1.FAMILY BUSINESS AND STRUCTURES Rajendran Ananda Krishnanhttps://www.facebook.com/ialwaysthinkprettythings

2. SYLLABUS Importance of family business Types, History Responsibilities and rights of shareholders of afamily business, Succession in family business, Pitfalls of the family business, strategies for improving the capability of familybusiness, Improving family business performancehttps://www.facebook.com/ialwaysthinkprettythings 3. https://www.facebook.com/ialwaysthinkprettythings 4. DEFINITIONS Family business is a corporation that is entirely ownedand managed by members of a single family. Family firm is a corporation that is entirely owned bymembers of single family. It is also known as companyowned, controlled and operated by members of one orseveral families. Family business is one in which one or more membersof one or more families have ownership, interest andsignificant commitment towards business.https://www.facebook.com/ialwaysthinkprettythings 5. https://www.facebook.com/ialwaysthinkprettythings 6. CHARACTERISTICS OF FAMILY BUSINESS Family business are ideal in nature as they areloyal to the principles of the founder and thus ensureuniformity in their operations. Succession is one important decision whichdetermines future effectiveness in terms of companyoperation. family business comprises of family members inbusiness operations ensuring effective utilization ofin house talent in family. Single minded dedication of family members ensuressurvival of family business through toughest times. https://www.facebook.com/ialwaysthinkprettythi ngs 7. Effectiveness and existence of family business isdetermined depending on understanding persistingwithin the family. Family business may be comprised of one or morethen one family in business operations. Family members who are not contributing or notinvolved in business are part of business. Family business values are reflection of valuespossessed 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 : familybusiness play crucial role in economic developmentof most of the countries. Retail sector, small scaleindustry, and service sector are owned by familybusiness. Spirit of entrepreneurship : family business ascontributes towards development and has beensuccessful in country like India it paves way tovarious families to initiate and bring up new venturesin country. Philanthropy : family business in India along withtheir development have also concentrated towardswelfare of general public by investing on hospitals,https://www.facebook.com/ialwaysthinkprettythieducational institutions, construction of roads etc.ngs 9. Trust Lowers transaction cost : partnership andother forms of business involving outsiders usuallyleads to conflict in long run. In case of familybusiness as all the parties in family are affected byloss incurred in company do not involve any soughtof conflict and difference in point of view arises theytry and solve it internally in the family ensuringbusiness is not affected by the same. Small, nimble and quick to react : as managingteam size in family business is small compare toother form of business decision making processinvolves less period of time which helps to taketimely decision. Information as source of advantage : as familybusiness is private firm it is not required to takedecision in accordance with pressure from othersources and strategies of business need not berevealed to outsiders of business.https://www.facebook.com/ialwaysthinkprettythi ngs 10. TYPES OF FAMILY BUSINESS Family owned business Family owned and managedFamily businessbusiness Family ownedand led businesshttps://www.facebook.com/ialwaysthinkprettythings 11. TYPES OF FAMILY BUSINESS Family owned business : is a profit organization werenumber of voting shares, but not necessarily majority ofshares are owned by members of single extended family butsignificantly influenced by other members of family. Family owned and managed business : is a profitorganization were number of voting shares, but notnecessarily majority of shares are owned by members ofsingle extended family but significantly influenced by othermembers of family. In this business has active participation byone family member in the top management of company so thatone or more family members have ultimate managementcontrol. https://www.facebook.com/ialwaysthinkprettythi ngs 12. Familyowned 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/ialwaysthinkprettythings 13. 3 CIRCLE MODEL OF FAMILY BUSINESS Ownership FamilyBusinesshttps://www.facebook.com/ialwaysthinkprettythings 14. 3 CIRCLE OF FAMILY BUSINESS Business system : comprises of start up,expansion, formalization and maturity of business. Family system : young business family, enteringbusiness family, working together etc. Ownership system : controlling owner, siblingpartnership, cousin consortium.https://www.facebook.com/ialwaysthinkprettythings 15. https://www.facebook.com/ialwaysthinkprettythings 16. GOVERNANCE OF FAMILY BUSINESS There are three components to governance of familybusiness :1.Perodic assemblies of family2. Family council meeting : if the size of the family issmall in size than members of family can meet onfrequent basis, when the operation of the family businessexpands geographically each team has to choose inrepresentative for every unit who on behalf of every areacan meet on regular basis to decode on plans, createpolicies, 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/ialwaysthinkprettythings 18. https://www.facebook.com/ialwaysthinkprettythings 19. BENEFITS OF CONDUCTING FAMILY ASSEMBLYOR COUNCIL MEETING Develop clarity on roles, rights and responsibilities offamily members. Encourage members of family, family employeesand owners family to act responsibly towards thefamily and business. Regulate appropriate family and owner