Tag Archives: Family Business Management

Family Business – Mails to my clients – 5 – Corporate HR for the XYZ Group: Priority Areas

RS: April 27, 2010

Corporate HR for the XYZ Group: Priority Areas

The role of the Corporate Human Resources – also referred to as GROUP HR –  is to develop and implement human resource management policies and strategies that will enable the XYZ Group  to attract, recruit, develop, retain and sustain a high quality, performing, and productive Management Cadre to ensure succession, continuity, upgradation, and positive growth of the Group Companies. This would include as a process:

1. Preparing a comprehensive Data Bank of all employees across the Group Companies in Senior, Middle, and Supervisory positions.

2. Classifying them into A/ B/ C categories based on Age, Over-all Experience, and Experience with Group, Qualifications, Domain Expertise, Track Record, and Growth Potential.

3. Developing a Career Plan/ Map for each incumbent with lateral and upward movement within the Organization, and Capacity Upgrading Plan incorporating Leadership and Domain Training Programmes, and Management and Process Exposure on-the-job with Collaborators and other Organizations.

4. When there is a gap between the position required to be filled, and the human resource available within, the Corporate HR goes for fresh recruitment.

5. Since key positions are based in Tier 2 city, it is essential, as part of the recruitment process, to ‘Sell the Location’ to potential candidates in terms of both the professional’s aspirations and of his/her family. Particularly important are housing, employment for spouse, education for children, opportunity for extra-curricular pursuits for children/ recreation and leisure activity for the family, medical assistance, security, and medium and long-term projections for the Tier 2 Location from the family point of view. All this is over and above the employment position and monetary package. The Location also has to be sold in terms of proximity to Chennai, and whether the XYZ Group provides guest house facilities at Chennai to specific levels of the management cadre on personal visits.

6. Recruit/ Induct Professional CEOs to head Group Companies.

7. Corporate HR in terms of the above will need to be driven by a Family Professional with personal commitment to the effort so as to protect the Family’s Investment even as they move away from direct management roles.

*****************************

Raju Swamy                                       
Founder
& Advisor to Family Business
PROMAG Consultancy Services

Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email:
rajupromag@hotmail.com
www.promagconsult.in
www.familybusinessadvice.wordpress.com   (Blogsite)
Strengthening Family Dynamics for Family Business Growth…….since 1985

 

 

Family Business – Mails to my clients – 4 – Avoiding the Designation Trap

Avoiding the Designation Trap                                 RS:XYZ: June 27, 2010                                                                  

I am prompted to write this based on the imminent induction into your Indian operations of a few employees from the Overseas subsidiary. I would also suggest that there should be a Management Policy on Designations: both at the Corporate and Operational levels.

A few years ago, the CMD of a client company of mine was extremely keen, in fact determined and desperate, to recruit a particular candidate for a senior technical position. This candidate was just the right fit to fulfill a critical need at that point of time. The interview went very well, except for one issue: the candidate was insisting on a particular designation which rationally could not be conceded to within the present organizational structure. The candidate was adamant, and the CMD was desperate: an extremely negative transactional situation to be in. The CMD gave in and in his frustration, almost shouted: “You can have any designation you want but you will do exactly what I want you to do!”

We are confronted by a similar situation many times, and invariably take a short-cut position of ‘resolving the problem when it arises’, or ‘we will cross the bridge when we come to it’. In this case, two critical managers threatened to resign, one actually left taking along with him two of his assistants. The other could be ‘bought’ back.

