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THEIR FAILINGS, OUR LEARNINGS

PLANNING FOR POSTERITY

Context:

The infrastructure major decided to erect governance structures to preserve and protect family unity in business. Anticipation and preparation are major contributors to a peaceful existence. Is there a lesson here for business families that tend to disintegrate?

  • A Group, which is considered an infrastructure major, was set up by a first generation entrepreneur, who is the Group Chairman.
  • He made it clear that he will step down from his position when he reaches the age of 70 years.
  • He also made it clear that no outsider will head the Group after him, and the successor will be chosen from the core team of three members – his two sons and son-in-law. All three of them are Business Chairmen in charge of different businesses. The Group also has non-family members as Business Chairmen.
  • The Group has structured all its organisations for the future in a professional manner, with job rotation after every 4 years among its key businesses for all the three core team members, to familiarise them with all the aspects of business.
  • All family members have clearly demarcated roles and functions.
  • To facilitate this, the Group has put in place an extensive “Family Constitution”, which is a voluntary effort. It defines how a successor to him will be selected. It also defines the minimum qualification the family members must have to enter business, their remuneration and perks, including what car they will get to drive, and provides for a family member wanting to branch out.
  • This document has been crafted participatively over several years, involving all senior family members, to avoid possible infighting among family members. It addresses issues such as conflict resolution, ownership, leadership, code of conduct and power sharing.
  • The starting point of this exercise was a Family Business Board. The entire family has committed to certain core values and a willingness to manage differences. It has also laid down policies on all family and business matters, including consensus in decision making, media policy, code of conduct and the process of inducting family members into the business as well as providing for those who do not want to enter the business.
  • The Family Business Board works on a three-year business plan. It has a Family Council, with a well-documented code of conduct. All family members meet every three months to resolve any conflicts and discuss all important matters. Minutes of these meetings are also kept.
  • The document also has a concept of a deadlock trustee who will resolve any disagreements between the three next-gen successors when it comes to deciding the next Chairman. As per the Constitution, the two options available in case of a deadlock are either a partnership model, where the Group is run as a partnership by the three core team members or a rotating Chairmanship among the three every five years.
  • The Group took these steps as early as in 2007, when the document was signed by the core family members in the presence of 150 senior management personnel of the Company.