expands geographically each team has to choose in
  representative for every unit who on behalf of every area
  can meet on regular basis to decode on plans, create
  policies, and strengthen family business communication.




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 Family constitution : family policies and guiding
 vision and values that regulate members relationship
 in business. Developed plan may be detailed or
 simple in nature but every family is benefited by the
 same.




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BENEFITS OF CONDUCTING FAMILY ASSEMBLY
                OR COUNCIL MEETING
 Develop clarity on roles, rights and responsibilities of
  family members.
 Encourage members of family, family employees
  and owners family to act responsibly towards the
  family and business.
 Regulate appropriate family and owner inclusion in
  business discussion.




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DUTIES PERFORMED BY FAMILY COUNCIL MEETING
 Plan assembly meetings, which otherwise has to be
  arranged by CEO in company.
 discuss current business, ownership, family issues and
  keep family informed about the issues.
 help family reach decisions and collectively focus on
  attainment of single goal.
 Keep the board of directors informed about family views
  on company and keep in touch with the board about key
  business policies and plans.
 Develop plans and policies in line with the board, that
  regulate family activity with business.




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 Try avoiding issues in family while seeing that key
  family goals are satisfied.
 Develop loyal, informed and contributing family
  shareholders.
 Scout the family for business talent.
 Create educational events to encourage education of
  family members towards family business.
 Plan family social gatherings and rituals which help
  to create healthy, harmonious relationship within the
  family.




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REASONS FOR CONDUCTING FAMILY BUSINESS
 planning employment standards for next generation
 Career development policies for family employees
 Family employee compensation
 Succession process, including retirement ages
 Ownership agreements which comprises of buy and
  sell agreements
 dividends




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HISTORY OF FAMILY BUSINESS
 History of family business refers to reason why
  business came into existence, vision and mission of
  company, people contributions towards success of
  business and contribution of business towards
  development of society on the whole.
REASONS TO CREATE HISTORY OF FAMILY
  BUSINESS
1. Founders vision and mission : refers to reason
  why business came into existence, operations of
  company under various leadership and insight
  about founder and his vision and mission.


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2. Historical accuracy : without valid information about
  family business customers, employees of business may
  be biased by wrong information through other sources
  about purpose of business and its contribution towards
  society to avoid these problems details of business
  should be documented on timely basis.
3. Honouring long time employees : long-time or retired
  employees who have contributed towards success of
  family may have feeling that that efforts towards business
  have been forgotten. If proceedings of business are
  recorded in form of document past employees of
  company develop form of belongingness towards
  company.




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 Thanking customers and vendors : maintaining
  good relationship with customers and vendors
  specially the ones who have supported during critical
  situation is very important. Owners by documenting
  these peoples contribution get way to publically
  thank these parties contribution.
 Background for the uniformed : new hires,
  potential clients, bankers and investors may not
  know the company's background during which
  documented data of company will suffice to their
  needs.




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BENEFITS OF HISTORY OF FAMILY BUSINESS
 Interdependence between company and community is
  documented as is the owners individual contribution and
  involvement in community affairs.
 Succeeding family members have valid resource from
  which they can rely on for suggestion to overcome
  persisting problems.
 Documenting company's contribution and commitment to
  the community builds sense of confidence among clients,
  potential clients which helps in strengthen relationship
  between business and key individual related to the
  business.




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 Content created for books can be recreated for other
  media including company brochure, websites, press
  release, news letters etc.
 Family business that create quality hand book will
  always be valued and treasured.




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RESPONSIBILITY AND RIGHTS OF FAMILY
                     SHAREHOLDERS
 Be knowledgeable about company operations ( products,
  services, locations top managers, industry, competition,
  measure of performance )
 Have information about basic company finance, and be
  able to read and ask questions about the income
  statement and balance sheet of their company.
 Attend shareholders meeting.
 Understand board member qualification and participate,
  in screening of board members.
 Constructively    question management and offer
  suggestions to management.