 My advice:

  1. Plan well in advance for this induction, as well as for future inductions.
  2. Don’t overload the structure to ‘accommodate’.
  3. Don’t create compromises: designations are like elastic and if they are pulled beyond the actual job content, they break, or they boomerang, and can hurt.
  4. Designations should truly match job content and supervisory boundaries.
  5. Designations should not be thrown about as a reward, or a motivator, without back-up content.
  6. Designations should not be created under threat.
  7. Designations should support the structure, not structure support designations.
  8. Be aware of all consequences before you take an ‘insensitive’ decision, aimed at meeting a narrow objective.
  9. Do not create too many designations. Instead, establish attractive multi-stage salary package structures per designation for performing employees, till they actually reach a stage where a vacancy exists either because of a promotion chain, or because of an exit, or because of expansion.
  10. Don’t make designations ‘cheap’
  11. At Senior and Middle levels, better for the Family Business Board – Governing Council – to take a joint, well-considered decision, in the Group’s interest.

Raju Swamy                                       
Founder
& Advisor to Family Business
PROMAG Consultancy Services

Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email:
rajupromag@hotmail.com
www.promagconsult.in
www.familybusinessadvice.wordpress.com   (Blogsite)
Strengthening Family Dynamics for Family Business Growth…….since 1985

 

Family Business – Mails to my Clients – 3 – The XYZ Group: Being ‘Professional’ yourself…..“should Inheritance boost capacity to achieve, or should inheritance give you the right to be complacent”?

RS/XYZ/U-FAQs/ March 03, 2015

The XYZ Group: Being ‘Professional’ yourself…..

Attention: Chairman & Members of the XYZ Family Executive Board:

My Answers to Unasked FAQs (U-FAQs):

1. Yes, you are really the Supreme Management Decision Making Team of the Group, answerable and reporting to the Chairman & Members of the Family Business Board who are in turn Stakeholders/ Shareholders/ Partners in the XYZ Group Businesses.

2. Yes, the CEO of each Group Company, whether an FMB – Family Member in Business – or a Professional Non-Family CEO, is answerable to the Executive Board on his Company’s plans and performance.

3. Yes, even if the CEO is an FMB, and a brother or a cousin, he is answerable to the Executive Board, and the Executive Board needs to evaluate his performance, on behalf of the Stakeholders of the Group.

4. No, he is not the sole owner of the Company of which he is CEO, in the present Group Structure. You are all owners of the Company, equal owners as Families. You all have a stake in the Company’s performance, and therefore in the CEO‘s performance.

5. The FMB CEO has been nominated by the FBB, to protect the Group’s interests, and not because he is the Sole Owner of the Company.

6. Yes, if you find it difficult to question a CEO because he is an FMB, it is desirable to appoint Professional Non-Family CEOs who can be held accountable for their performance, without fear of family sensitivities. This matter needs urgent consideration as over-all performance of the Group is in ‘Stagnation’ mode primarily because of the absence of competitiveness, and of performance demands, because of soft family sensitivities.

7. Yes, the Chairman and Members of the Executive Board of the XYZ Group have 24×7 responsibility and accountability for the successful functioning and performance of the Group and of all the Group Companies.

8. Yes, the Chairman and Members of the Executive Board should be available and accessible to each other by person or by telephonic or by internet communication or by any other means 24×7 on a need-to-contact basis, even when on a vacation.

9. Yes, the Chairman and Members of the Executive Board can be in contact and discharge their responsibilities wherever they are in the World at whatever time to protect the interests of the XYZ Group.

10. No, the Chairman and Members of the Executive Board can never have the excuse of not being able to do something because they are ‘away from Office’…..they are supposed to be in command of their resources, to get things done, even under the most difficult circumstances.

11. Yes, in today’s world, you cannot really be ‘away’ when you are needed most, because of the critical position that you hold. Yes, of course, you cannot be held responsible if you give up the position you hold, and want to have nothing to do with the Group’s businesses. Till then, you are accountable, because you are drawing benefits from it.

12. Yes, if you really are a Visionary, inspiring, and motivate great performance all around, today, and into the future, as Members of the Executive Board, you can aspire and demand for a better reward system, for yourselves. Nothing wrong. Totally justified.

13. No, justification for rewards for hard work is not in riding a treadmill all day…..you are really going nowhere…..You need to get off the beaten path to run, and to achieve.

