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Key challenges faced byfamily businessesContinuity planningContinuity planning is vital for perpetuating a family business. It is important that there is alignment of vision andcommitment of all family members to achieve the vision that is set out for the family and the business.Family v. businessIn a family business, very often a question arises, ‘What comes first, family or business?’ The answer to this often drives thevision and how businesses are run and managed.Families, which put the family first, take decisions with the ‘heart’ and emphasises on family harmony. Whereas, families,which prioritise the business, take decisions objectively with the ‘head’ without co-mingling family issues.Family firstBusiness firstDhiren GopalFeatherlite GroupYou can’t grow alone. As afamily we grow together —Leave no one behind!“In 1965 our father Gopal Ramnarayan while on a Rotarygroup exchange programme to the US, was intriguedby the aluminum folding furniture. He saw tremendouspotential and when he returned to India, he started amanufacturing unit for folding garden furniture, made ofaluminum tubes and called it Featherlite.When my brothers and I joined the business, we had avery clear understanding of what was expected fromus and the direction we should head towards. Ourbusiness is very unique and customer satisfaction is thekey. Although we professionalised certain functions, webelieve that R&D, sales and marketing will require activeinvolvement of family members.When we ventured into real estate, my eldest brotherJawahar took complete ownership of that businessalong with continuing handling our investments and allfinancial matters. My middle brother Manohar was giventhe responsibility of marketing and sales and is involvedin both the real estate and furniture business equally.8PwCHusein EsufallyHemas GroupWhat is best for the businessis best for the family“Our grandfather was a man of great foresight andentrepreneurship. He set up his own business aftermoving out of the existing family business.By the 1960s, the second generation, comprisinghis four sons, joined the business and continued theentrepreneurial spirit to develop and expand the businessand by the 1970s and 80s, the third generation wereready to come in and make their own mark.Going public and professionalising was not a visionshared by my two uncles and in 2000 they sold their shareto the third generation—Abbas, Imtiaz, Murtaza and mein equal proportion.In 2001, I was appointed as the Group CEO and theother members of the family took on the role of drivingdifferent verticals of the business. In 2003, with theobjective of sustaining the business, we embarked on ajourney and successfully took the company public.

I was put in charge of manufacturing and R&D alongwith the task of technology up-gradation-in our plants.Although our responsibilities were well demarcatedand we have our roles and responsibilities clearlydefined, in terms of ownership we were all equal. Weshare all profits and losses equally and realized earlyon that in a joint family business the upside of beingtogether and working together is always more than thedownside. I sincerely believe that key to the success ofour business is the implicit faith, respect and trust wehave in each other.We also firmly believe that it is not ‘who is right’ but‘what is right’. This attitude that we all carry in ourhearts and minds helps us work together and livetogether in harmony at work and at home. As a policywe do not interfere in each other’s daily roles andresponsibilities and give each other ample space to takeindependent decisions in our areas of designated rolesand responsibilities, this noninterference is probablythe biggest contribution we make to each other’sgrowth and success.This doesn’t mean we do not question one anotheror seek advice on matters of importance or trivialirritations. We all know that each one of us isalways available for sounding out new ideas, airingfrustrations, and sharing successes.Professionalising the business is something the entirefamily needs to buy into and it cannot be just oneperson’s vision. It is a journey and we decide, whichdirection the family wants to head towards.We recognised early on that we, as family members,can drive things only to a certain extent and taking thecompany public automatically brought in a certain levelof professionalism. We had an independent Board andany differences of opinion within the family, was airedin a Board meeting, which helped us take decisions in arational manner.Moreover, we understood early on the importance ofthe external dimension brought in by professionals andappointed an external CEO. We became stewards toensure the future success of the family business.For effective governance of the business, we alsoestablished a Family Constitution, which clearly lays outthe interaction between the family and the business.As a family we understood that every business is uniqueand there is no ‘one size fits all’. Our underlying principleis that ‘business comes first’ and this principle drives allour decisions.”We debrief, debate and deliberate and sometimes evenargue about matters that effect all of us or the businessbut the final decision is left to the person driving thebusiness. We always trust and respect each other’sjudgment even if we may not completely agree with it.At the back of our minds, I know that each and everyone of us takes that leap of faith into the unknown,knowing that the family has his back, should he or shestumble or fall.As a family it’s imperative that we strive to inculcatethe similar values in our children and professionalsworking in the business. We are now in the process offormalizing our Family Constitution and governanceframework so that all our values and ideologies areformalized and passed on for next generations as well.‘Love All Serve All’ is a motto our family stronglybelieves in. For us, it is and always will be, ‘familycomes first’ and all our decisions are taken keeping inmind our family principles and beliefs.”Perspectives on succession planning and business continuity9