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 Publically support management decisions
 Keep appropriate company information in strict
  confidence and recognize that shareholders are not
  entitled to all company information on demand.
 Where possible and useful, generate business leads.
 Try and provide additional investment capital.




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Expectations of family shareholders from
          managers of business
 Timely     information on company strategy, important
  organizational changes and company’s basic financial status
  before information being released to general public.
 Openness by company board and management to
  shareholders on the above mentioned information.
 Ability to participate in the election of board members.
 Fair policies that protect shareholders interest but also
  requires their cooperation and risk taking.
 Acceptance economic performance by the company, including
  reasonable dividends and capital gains.




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SUCCESSION IN FAMILY BUSINESS
1. First family succession plan, then business
  succession plan : family business plan must
  recognize and accommodate the needs, goals and
  objectives of each member of family. Family
  succession plan has to be developed first as if
  business plan is designed in advance it proves to be
  difficult for owner to coordinates goals of family
  members towards business.




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Family business plan should include following
                      dimensions
 strategies to put business interest ahead of family
  business.
 Emphasise merit over family position
 Income for working members of the family and
  shareholders.
 The business environment during transition
 Treatment of loyal customers
 Tax consequences.




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2. Family first business or business first family :
  important issue to be determined before beginning family
  succession plan is whether yours is family first business
  or business first family. It is often seen that most of the
  business fail to succeed when managed by second and
  third generation of business.
3. Succession management : business families take
  advice of business advisory board who suggest on
  eligible person for transition. Advisory board are not
  experts in managing business but are consultants who
  suggest strategies for effective succession management.




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4.Business valuation : may not be formal written report
  but is required as part of annual strategic planning
  process. Reasons for valuing family business are as
  follows :
 Buying or selling shares to employees
 Retiring or selling to other family members
 Planning gifts for hires
 Anticipating estate tax problems
 Providing adequate key man insurance coverage
 Tracking of business plan towards achievement of
  results.



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5. Bur or sell agreement : is used to transfer share
  owownership for buy and sell agreement. This
  agreement is established between related parties
  and shareholders in family.
 It is an agreement to transfer a business interest to
  hires for less than fair market value
 The agreement is real ; it is part of bona fied
  business arrangements




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KEY POINTS TO BE CONSIDERED BEFORE
                     SUCCESSION PLAN
 Quick decision on business plan process will provide
  more alternatives to the process.
 A child than having right to inherit business should have
  ability to manage family business. Children's must be
  encouraged to out of family business so that they have
  better insight about competition persisting in market and
  accordingly develop strategies for development of own
  business.
 Establishing an outsider as advisor for family business
  may prove to be risky for which experts in succession
  planning should be chosen from management team with
  in the family business.




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 Conducting family meeting on regular basis will help establish
  and keep the family focused on rules, goals and objective
 Develop non business interest
 Develop financial resources that are independent of business
 Evaluate component successor : which requires to assess
  whether person to be chosen as successor has potential to
  lead the business, will he be accepted by all members in
  family, check his willingness to control the business.
 Person who will be chosen as successor should be give an
  appropriate standard to be achieved which will help him deign
  effective strategy and have yardstick to compare his actual
  performance with expected one.




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WAYS TO EASE TRANSITION PROCESS
 Hire    most competent advisors ( attorneys,
  accountants,     financial planners,     and    business
  consultants for succession planning. Succession
  planning is complicated process and requires advice of
  expertise on the same.
 Business valuation : when business transition takes
  place it leads to change in controlling hands and
  accordingly even present situation may change in
  business. Depending on the purpose of the valuation,
  cost vary accordingly. Usually business owners value
  family business for purpose of strategic planning of their
  business.




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 Funding to be considered as part of succession
 plan : it is important to understand that business
 may need to grow significantly in order to pay the
 transition cost which includes which includes tax ,
 insurance, professional advisors. Funds available for
 expansion should be retained in the process for
 transition.




