SOFT RULES FOR BUSINESS FAMILIES

Managing a family business is complex.

- JANMEJAYA SINHA

In addition to managing the business, the family also needs to manage itself. Countries and jurisdictions impose well-established structures with well-defined rules and roles to manage a business-boards of directors, board committees, required audits, chief executives' management teams and executive directors-with clear goals and incentives.

These do not exist for a family.

At a minimum, the family needs a mechanism to align its views as a family. As families grow, alignment is harder to achieve. So, many families create family. charters, constitutions and rules for behaviour. They also create forums for families to meet and discuss and agree on issues in respect of their ownership of the business.

These rules cover a set of subjects-family values, purpose of business, rules regarding the distribution of wealth and benefits, a definition of the family, rules around exit from the family business, rules of management and employment, succession and selection of business leaders, principles around entry into politics, and methods of conflict resolution. While some of this is required, the extent of specification varies by family. But what most families neglect is to have a system to manage the emotional well-being of family members.

People Get Hurt

In its ideal form, a family is about love, affection, fairness, respect and trust. And yet, every family member understands that frustrations and major fights can arise over seemingly trivial issues. People get hurt. Conflicts about hurt feelings are rarely about right and wrong. They frequently cannot even be reduced to material issues like money or self-interest. These 'hard' issues are easier to identify and even resolve logically.

Rather, conflicts often spring from the well of hurts, slights to self-esteem and 'soft' emotional issues. Once these issues start, they are difficult to heal.