Passing on the baton – Journey of NR GroupArjun RangaNR Group“Sustaining and perpetuating a businessthrough family values is essential to itssurvival. Family values is what defines anddrives the business.”Arjun Ranga is the Managing Director of Cycle PureAgarbathies, a brand which is now synonymous with prayerand spirituality.Given that the business is currently managed by the thirdgeneration, we asked Arjun how his family has successfullymanaged transition to the third generation. He explains,“Around the time India got independence, my grandfathersold home products and incense sticks in Mysore. The secondgeneration grew the business on the foundation built by mygrandfather. From a very young age, the second generationencouraged us, the third generation, to be a part of thebusiness discussions. As a young boy I used to accompany myfather to the market for sales and marketing of agarbathis.This exposure helped me understand the family, the businessand most importantly, the distinction between the two.Today, my son accompanies me to office during his summervacations.There were also certain ground rules that were laid downfor the business. From a very young age, my cousins and Iwere made aware of what the family business had to offer interms of perks and travel, provided we chose to be a part ofit. As soon as we turned 18, we were also made aware of ourshareholding in the business. It was an unwritten rule that allthird generation members would need to get a master’s degreeand also, work outside prior to joining the business. We intendto apply the same rules for the incoming generations as well,to ensure they are well equipped when they join the business.Our family also created a path to learn different parts ofthe business and created opportunities to work in differentbusinesses. The second generation had one main business andmy father and uncles were given to manage different verticalsof the business within defined rules. When my cousins andI joined the business, the business had expanded beyondincense sticks and each one of us managed the chosen businessindependently. Moreover, regardless of the size of the business,the salary, allowances and perks available to each member isthe same.”When asked about the role of the third generation in thebusiness, Arjun says “The family gave us a lot of autonomyand independence to drive our respective businesses.10PwCArjun RangaThere was a certain level of trust and safety net of howthe family will support us. We all sit on the Board and areanswerable to each other, but the ultimate decision is left to thejudgement of the family member running a particular business.However, in terms of investment decisions or entering a newbusiness, all decisions are unanimous and everyone has to beon board.” He enunciated the importance of trust amongstthe third generation as family members as well as businesspartners. He agreed that since all decisions need to betaken unanimously, it can sometimes be counterproductive.However, it keeps the family together.Arjun then touched upon an aspect that is a challenge forall family businesses, which is the succession and transitionof power from the senior to the next generation. He says,“Our earlier generation told us ‘you help us structure ourexit rather than we structure your entry.’ Similar to how mygrandfather transitioned the business, my father retired andtook a back seat. He took a minority share in the company andtransferred half his shareholding when I joined the business anddid the same for my brother as well. This gave us tremendousconfidence and belief. We also have a similar plan and haveclearly articulated a phase-wise transition of shareholding tothe fourth generation to encourage them to join the business.”Arjun reiterates that having a clear succession plan iscrucial for the survival of the business as well as ensurestransparency and provides clarity. Some of the importantaspects he emphasised on include having a family governancecode and business succession plan. “There should be a clearretirement policy which includes defining the benefits andshareholding of the senior generation post retirement. Workingbackwards, this should form the basis of how the share andbenefits will be transferred.”Arjun signs off by telling us that, “altruism is the key tosustenance of our family and we understand the meaningof the greater good. Selflessly putting the family first is keyto survival of our business.”

Planning for succession: SRF’s experienceAshish Bharat RamSRFSRF Limited, based out of Gurgaon, manufacturesengineering plastics, chemicals, packaging films andautomotive components.We spoke to Ashish Bharat Ram, the Managing Director ofthe Group, on how his family has planned for succession.Ashish explains, “In the context of a family business, we candraw comparison to the three circle model. The first representsthe family, the second represents owners and the thirdrepresents the management. It is not necessary that a familymember should be present in all the three circles. Being bornin a family and being an owner of the family business is not achoice and you invariably occupy the first two circles of familyand owner. However, one can choose whether or not to be partof the active management of the family business. If a familymember doesn’t have the passion or doesn’t want to take on theresponsibilities to run the day to day business, he or she shouldensure that they assume the role of a responsible family ownerand should not interfere in business management. There aremany eminent business houses who have completely separatedownership from management roles. Although the familymembers are a part of the board, they do not interfere in theday-to-day functioning of the business.In the next 10 to 15 years, Kartik and I intend to retire. The keyis to know when to let it go. When my father did it back in 2007,his clarity on succession facilitated smooth transition. We willpass on the reins, either to our next generation or professionalsbut will continue to support them for a few years till they learnand understand the culture and values upon which my fatherand we have built the business.We will be more than happy if our next generation wants to jointhe family business but we don’t believe in nepotism. Whetherit is the next generation or outside generations, we stronglybelieve that whoever has the zest, zeal and capability should runthe business.I don’t believe in forcing the responsibility of running the familybusiness onto our children. The stakes are high and we want tokeep creating value for all stakeholders. If our next generationare interested in joining the family business we are committedto nurture them. It goes without saying that they need to becapable and of course passionate about running the business.At the end of the day we are here to serve the society and createvalue for our investors.”In our case, right from childhood, my brother Kartik and I wereexposed to the business and we were groomed by our father. Itwas ingrained in our minds that our career path would be inthe family business. In the 1990s, the options were very limitedand I made a deliberate choice to join the family business.From 1995 to 2003, I worked very closely with the professionalCEO and CFO to learn and get a deeper understanding of thefinancial and operational aspects of the business. It is importantthat when a family member joins the business, there shouldbe buy in of the professionals who are running the day-to-dayoperations. A family member should be competent to commandrespect of the professional colleagues. In 2003, I started leadingthe business.My father was always very supportive and he groomed andnurtured us. In 2007, he paved the way for me to become theCEO of the company. He gave me the autonomy and space tomake my own decisions and never imposed his views. Afterhanding over the reins to us, he would seldom participate inrunning of the business and would only advise us on strategicdecisions. It was my father’s thoughtful succession planningwhich made the transition smooth and free of turbulence.Perspectives on succession planning and business continuity11