14. Ask yourself this fundamental question: “should Inheritance boost capacity to achieve, or should inheritance give you the right to be complacent”? Who wins in the end???

 

Raju Swamy                                       
Founder
& Advisor to Family Business
PROMAG Consultancy Services

Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email:
rajupromag@hotmail.com
www.promagconsult.in
www.familybusinessadvice.wordpress.com   (Blogsite)
Strengthening Family Dynamics for Family Business Growth…….since 1985

 

Family Business – Mails to my Clients – 2 – XYZ Family Business Board Meetings: Meetings Checklist

Raju Swamy: PROMAG: January 21, 2010

 

XYZ Family Business Board Meeting:

Meeting Checklist: Draft Recommendation

 1. Primary Business Objectives:

1.1. Business and Management Performance: To ensure that the Businesses where the Family has Management Control and Controlling Financial Interest contribute to the Wealth and Well-Being of the Family in perpetuity through:

1.1.1. Quality, Stability, and Growth of Human Resources employed in the Businesses.

1.1.2. Knowledge, Networking, and Alertness to be able to adapt to Innovation and Productivity, in time, to changing markets and to the changes in the larger business environment.

1.1.3. Continuous Growth both in ‘Financials’ and in Market Expansion that will generate increasing management and employment opportunity, and dividend income, for the Family.

1.1.4. Continuous and Sustainable Growth that will reflect positively to the relevant external world and which will result in increasing valuation of the Companies that will in turn contribute to the building of Wealth of the Family.

1.1.5.Sustained Growth and Performance of the Group Companies over time to be used to develop a Group Brand Equity that in turn will attract external investment for Expansion and for New Ventures.

1.1.6. Group Brand Equity will also help to attract Competent Senior Professionals who are essential inputs for Sustained Growth.

2. Career and Succession Planning:

2.1. Identification of Leadership positions that will require Successors in 3/ 5/ 7 years.

2.2. Identification/ mapping of career routing over 3/5/7 years of next generation Human Resources from within the Family to execute a Plan of Succession including training for Domain expertise, and for Leadership.

2.3. Identify Leadership positions where, for want of appropriate human resource from within the Family, external qualified professionals have to be inducted, or where such professionals from within can be identified and trained to higher levels of Leadership.

3. Retirement Planning

3.1. Who will retire when?

3.2. Phase in / Phase out Plan.

3.3. Financial Security

3.4. Social Security

3.5. Family Support.

4. Continuity & Performance of Not-for-Profits/ Charities.

5. Agenda for Monthly Meetings: The Agenda for each Meeting will have to flow naturally from the Checklist, and include:

5.1. Regular Performance Reporting from the Family’s perspective: For each company, for each charity institution.

5.2. Each Next-Gen. Professional from the Family to make a focused presentation on an area in the Family’s Business that requires attention with a fresh perspective.

5.3. Other Agenda listings will consist of priority attention areas for that month from the Primary Objectives Checklist.

6. Meeting Format: Formal seating/ Professional Family Meeting/ Performance & Solution Driven/ A Chairperson from within the family, by rotation, including a Next-Gen. member of the Family.

7. Organization, Minutes and Follow-up: A Family Member to take up this formal, accountable, leadership responsibility, for the productive success of each Monthly Meeting, for a specified period.

***********************************************

Raju Swamy                                       
Founder
& Advisor to Family Business
PROMAG Consultancy Services

Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email:
rajupromag@hotmail.com
www.promagconsult.in
www.familybusinessadvice.wordpress.com   (Blogsite)
Strengthening Family Dynamics for Family Business Growth…….since 1985

 

A Primer on Family Business……

 A Primer on Family Business (Version – 3) (4 pages)

Written by Raju Swamy

(Original Version published in March 17, 2009/ Updated on August 28, 2014)

(An introduction to typical issues confronting Family-owned and managed business enterprises and suggestions on how we can resolve them.)