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PITFALLS/ DEMERITS /PROBLEMS OF FAMILY BUSINESS
 lack of focus and strategy : family business initially perform
  in effective manner but at later point of time when aspect of
  transition comes into picture family business tends to lose its
  track from its actual vision .
 Lack of professionalism : data maintenance practice in
  family business usually will not be in par with that of private
  companies which proves to be major hurdle during decision
  making process.
 Difference in educational levels of family members which
  drives some people to follow obsolete method while others
  may focus on implementing latest technology and practices in
  business.




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 Rivalries between sibling in company which may end up
  in separation of family business.
 Difference of attitude towards employees in company
 Inability to separate family interest from the interest of
  business
 Short term approach towards business , leading to an
  absence of investment in employees and product
  development.
 Insensitivity towards customers due to uncompetitive
  market resulting in weaker market skills.




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APPROACHES TO AVOID CONFLICTS IN FAMILY BUSINESS
 Coping approach : which involves adopting to negotiation
  among family members try and resolve conflict and agree on
  common terms.
 Arbitrary approach : in this approach the elder person of the
  family will be allotted with the power to frame rules and control
  business activity. But this approach has not proven to be
  successful as most of the time elder person in family may not
  prove to be effective manager for business.
 Managed approach : this approach states that person who
  has ability to maintain better relationship with key individuals
  of business and have ability to understand business and
  manage the same should be appointed as lead person for the
  business.




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STRATEGIES FOR IMPROVING CAPABILITY OF FAMILY
                              BUSINESS
 Inculcate professionalism in family firms : professionalism
  in business refers to retaining of effective talent in company,
  proper documentation of business transaction, planning and
  implementation of efficient strategies for success of business.
 Replenishing entrepreneurship : basically refers to expand
  existing business and be role model for their families to open
  business of their own.
 Good management : refers to proper communication of
  information among family members about present business
  and utilization of available resources in business.




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 Ability to change : business environment is dynamic in
  nature for which business have to renew their strategies
  on regular basis to meet demand of changing situation to
  compete in market.
 Have strategic plan : situations of business are
  unpredictable in nature in nature so present plans of
  business should be designed keeping in point about
  future strategy in picture.
 Have active board of directors : refers to have
  competent employees in business who can assess future
  requirements and accordingly management business
  resources and take decisions in business.




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IMPROVING FAMILY BUSINESS PERFORMANCE
 Core value of family business act like yardstick for family
  members to act accordingly towards business. Core values are
  comprised of training of family members newly entering family
  business, future, finance and accountability of these members
  towards the business.
 Impact of family values on business performance : when
  members of family are clear about business expectation they can
  formulate their strategy well in advance which helps them enhance
  quality of their performance towards business.
 Training : members of family business should be trained about thee
  family values, competition existing in market and skills required to be
  possessed by in order to have competitive advantage in business
  market.




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MANAGEMENT DEVELOPMENT PLAN IN FAMILY
                         BUSINESS
 Management development plan is generated by top
  management people in company. The purpose is to
  predict staffing needs and plan in for career growth and
  development for family as well as non family members in
  business.
 Management development plan identifies the key
  jobs in the current company and career aspirants of
  all key mangers. It predicts what jobs will or should be
  vacant in future. It has to focus on balancing
  development of hires in business and encourage
  protective teamwork.




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 Who should create the plan : business plan should
 be created by owner manager, human resource
 person and top managers from key functions in
 business




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CREATING A BUSINESS PLAN
   Draw company's five year organization chart.
   circle position of future organization chart, at all levels and the most
    critical ones for the business.
   List the names of individuals in those jobs, their age now and in five
    years.
   List set of employees who may retire and who are planning to leave
    organization in future.
   What is the age of owner manager and he should be doing in future
    five years.
   What is the age of successor and where should he or she be in five
    years.
   What is best career path for the person in next five years
   What policy or policies ca be derived from these discussions ? What
    should be communicated to the successor , manager and
    employees.