Succession dimensionsSuccession dimensions in the context of family businessare twofold: Succession in management Succession in ownershipSuccession planning is about devising a strategy to ensurethat the ownership and management passes onto the rightpeople, at the right time and right controls are in placewhen it happens.Succession in managementFamily vis-à-vis professionals: the right balanceOf all the issues faced by a family business, the issue of‘succession’ is the most daunting. Many promoters facethe issue of ‘sticky baton’ syndrome, where the currentgeneration hand over management in theory, but inpractice retain complete control over things that reallymatter. As our India Family Business Survey indicated,almost one-third of family businesses do not have asuccession plan in place for key senior positions. Thiscreates uncertainty. A clearly documented successionplan helps families take decisions objectively and isinstrumental to the continuity of the business.Succession plan in placeYes, all seniorexecutives22%Yes, most seniorexecutives31%Yes, small number ofseniorexectuives12%No successionplan in place35%India12PwCGlobalThe lack of a formal management succession plan can leadto numerous issues when the current generation ceasesto maintain control due to unforeseen circumstances.For instance, the incoming generation may be reluctant,unprepared or unable to step into their predecessor’s role.Then again, the founder might identify a willing successorbut find that key stakeholders do not support his decision.Early planning will ensure sufficient time to prepare a wellthought out plan and also keep it flexible enough to allowcourse correction as circumstances change.The aim of every family business is to grow aggressively infuture. However, only a few are able to achieve their growthtargets. This is due to a gap in the skills required to achievethis. Family businesses acknowledge that there is a needto induct the next generation and/or professionals for newthinking and ideas.Finding a balance between family members and professionalsis challenging. In our India Family Business Survey 2016,we observed that only 35% of the respondents intend topass on the business to the next generation and nearlyhalf of them plan to pass on the ownership and bring inprofessional management. However, attracting externaltalent is a challenge given the lack of clarity on career pathsof professionals in a family enterprise.When deciding between family and non-family members torun the business, the family should objectively identify andevaluate a variety of candidates early on. Whether family ornon-family, they should be given the required training andopportunities to grow and the best candidate often emergesover time.16%18%21%43%

Gen Next: torchbearers of futureRole of next generationThe next generation play different roles in a family business: Stewards—focus on protecting the profitability of thefamily business and ensure its long-term sustainability Intrapreneurs—set up their own venture within thefamily business, often with the backing of family Transformers—look at driving change in the firm Entrepreneurs—set up their own venture outside thefamily firmIrrespective of the role they play, the next generation have aclear vision and strong ideas of how they will contribute—either from within or outside the family business.Gap in expectationsThe next generation faces several gaps such as credibilitygap, generation gap and communication gap.Credibility gap: Most next generation find it challengingto bridge the credibility gap, particularly with professionalsworking in the business.The next generation are usually equipped with post graduatedegrees in entrepreneurship, management, finance orengineering from India or overseas. As indicated by ourGlobal Next Generation Survey 2016, 70% of the nextgeneration have worked outside prior to joining the familybusiness. When they join the family business, they join atjunior or middle management levels and work their way up.They report to non-family members and professionals andin their view it helps them build credibility and trust in theorganisation.Generation gap: The differing perspectives andexpectations of current and next generation widens thegeneration gap. Nearly 20% of the next generation in ourIndia Next Gen Survey 2018 feel

Global importance of family businesses 32 . Perspectives on succession planning and business continuity 3 These are exciting times for family businesses. Promising new markets beckon and existing markets offer plenty of prospects for sustained growth and diversification. This is attributed to a combination of favourable factors such as