 Attendance at Conferences on Family Business across India and across Asia show increasing interest particularly from family-owned medium-sized enterprises where the third-generation has just been inducted, or is just about to be inducted. These Conferences have been providing an opportunity for family business houses to come together to discuss and debate issues of common interest that could lead to directions for future growth and success of their enterprises. ‘Family Business’ issues have become particularly important given the need to compete, survive, and grow in a ‘survival of the fittest’ business climate coupled with an increasingly demanding internal family environment.

Traditionally, many family-owned and owner-managed businesses have been living with their problems either on grounds of ‘family prestige’ or simply because of a feeling of helplessness. Most successful closely-held family managed businesses with recognizable brand equity, whether local, regional, national, or global, which have emerged over the last 15 to 50 years have been ‘founder-managed’ or single family managed, to start with. With the traditional hierarchy of the single family in place (father and unmarried sons / elder brother and younger brothers) and with a good cash flow and mutual understanding, peace has prevailed. In most such enterprises, and particularly where manufacturing, and international business and trading are involved, the ‘family managers’ are well educated and business-competitive. Work and responsibility are shared informally with mutual understanding.

Over time, however, with the business track record being good, and with relative peace and mutual understanding within the family, complacency on the family front sets in. Mutual understanding is taken for granted, and problems if any between the family members in the business are pushed under the carpet, or postponed for future consideration, because business pressures on a day to day basis leave no time for attending to such issues. So long as the cash flow is good, ‘business is as usual’. But, below the surface, individual feelings do get bottled up. Even then, if the enterprise continues to be with the members of a single family, not much damage may be caused over the next few years.

The real issues begin to emerge with the growth and extension of the family with marriages, children, and concurrent increase in responsibility and commitment of each son or brother to their respective families. Internal pressures are now ready to take off. Pressures become more serious where the patriarch of the family has passed on. Once all the sons or brothers are married and have their own families, the enterprise is no longer ‘single-family owned’ – it is now owned by more than one family with multiple vested interests in the business.

When the third generation is ready to enter the business, and the business has not grown adequately to service the increase in numbers of potentially business-active members of the ‘families’, bottled up issues can become explosive. And the business can almost reach breaking point unless damage control exercises are carried through till an acceptable solution emerges.

Part of the problem is that family-owned and managed enterprises have been inducting into the business – as a matter of ‘duty’ – new cost-incurring but profit-sharing family members at a rate higher than their business growth rate. Each induction must necessarily result in value addition to the business. However, more new family members with higher standards of living but without concurrent value addition capability, dependent on a stagnant or slow-growth business, means greater chances of poor performance and sickness, and of conflict and stress.

There are many other issues confronting family enterprises today including induction of wives, daughters, daughters-in-law into the business, ‘leadership among equals’, and ‘professionalization’ both in terms of attitude, knowledge, and result-orientation of family managers, and in terms of inducting qualified ‘external to family’ professionals who will require to be handled with care.

In many family enterprises, there is actually a reluctance to induct proven, intelligent professionals. Many family enterprises, particularly the older ones, have continued to run their businesses internally with a feudal undercurrent that encourages subservience and consequent mediocrity in employee quality and performance standards. Unfortunately, functioning in such an environment every day over the years can lead family managers to attribute to themselves an exaggerated estimate of their own knowledge and performance capacities. This tends to be tested often in the tough market and the external world much to the disadvantage of the family enterprise.

The other very important issue is ‘Succession’, which is really one part of the ‘planning for change’ process. Many seminars focus particularly on this issue.