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FAMILY REUNION GAMES TO PROMOTE FAMILY VALUES
 Family reunion basically refers to coming together of family
  member for occasion ,event in family. These kind of events give
  platform to family members to have discussion on various
  matters in relation to family and family business..
 Family bonding : is crucial component of every successful
  family. It leads to family communication system that encourages
  growth and prosperity for business while building good bonding
  among family members in business.
 Family values : influence the way in which family business is
  managed and operates. Ethics of family business are shaped
  by values of the family.




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 Family religion : plays important role in operation of
  business. Business may not prefer market in certain
  products which their religion do not permit for.
 Family secrets : may be in form of core values, ethics
  and beliefs followed by family members of business
  which is not preferred being revealed to general public or
  media channels.
 Family rules : are implemented in business and are to
  be followed people in charge and family members of the
  business. These rules regulate activities of members and
  family business on the whole.




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RULES TO SAVE FAMILY BUSINESS

Rule 1                            Formulate policy frame work rules


Rule 2                             Families must serve the business


Rule 3                                           Future outlook



Rule 4                            Accountability addressing the issue


                                           Addressing the issue
Rule 5



Rule 6                                     Creating shared vision
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RULES TO SAVE FAMILY BUSINESS
 Formulate policy framework and rules : succession
  plan is one of the important aspect for formulating policy
  framework and rules. Succession plan should outline
  exactly how the transfer of leadership will occur and
  should establish the criteria that hires must meet before
  moving to role of leadership.
 Families must serve the business : members of the
  family should give their best performance as per the
  expectation of the company. Members of the family
  business should perform as effectively as non family
  members of the business.




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 Future outlook : business firms should have proper core
  values which prove to be yardstick for performance of
  business. Family members should believe that present
  strategy prove to be obsolete in long run for the same
  company should be flexible in nature in terms of adjusting
  to changes taking place in business environment.
 Accountability : should be one of the major criteria for
  transition process in family business. Family members
  should be made clear about what is expected from them
  by family business and they are required to prove their
  efficiency through effective performance. They should be
  responsible for decision taken by them during time of
  their leadership.




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 Addressing the issue : family business who focus on
  improving their overall company performance should take
  structured approach through addressing the issue by
  careful examination of its core values. Members of the
  family are required to evaluate their core value and
  understand their relevance in relation to success of
  business.
 Creating shared vision : it refers to communicating
  vision , objective of the company to family and non family
  members of business. Communication of information
  takes place through various sessions of meeting in
  company. All the family members should have common
  and shared vision towards goal attainment in company.