inclusion inbusiness discussion. https://www.facebook.com/ialwaysthinkprettythi ngs 20. DUTIES PERFORMED BY FAMILY COUNCIL MEETING Plan assembly meetings, which otherwise has to bearranged by CEO in company. discuss current business, ownership, family issues andkeep family informed about the issues. help family reach decisions and collectively focus onattainment of single goal. Keep the board of directors informed about family viewson company and keep in touch with the board about keybusiness policies and plans. Develop plans and policies in line with the board, thatregulate family activity with business. https://www.facebook.com/ialwaysthinkprettythi ngs 21. Try avoiding issues in family while seeing that keyfamily goals are satisfied. Develop loyal, informed and contributing familyshareholders. Scout the family for business talent. Create educational events to encourage education offamily members towards family business. Plan family social gatherings and rituals which helpto create healthy, harmonious relationship within thefamily. 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 andsell agreements dividendshttps://www.facebook.com/ialwaysthinkprettythings 23. HISTORY OF FAMILY BUSINESS History of family business refers to reason whybusiness came into existence, vision and mission ofcompany, people contributions towards success ofbusiness and contribution of business towardsdevelopment of society on the whole.REASONS TO CREATE HISTORY OF FAMILYBUSINESS1. Founders vision and mission : refers to reasonwhy business came into existence, operations ofcompany under various leadership and insightabout founder and his vision and mission. https://www.facebook.com/ialwaysthinkprettythi ngs 24. 2. Historical accuracy : without valid information aboutfamily business customers, employees of business maybe biased by wrong information through other sourcesabout purpose of business and its contribution towardssociety to avoid these problems details of businessshould be documented on timely basis.3. Honouring long time employees : long-time or retiredemployees who have contributed towards success offamily may have feeling that that efforts towards businesshave been forgotten. If proceedings of business arerecorded in form of document past employees ofcompany develop form of belongingness towardscompany. https://www.facebook.com/ialwaysthinkprettythi ngs 25. Thanking customers and vendors : maintaininggood relationship with customers and vendorsspecially the ones who have supported during criticalsituation is very important. Owners by documentingthese peoples contribution get way to publicallythank these parties contribution. Background for the uniformed : new hires,potential clients, bankers and investors may notknow the companys background during whichdocumented data of company will suffice to theirneeds. https://www.facebook.com/ialwaysthinkprettythi ngs 26. BENEFITS OF HISTORY OF FAMILY BUSINESS Interdependence between company and community isdocumented as is the owners individual contribution andinvolvement in community affairs. Succeeding family members have valid resource fromwhich they can rely on for suggestion to overcomepersisting problems. Documenting companys contribution and commitment tothe community builds sense of confidence among clients,potential clients which helps in strengthen relationshipbetween business and key individual related to thebusiness. https://www.facebook.com/ialwaysthinkprettythi ngs 27. Content created for books can be recreated for othermedia including company brochure, websites, pressrelease, news letters etc. Family business that create quality hand book willalways 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 beable to read and ask questions about the incomestatement and balance sheet of their company. Attend shareholders meeting. Understand board member qualification and participate,in screening of board members. Constructivelyquestion management and offersuggestions to management. https://www.facebook.com/ialwaysthinkprettythi ngs 29. Publically support management decisions Keep appropriate company information in strictconfidence and recognize that shareholders are notentitled 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 frommanagers of business Timely information on company strategy, importantorganizational changes and companys basic financial statusbefore information being released to general public. Openness by company board and management toshareholders on the above mentioned information. Ability to participate in the election of board members. Fair policies that protect shareholders interest but alsorequires their cooperation and risk taking. Acceptance economic performance by the company, includingreasonable dividends and capital gains. https://www.facebook.com/ialwaysthinkprettythi ngs 31. https://www.facebook.com/ialwaysthinkprettythings 32. SUCCESSION IN FAMILY BUSINESS1. First family succession plan, then businesssuccession plan : family business plan mustrecognize and accommodate the needs, goals andobjectives of each member of family. Familysuccession plan has to be developed first as ifbusiness plan is designed in advance it proves to bedifficult for owner to coordinates goals of familymembers towards business. https://www.facebook.com/ialwaysthinkprettythi ngs 33. Family business plan should include followingdimensions strategies to put business interest ahead of familybusiness. Emphasise merit over family position Income for working members of the family andshareholders. 