Looking at the seriousness of issues confronting family-owned-and-managed enterprises, and the extremely competitive business environment in which these enterprises have to survive and grow, the family enterprise is now entering into an inevitable phase of change:

1. Family enterprises need to plan for their future.
2. They need to ‘formalize’ their management structure of business-active family members/ partners/ directors of the enterprise in terms of role definition, functional responsibility, authority, reporting, accountability and performance appraisal, and the reward system.
3. They need to match the enterprise/business purpose, objectives and plans with the requirements both of the incoming younger generation as also of the existing partners to be able to cope with increasing complexities of running the family business in particular, and of business in general.
4. They need to evolve a solution package, with external assistance if necessary, that could include a ‘Partnership Pact’ or a ‘Governance Code’ or a ‘Constitution’ or a ‘Protocol’ to sustain the change process on a long-term basis
as the Family Business grows, across many locations, and also as the number of Family Members in Business increases to a level where traditional and frequent interpersonal contact is no longer possible.
5. ‘Succession’ as a process must not be translated into an over-simplified exercise in which a single family member over-rides other equally capable family members just because people will have to suppress or squeeze themselves into a tight pyramid to maintain the peace or to enable a ‘smooth’ succession. In fact a good ‘Succession Plan’ will re-structure the enterprise to harness the leadership skills and potential of competent members of the family, and therefore help create new growth opportunities that will further enhance opportunities for progress of other family members, and of the family enterprise group.
6. Tax Planning as part of a Restructuring Strategy, consequent to Succession Planning, is necessary and important. However, Tax Planning must not over-ride the need to sustain Family Business Unity into future generations. To re-empasise, being obsessed with sustaining Family Business Unity is more precious than saving Tax as the primary motivation in restructuring.
7. Distrust within a Family Business/ Family Business Group multiplies proportionately to increase in scale of unaccounted business transactions, as Family Members in Business increase, within such a Family Business culture that has existed over time.
8. In most cases, feelings of financial and social insecurity among either less-advantaged or less competent family members, and of aging family members, in the enterprise, can result in ego clashes, mis-trust, destructive nepotism, and other obstacles to survival of the family business. To a very large extent this can be pre-empted by establishing family-constituted and professional advise-assisted entities driven by a family charter to ensure a process of common wealth management, of ensuring minimum economic support, of protection from unforeseen disasters and calamities, and of providing personal and social security into old age.
9. The ‘Family Office’ is the facilitator and administrator of this process of ensuring family well-being, and of peace within the family. Such a process, if properly planned and constituted, can promote meritocracy as the key driver as far as the Business part of the family is concerned. It is finally the ‘Business’ that will provide the resources for building family security and wealth, and of well-being, and of peace.
10. With positive intentions, there are many routes to the success of family business in perpetuity. Growth is the greatest driver, stagnation the greatest enemy. Space provides flexibility, walls suppress, physically and mentally.

Family Businesses by their very nature are entrepreneurial. They are necessary constituents of a dynamic society riding on a new economic wave. I will not be exaggerating when I say that India – minus the passing hiccups – continues to be in the process of emerging into a spanking new entrepreneurial society where, paradoxically, it will be even more difficult to survive, if you have not done your homework, but if you do your homework, then it could be NIRVANA all the way!

Many family enterprises across the country have already initiated the change process. There are also many examples today to prove that in an unsuppressed creative business environment, a flood of successful first-generation entrepreneurs is emerging with a multiplier effect. The horizon of opportunity has widened like never before, truly into a “borderless world”. Family enterprises need to recognize this fact and initiate the change process. They have little choice, for markets do not wait. It is a race against time.

Raju Swamy                                       
Founder
& Advisor to Family Business
PROMAG Consultancy Services

Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email:
rajupromag@hotmail.com
www.promagconsult.in
www.familybusinessadvice.wordpress.com   (Blogsite)
Strengthening Family Dynamics for Family Business Growth…….since 1985

 

Family Business – From Mails to my Clients – 1: To a Founder who doesn’t want to ‘Let Go’…..