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THANK YOU

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Family business

  • 1. FAMILY BUSINESS AND STRUCTURES Rajendran Ananda Krishnan https://www.facebook.com/ialwaysthinkprettythi ngs
  • 2. SYLLABUS  Importance of family business  Types, History  Responsibilities and rights of shareholders of a family business,  Succession in family business,  Pitfalls of the family business,  strategies for improving the capability of family business,  Improving family business performance https://www.facebook.com/ialwaysthinkprettythi ngs
  • 4. DEFINITIONS  Family business is a corporation that is entirely owned and managed by members of a single family.  Family firm is a corporation that is entirely owned by members of single family. It is also known as company owned, controlled and operated by members of one or several families.  Family business is one in which one or more members of one or more families have ownership, interest and significant commitment towards business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 6. CHARACTERISTICS OF FAMILY BUSINESS  Family business are ideal in nature as they are loyal to the principles of the founder and thus ensure uniformity in their operations.  Succession is one important decision which determines future effectiveness in terms of company operation.  family business comprises of family members in business operations ensuring effective utilization of in house talent in family.  Single minded dedication of family members ensures survival of family business through toughest times. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 7.  Effectiveness and existence of family business is determined depending on understanding persisting within the family.  Family business may be comprised of one or more then one family in business operations.  Family members who are not contributing or not involved in business are part of business.  Family business values are reflection of values possessed and followed by family members.  Members of family have legal control over business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 8. IMPORTANCE OF FAMILY BUSINESS  Contributing to economic development : family business play crucial role in economic development of most of the countries. Retail sector, small scale industry, and service sector are owned by family business.  Spirit of entrepreneurship : family business as contributes towards development and has been successful in country like India it paves way to various families to initiate and bring up new ventures in country.  Philanthropy : family business in India along with their development have also concentrated towards welfare of general public by investing on hospitals, https://www.facebook.com/ialwaysthinkprettythi educational institutions, construction of roads etc. ngs
  • 9.  Trust Lowers transaction cost : partnership and other forms of business involving outsiders usually leads to conflict in long run. In case of family business as all the parties in family are affected by loss incurred in company do not involve any sought of conflict and difference in point of view arises they try and solve it internally in the family ensuring business is not affected by the same.  Small, nimble and quick to react : as managing team size in family business is small compare to other form of business decision making process involves less period of time which helps to take timely decision.  Information as source of advantage : as family business is private firm it is not required to take decision in accordance with pressure from other sources and strategies of business need not be revealed to outsiders of business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 10. TYPES OF FAMILY BUSINESS Family owned business Family owned and managed Family business business Family owned and led business https://www.facebook.com/ialwaysthinkprettythi ngs
  • 11. TYPES OF FAMILY BUSINESS  Family owned business : is a profit organization were number of voting shares, but not necessarily majority of shares are owned by members of single extended family but significantly influenced by other members of family.  Family owned and managed business : is a profit organization were number of voting shares, but not necessarily majority of shares are owned by members of single extended family but significantly influenced by other members of family. In this business has active participation by one family member in the top management of company so that one or more family members have ultimate management control. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 12.  Family owned and led company : is a profit organization were number of voting shares, but not necessarily majority of shares are owned by members of single extended family but significantly influenced by other members of family. In this business has active participation by one family member in the top management of company so that one or more family members have ultimate management control. But in this method one member has major influence on business activities who in charge of regulating activities of business and members of family business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 13. 3 CIRCLE MODEL OF FAMILY BUSINESS Ownership Family Business https://www.facebook.com/ialwaysthinkprettythi ngs
  • 14. 3 CIRCLE OF FAMILY BUSINESS  Business system : comprises of start up, expansion, formalization and maturity of business.  Family system : young business family, entering business family, working together etc.  Ownership system : controlling owner, sibling partnership, cousin consortium. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 16. GOVERNANCE OF FAMILY BUSINESS  There are three components to governance of family business : 1.Perodic assemblies of family 2. Family council meeting : if the size of the family is small in size than members of family can meet on frequent basis, when the operation of the family business expands geographically each team has to choose in representative for every unit who on behalf of every area can meet on regular basis to decode on plans, create policies, and strengthen family business communication. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 17.  Family constitution : family policies and guiding vision and values that regulate members relationship in business. Developed plan may be detailed or simple in nature but every family is benefited by the same. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 19. BENEFITS OF CONDUCTING FAMILY ASSEMBLY OR COUNCIL MEETING  Develop clarity on roles, rights and responsibilities of family members.  