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 familysuccession plan is whether yours is family first businessor business first family. It is often seen that most of thebusiness fail to succeed when managed by second andthird generation of business.3. Succession management : business families takeadvice of business advisory board who suggest oneligible person for transition. Advisory board are notexperts in managing business but are consultants whosuggest strategies for effective succession management. https://www.facebook.com/ialwaysthinkprettythi ngs 35. 4.Business valuation : may not be formal written reportbut is required as part of annual strategic planningprocess. Reasons for valuing family business are asfollows : 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 ofresults. https://www.facebook.com/ialwaysthinkprettythi ngs 36. 5. Bur or sell agreement : is used to transfer shareowownership for buy and sell agreement. Thisagreement is established between related partiesand shareholders in family. It is an agreement to transfer a business interest tohires for less than fair market value The agreement is real ; it is part of bona fiedbusiness arrangements https://www.facebook.com/ialwaysthinkprettythi ngs 37. KEY POINTS TO BE CONSIDERED BEFORE SUCCESSION PLAN Quick decision on business plan process will providemore alternatives to the process. A child than having right to inherit business should haveability to manage family business. Childrens must beencouraged to out of family business so that they havebetter insight about competition persisting in market andaccordingly develop strategies for development of ownbusiness. Establishing an outsider as advisor for family businessmay prove to be risky for which experts in successionplanning should be chosen from management team within the family business. https://www.facebook.com/ialwaysthinkprettythi ngs 38. Conducting family meeting on regular basis will help establishand 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 assesswhether person to be chosen as successor has potential tolead the business, will he be accepted by all members infamily, check his willingness to control the business. Person who will be chosen as successor should be give anappropriate standard to be achieved which will help him deigneffective strategy and have yardstick to compare his actualperformance with expected one. https://www.facebook.com/ialwaysthinkprettythi ngs 39. WAYS TO EASE TRANSITION PROCESS Hiremost competent advisors ( attorneys,accountants, financial planners, andbusinessconsultants for succession planning. Successionplanning is complicated process and requires advice ofexpertise on the same. Business valuation : when business transition takesplace it leads to change in controlling hands andaccordingly even present situation may change inbusiness. Depending on the purpose of the valuation,cost vary accordingly. Usually business owners valuefamily business for purpose of strategic planning of theirbusiness. 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/ialwaysthinkprettythings 41. PITFALLS/ DEMERITS /PROBLEMS OF FAMILY BUSINESS lack of focus and strategy : family business initially performin effective manner but at later point of time when aspect oftransition comes into picture family business tends to lose itstrack from its actual vision . Lack of professionalism : data maintenance practice infamily business usually will not be in par with that of privatecompanies which proves to be major hurdle during decisionmaking process. Difference in educational levels of family members whichdrives some people to follow obsolete method while othersmay focus on implementing latest technology and practices inbusiness. https://www.facebook.com/ialwaysthinkprettythi ngs 42. Rivalries between sibling in company which may end upin separation of family business. Difference of attitude towards employees in company Inability to separate family interest from the interest ofbusiness Short term approach towards business , leading to anabsence of investment in employees and productdevelopment. Insensitivity towards customers due to uncompetitivemarket 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 negotiationamong family members try and resolve conflict and agree oncommon terms. Arbitrary approach : in this approach the elder person of thefamily will be allotted with the power to frame rules and controlbusiness activity. But this approach has not proven to besuccessful as most of the time elder person in family may notprove to be effective manager for business. Managed approach : this approach states that person whohas ability to maintain better relationship with key individualsof business and have ability to understand business andmanage the same should be appointed as lead person for thebusiness. https://www.facebook.com/ialwaysthinkprettythi ngs 44. STRATEGIES FOR IMPROVING CAPABILITY OF FAMILYBUSINESS Inculcate professionalism in family firms : professionalismin business refers to retaining of effective talent in company,proper documentation of business transaction, planning andimplementation of efficient strategies for success of business. Replenishing entrepreneurship : basically refers to expandexisting business and be role model for their families to openbusiness of their own. Good management : refers to proper communication ofinformation among family members about present businessand utilization of available resources in business. https://www.facebook.com/ialwaysthinkprettythi ngs 45. Ability to change : business environment is dynamic innature for which business have to renew their strategieson regular basis to meet demand of changing situation tocompete in market. Have strategic plan : situations of business areunpredictable in nature in nature so present plans ofbusiness should be designed keeping in point aboutfuture strategy in picture. Have active board of directors : refers to havecompetent employees in business who can assess futurerequirements and accordingly management businessresources 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 