RS/Analysis-3/June 08, 2015 (2 Pages) My Analysis of the Management Style of a Family Business: XYZ Group: My conclusions from our Meetings:

  1. My last 2 Reports have comprehensively provided a direction towards saving/ helping the XYZ Group get out of the current mess and move forward. Unfortunately, my observations and recommendations have not been taken seriously.
  2. The Group Chairman has always maintained that he has done his best for ‘everyone’ but yet nobody is happy. In our very first meeting there was 100% agreement from everyone present that they were not satisfied or happy.
  3. All the subsequent meetings have not changed the above situation: Nobody is happy.
  4. I have given much thought to this issue, and I have noted that none of the Family Members in Business really care for Growth, Diversification, Results, Modernization, Management Upgrading, etc.
  5. The main focus and interest of all FMBs – Family members in Business – is on extracting more money and property and anything related to these, from the Group Chairman.
  6. The Chairman, in turn, has total control on the above, and he is aware that his continued value to the other Group Members, and power over them, can be sustained indefinitely only so long as he fully controls Group/ Family Accounting, Money, and Property.
  7. It is also true that FMBs are grateful to the Group Chairman for having initiated them into business and wealth through his pioneering efforts over the last maybe 40 years……
  8. Unfortunately, the Group Chairman has not realized that all the FMBs and their families are now bothered only about the future, and therefore on what he can do for them in the future……the gratefulness for the ‘Past’ has now dissipated and is no longer a matter of importance.
  9. Obviously, what the Group Chairman could accomplish in his younger days are totally different from what he can replicate now as a much older person with energy limitations. He has therefore set up a ‘system’ of his own which is possibly based on disbursing ‘favours’ and controlling all monetary resources and decisions on their use.
  10. As of today, more than half of the able-bodied men in the Group do not have enough work, or have no real work at all……but all of them are paid salaries and enjoy perks like housing and cars, etc. The Group has not grown enough to provide them hard-working opportunities to justify their earnings, and at the same time, they have not had the guts to exit and become independently successful. The irony is that even such people are unhappy!
  11. The very few people who have an opportunity have made themselves indispensible, but are unhappy because they just cannot get away to do what they want……all resources are controlled by the Group Chairman.
  12. The Group Chairman, in such a situation, sees himself as secure and, other than superficial desire to do something to make people happy, he is really not doing anything in particular. He is happy…..
  13. What the Group Chairman does not see, or appreciate, is the fact that he has carefully nurtured a family business culture which will most definitely fall apart once his influence is over, in terms of his control on resources.
  14. The whole structure of the Family Business is extremely weak both in terms of Group Management Structure and Control, and in terms of total absence of Values that keep the Families together in a Family Business.
  15.  And every meeting makes it obvious that nobody really cares for long-term well-being of the Business or of the Group……….there is utter selfishness on all sides, total absence of trust, and absolutely no ‘Loyalty’ to any entity that can hold the families together.
  16. On the whole, as of now, the situation is a hopeless one…….unless, of course, the Group Chairman realizes immediately that emotional outbursts and ‘emotional blackmail’ and monopolizing  power over resources, and without transparent accounting, and doling out favours, only builds superficial loyalty and promotes loss of integrity and trust within the Family Business, and within the Families.
  17. There is hope, if the Group Chairman wakes up before it is too late……Once he understands his legitimate duties to the Family Business (and consequently to Families), he can demand the same from the others…….Mr. Group Chairman, Sir, there is still time for you to become a Great Leader……and there is urgent need for a Great Leader to save the XYZ Group……

Raju Swamy                                       
Founder
& Advisor to Family Business
PROMAG Consultancy Services

Apt. 206 Brigade Rathna
42 Ranga Rao Road
Shankarapuram
Bangalore – 560004 INDIA
Tel. +91-80-26676298/ Cell: 9845271498
Email:
rajupromag@hotmail.com
www.promagconsult.in
www.familybusinessadvice.wordpress.com   (Blogsite)
Strengthening Family Dynamics for Family Business Growth…….since 1985