Encourage members of family, family employees and owners family to act responsibly towards the family and business.  Regulate appropriate family and owner inclusion in business discussion. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 20. DUTIES PERFORMED BY FAMILY COUNCIL MEETING  Plan assembly meetings, which otherwise has to be arranged by CEO in company.  discuss current business, ownership, family issues and keep family informed about the issues.  help family reach decisions and collectively focus on attainment of single goal.  Keep the board of directors informed about family views on company and keep in touch with the board about key business policies and plans.  Develop plans and policies in line with the board, that regulate family activity with business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 21.  Try avoiding issues in family while seeing that key family goals are satisfied.  Develop loyal, informed and contributing family shareholders.  Scout the family for business talent.  Create educational events to encourage education of family members towards family business.  Plan family social gatherings and rituals which help to create healthy, harmonious relationship within the family. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 22. REASONS FOR CONDUCTING FAMILY BUSINESS  planning employment standards for next generation  Career development policies for family employees  Family employee compensation  Succession process, including retirement ages  Ownership agreements which comprises of buy and sell agreements  dividends https://www.facebook.com/ialwaysthinkprettythi ngs
  • 23. HISTORY OF FAMILY BUSINESS  History of family business refers to reason why business came into existence, vision and mission of company, people contributions towards success of business and contribution of business towards development of society on the whole. REASONS TO CREATE HISTORY OF FAMILY BUSINESS 1. Founders vision and mission : refers to reason why business came into existence, operations of company under various leadership and insight about founder and his vision and mission. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 24. 2. Historical accuracy : without valid information about family business customers, employees of business may be biased by wrong information through other sources about purpose of business and its contribution towards society to avoid these problems details of business should be documented on timely basis. 3. Honouring long time employees : long-time or retired employees who have contributed towards success of family may have feeling that that efforts towards business have been forgotten. If proceedings of business are recorded in form of document past employees of company develop form of belongingness towards company. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 25.  Thanking customers and vendors : maintaining good relationship with customers and vendors specially the ones who have supported during critical situation is very important. Owners by documenting these peoples contribution get way to publically thank these parties contribution.  Background for the uniformed : new hires, potential clients, bankers and investors may not know the company's background during which documented data of company will suffice to their needs. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 26. BENEFITS OF HISTORY OF FAMILY BUSINESS  Interdependence between company and community is documented as is the owners individual contribution and involvement in community affairs.  Succeeding family members have valid resource from which they can rely on for suggestion to overcome persisting problems.  Documenting company's contribution and commitment to the community builds sense of confidence among clients, potential clients which helps in strengthen relationship between business and key individual related to the business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 27.  Content created for books can be recreated for other media including company brochure, websites, press release, news letters etc.  Family business that create quality hand book will always be valued and treasured. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 28. RESPONSIBILITY AND RIGHTS OF FAMILY SHAREHOLDERS  Be knowledgeable about company operations ( products, services, locations top managers, industry, competition, measure of performance )  Have information about basic company finance, and be able to read and ask questions about the income statement and balance sheet of their company.  Attend shareholders meeting.  Understand board member qualification and participate, in screening of board members.  Constructively question management and offer suggestions to management. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 29.  Publically support management decisions  Keep appropriate company information in strict confidence and recognize that shareholders are not entitled to all company information on demand.  Where possible and useful, generate business leads.  Try and provide additional investment capital. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 30. Expectations of family shareholders from managers of business  Timely information on company strategy, important organizational changes and company’s basic financial status before information being released to general public.  Openness by company board and management to shareholders on the above mentioned information.  Ability to participate in the election of board members.  Fair policies that protect shareholders interest but also requires their cooperation and risk taking.  Acceptance economic performance by the company, including reasonable dividends and capital gains. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 32. SUCCESSION IN FAMILY BUSINESS 1. First family succession plan, then business succession plan : family business plan must recognize and accommodate the needs, goals and objectives of each member of family. Family succession plan has to be developed first as if business plan is designed in advance it proves to be difficult for owner to coordinates goals of family members towards business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 33. Family business plan should include following dimensions  strategies to put business interest ahead of family business.  Emphasise merit over family position  Income for working members of the family and shareholders.  The business environment during transition  Treatment of loyal customers  Tax consequences. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 34. 2. Family first business or business first family : important issue to be determined before beginning family succession plan is whether yours is family first business or business first family. It is often seen that most of the business fail to succeed when managed by second and third generation of business. 3. Succession management : business families take advice of business advisory board who suggest on eligible person for transition. Advisory board are not experts in managing business but are consultants who suggest strategies for effective succession management. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 35. 4.Business valuation : may not be formal written report but is required as part of annual strategic planning process. Reasons for valuing family business are as follows :  Buying or selling shares to employees  Retiring or selling to other family members  Planning gifts for hires  Anticipating estate tax problems  Providing adequate key man insurance coverage  Tracking of business plan towards achievement of results. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 36. 5. Bur or sell agreement : is used to transfer share owownership for buy and sell agreement. This agreement is established between related parties and shareholders in family.  It is an agreement to transfer a business interest to hires for less than fair market value  The agreement is real ; it is part of bona fied business arrangements https://www.facebook.com/ialwaysthinkprettythi ngs
  • 37. KEY POINTS TO BE CONSIDERED BEFORE SUCCESSION PLAN  Quick decision on business plan process will provide more alternatives to the process.  A child than having right to inherit business should have ability to manage family business. Children's must be encouraged to out of family business so that they have better insight about competition persisting in market and accordingly develop strategies for development of own business.  Establishing an outsider as advisor for family business may prove to be risky for which experts in succession planning should be chosen from management team with in the family business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 38.  Conducting family meeting on regular basis will help establish and keep the family focused on rules, goals and objective  Develop non business interest  Develop financial resources that are independent of business  Evaluate component successor : which requires to assess whether person to be chosen as successor has potential to lead the business, will he be accepted by all members in family, check his willingness to control the business.  Person who will be chosen as successor should be give an appropriate standard to be achieved which will help him deign effective strategy and have yardstick to compare his actual performance with expected one. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 39. WAYS TO EASE TRANSITION PROCESS  Hire most competent advisors ( attorneys, accountants, financial planners, and business consultants for succession planning. Succession planning is complicated process and requires advice of expertise on the same.  Business valuation : when business transition takes place it leads to change in controlling hands and accordingly even present situation may change in business. Depending on the purpose of the valuation, cost vary accordingly. Usually business owners value family business for purpose of strategic planning of their business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 40.  Funding to be considered as part of succession plan : it is important to understand that business may need to grow significantly in order to pay the transition cost which includes which includes tax , insurance, professional advisors. Funds available for expansion should be retained in the process for transition. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 41. PITFALLS/ DEMERITS /PROBLEMS OF FAMILY BUSINESS  lack of focus and strategy : family business initially perform in effective manner but at later point of time when aspect of transition comes into picture family business tends to lose its track from its actual vision .  Lack of professionalism : data maintenance practice in family business usually will not be in par with that of private companies which proves to be major hurdle during decision making process.  Difference in educational levels of family members which drives some people to follow obsolete method while others may focus on implementing latest technology and practices in business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 42.  Rivalries between sibling in company which may end up in separation of family business.  Difference of attitude towards employees in company  Inability to separate family interest from the interest of business  Short term approach towards business , leading to an absence of investment in employees and product development.  Insensitivity towards customers due to uncompetitive market resulting in weaker market skills. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 43. APPROACHES TO AVOID CONFLICTS IN FAMILY BUSINESS  Coping approach : which involves adopting to negotiation among family members try and resolve conflict and agree on common terms.  Arbitrary approach : in this approach the elder person of the family will be allotted with the power to frame rules and control business activity. But this approach has not proven to be successful as most of the time elder person in family may not prove to be effective manager for business.  Managed approach : this approach states that person who has ability to maintain better relationship with key individuals of business and have ability to understand business and manage the same should be appointed as lead person for the business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 44. STRATEGIES FOR IMPROVING CAPABILITY OF FAMILY BUSINESS  Inculcate professionalism in family firms : professionalism in business refers to retaining of effective talent in company, proper documentation of business transaction, planning and implementation of efficient strategies for success of business.  Replenishing entrepreneurship : basically refers to expand existing business and be role model for their families to open business of their own.  Good management : refers to proper communication of information among family members about present business and utilization of available resources in business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 45.  