familymembers to act accordingly towards business. Core values arecomprised of training of family members newly entering familybusiness, future, finance and accountability of these memberstowards the business. Impact of family values on business performance : whenmembers of family are clear about business expectation they canformulate their strategy well in advance which helps them enhancequality of their performance towards business. Training : members of family business should be trained about theefamily values, competition existing in market and skills required to bepossessed by in order to have competitive advantage in businessmarket.https://www.facebook.com/ialwaysthinkprettythings 47. MANAGEMENT DEVELOPMENT PLAN IN FAMILY BUSINESS Management development plan is generated by topmanagement people in company. The purpose is topredict staffing needs and plan in for career growth anddevelopment for family as well as non family members inbusiness. Management development plan identifies the keyjobs in the current company and career aspirants ofall key mangers. It predicts what jobs will or should bevacant in future. It has to focus on balancingdevelopment of hires in business and encourageprotective 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 businesshttps://www.facebook.com/ialwaysthinkprettythings 49. https://www.facebook.com/ialwaysthinkprettythings 50. CREATING A BUSINESS PLAN Draw companys five year organization chart. circle position of future organization chart, at all levels and the mostcritical ones for the business. List the names of individuals in those jobs, their age now and in fiveyears. List set of employees who may retire and who are planning to leaveorganization in future. What is the age of owner manager and he should be doing in futurefive years. What is the age of successor and where should he or she be in fiveyears. What is best career path for the person in next five years What policy or policies ca be derived from these discussions ? Whatshould be communicated to the successor , manager andemployees. https://www.facebook.com/ialwaysthinkprettythi ngs 51. https://www.facebook.com/ialwaysthinkprettythings 52. FAMILY REUNION GAMES TO PROMOTE FAMILY VALUES Family reunion basically refers to coming together of familymember for occasion ,event in family. These kind of events giveplatform to family members to have discussion on variousmatters in relation to family and family business.. Family bonding : is crucial component of every successfulfamily. It leads to family communication system that encouragesgrowth and prosperity for business while building good bondingamong family members in business. Family values : influence the way in which family business ismanaged and operates. Ethics of family business are shapedby values of the family. https://www.facebook.com/ialwaysthinkprettythi ngs 53. Family religion : plays important role in operation ofbusiness. Business may not prefer market in certainproducts which their religion do not permit for. Family secrets : may be in form of core values, ethicsand beliefs followed by family members of businesswhich is not preferred being revealed to general public ormedia channels. Family rules : are implemented in business and are tobe followed people in charge and family members of thebusiness. These rules regulate activities of members andfamily business on the whole. https://www.facebook.com/ialwaysthinkprettythi ngs 54. RULES TO SAVE FAMILY BUSINESSRule 1Formulate policy frame work rulesRule 2 Families must serve the businessRule 3 Future outlookRule 4Accountability addressing the issue Addressing the issueRule 5Rule 6 Creating shared visionhttps://www.facebook.com/ialwaysthinkprettythings 55. RULES TO SAVE FAMILY BUSINESS Formulate policy framework and rules : successionplan is one of the important aspect for formulating policyframework and rules. Succession plan should outlineexactly how the transfer of leadership will occur andshould establish the criteria that hires must meet beforemoving to role of leadership. Families must serve the business : members of thefamily should give their best performance as per theexpectation of the company. Members of the familybusiness should perform as effectively as non familymembers of the business. https://www.facebook.com/ialwaysthinkprettythi ngs 56. Future outlook : business firms should have proper corevalues which prove to be yardstick for performance ofbusiness. Family members should believe that presentstrategy prove to be obsolete in long run for the samecompany should be flexible in nature in terms of adjustingto changes taking place in business environment. Accountability : should be one of the major criteria fortransition process in family business. Family membersshould be made clear about what is expected from themby family business and they are required to prove theirefficiency through effective performance. They should beresponsible for decision taken by them during time oftheir leadership. https://www.facebook.com/ialwaysthinkprettythi ngs 57. Addressing the issue : family business who focus onimproving their overall company performance should takestructured approach through addressing the issue bycareful examination of its core values. Members of thefamily are required to evaluate their core value andunderstand their relevance in relation to success ofbusiness. Creating shared vision : it refers to communicatingvision , objective of the company to family and non familymembers of business. Communication of informationtakes place through various sessions of meeting incompany. All the family members should have commonand shared vision towards goal attainment in company. https://www.facebook.com/ialwaysthinkprettythi ngs 58. THANK YOUhttps://www.facebook.com/ialwaysthinkprettythings