Ability to change : business environment is dynamic in nature for which business have to renew their strategies on regular basis to meet demand of changing situation to compete in market.  Have strategic plan : situations of business are unpredictable in nature in nature so present plans of business should be designed keeping in point about future strategy in picture.  Have active board of directors : refers to have competent employees in business who can assess future requirements and accordingly management business resources and take decisions in business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 46. IMPROVING FAMILY BUSINESS PERFORMANCE  Core value of family business act like yardstick for family members to act accordingly towards business. Core values are comprised of training of family members newly entering family business, future, finance and accountability of these members towards the business.  Impact of family values on business performance : when members of family are clear about business expectation they can formulate their strategy well in advance which helps them enhance quality of their performance towards business.  Training : members of family business should be trained about thee family values, competition existing in market and skills required to be possessed by in order to have competitive advantage in business market. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 47. MANAGEMENT DEVELOPMENT PLAN IN FAMILY BUSINESS  Management development plan is generated by top management people in company. The purpose is to predict staffing needs and plan in for career growth and development for family as well as non family members in business.  Management development plan identifies the key jobs in the current company and career aspirants of all key mangers. It predicts what jobs will or should be vacant in future. It has to focus on balancing development of hires in business and encourage protective teamwork. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 48.  Who should create the plan : business plan should be created by owner manager, human resource person and top managers from key functions in business https://www.facebook.com/ialwaysthinkprettythi ngs
  • 50. CREATING A BUSINESS PLAN  Draw company's five year organization chart.  circle position of future organization chart, at all levels and the most critical ones for the business.  List the names of individuals in those jobs, their age now and in five years.  List set of employees who may retire and who are planning to leave organization in future.  What is the age of owner manager and he should be doing in future five years.  What is the age of successor and where should he or she be in five years.  What is best career path for the person in next five years  What policy or policies ca be derived from these discussions ? What should be communicated to the successor , manager and employees. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 52. FAMILY REUNION GAMES TO PROMOTE FAMILY VALUES  Family reunion basically refers to coming together of family member for occasion ,event in family. These kind of events give platform to family members to have discussion on various matters in relation to family and family business..  Family bonding : is crucial component of every successful family. It leads to family communication system that encourages growth and prosperity for business while building good bonding among family members in business.  Family values : influence the way in which family business is managed and operates. Ethics of family business are shaped by values of the family. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 53.  Family religion : plays important role in operation of business. Business may not prefer market in certain products which their religion do not permit for.  Family secrets : may be in form of core values, ethics and beliefs followed by family members of business which is not preferred being revealed to general public or media channels.  Family rules : are implemented in business and are to be followed people in charge and family members of the business. These rules regulate activities of members and family business on the whole. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 54. RULES TO SAVE FAMILY BUSINESS Rule 1 Formulate policy frame work rules Rule 2 Families must serve the business Rule 3 Future outlook Rule 4 Accountability addressing the issue Addressing the issue Rule 5 Rule 6 Creating shared vision https://www.facebook.com/ialwaysthinkprettythi ngs
  • 55. RULES TO SAVE FAMILY BUSINESS  Formulate policy framework and rules : succession plan is one of the important aspect for formulating policy framework and rules. Succession plan should outline exactly how the transfer of leadership will occur and should establish the criteria that hires must meet before moving to role of leadership.  Families must serve the business : members of the family should give their best performance as per the expectation of the company. Members of the family business should perform as effectively as non family members of the business. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 56.  Future outlook : business firms should have proper core values which prove to be yardstick for performance of business. Family members should believe that present strategy prove to be obsolete in long run for the same company should be flexible in nature in terms of adjusting to changes taking place in business environment.  Accountability : should be one of the major criteria for transition process in family business. Family members should be made clear about what is expected from them by family business and they are required to prove their efficiency through effective performance. They should be responsible for decision taken by them during time of their leadership. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 57.  Addressing the issue : family business who focus on improving their overall company performance should take structured approach through addressing the issue by careful examination of its core values. Members of the family are required to evaluate their core value and understand their relevance in relation to success of business.  Creating shared vision : it refers to communicating vision , objective of the company to family and non family members of business. Communication of information takes place through various sessions of meeting in company. All the family members should have common and shared vision towards goal attainment in company. https://www.facebook.com/ialwaysthinkprettythi ngs