Nepali Times Asian Paints
Business
All in the family


BINOD BHATTARAI


Such stories are legion. The complex relationships within families that so often include conflicts over family assets and businesses. Most of what we're told in these stories is true, except the "and they lived happily ever after" endings, which are particularly rare when it comes to succession and ownership transfers of family-run businesses.

Though over 80 percent of all businesses in the world are family-run operations-the number in Nepal might be closer to 99 percent-only 16 percent of them actually remain intact beyond the second generation.

This doesn't have to happen, though. Or so says Joe Paul, a consultant who helps families find ways to ensure their business remain successful "for ever after". "Not all family operations have to be failures," he says. "Some of today's largest businesses began as or are family run-operations," he adds.

We don't have statistics on how family businesses fare in Nepal but a casual look around shows that there is as much fragmentation there as there is in agricultural holdings, which is not a sign of good health. A sample of questions that followed a talk Paul gave in Kathmandu a few weeks ago also suggests that all is not well.
. How do you deal with indiscipline in the family, or dishonesty? (Paul's response: How would you deal with a non-family member?)
. How do you deal with in-laws working for you? (Paul says that has to be decided by the family, perhaps with some sort of an agreement among all adult members)
. What about women in family businesses in Nepal? They don't speak up in meetings, especially when their elders are around (Paul suggests giving them the space to have a say, within broad-based pre-agreed family principles)
. What do you do about giving daughters their share of assets (The expert was careful about cultural sensitivity here, saying only that rules need to be made and abided by)
. What should my son do if he does not get to join the family business (Simply have rules for family employment well in advance)

These are only some of the issues that came up, but they reflect the tensions within family-run operations, where more often than not, members have the final say rather than professional managers. And as stories about family feuds are personal, they rarely get told in full in public, so it had to figure out the real story.

Someone like Paul, who represents the Colorado, USA-based Aspen Family Business Group, has to be a cross between an expert on corporate and property law, psychoanalysis and sociology.
Generally, by Joe Paul's understanding, things remain under control as long as the patriarch continues to have a grip on the family, and has the last word in decision-making. All hell breaks loose, to put it quite bluntly, after the patriarch retires or passes away and competing interests of other family members come into play. By the time families realise what is going on, most business are likely to have been damaged beyond repair.

However, that does not necessarily have to happen with all family businesses, says Paul who draws on his experience helping family businesses find ways. Paul is now helping the Jyoti Group in Nepal find better ways to keep their already successful family operation strong over the coming generations.

Both the Jyoti brothers, Padma and Roop, were at Paul's talk. "Our families get together to plan and manage social occasions such as weddings," says Padma Jyoti. "It sounds challenging to get the same idea working for our businesses, but is has to be that way."

"Parents usually train and educate their children to take over business responsibilities," Roop said, asking Paul, "How do you draft an employment policy when you want to bring your children into business?" Paul did not have readymade answers, but believes the idea is to find them from within every family's particular situation. The Jyoti's are already working on that by trying to activate what Paul calls the family council.

Paul and the Aspen Group essentially help families set up clearly defined structures. While that may sound too business-like for many families in the Nepali context, it is the best way to keep a company going. This family council is where the family-all the adults and older teenagers-meet and discuss business. Such forums can also be places where entire families discuss, plan and agree on how best they can prepare the next generation to take over and manage family assets.

"Our whole family met and had discussions with the consultant," says Padma Jyoti. "Even family members who have otherwise been uninterested in business were very enthusiastic about the process." The Jyotis have some "homework" to do before they will see the consultant again.

Generally, most family companies get caught up in wrangles over ownership, authority, knowledge transfer and changes in management responsibilities. Often siblings and cousins joining the businesses first have already carved out little empires leaving little room for others who join later to play. "Families need to have something similar to the shareholder's agreement on norms of buying and selling stock," says Roop Jyoti.

The intangibles are no less tricky-issues of separation of authority from the ownership and management, communication problems, perceived unfairness in successor generation of siblings, children, and cousins, etc. For instance, Roop had a question for Paul about how to deal with less competent family members when you are expected to treat all equally? This issue is typical to Nepal, where offspring can even sue parents for a fair share of the inheritance. Paul would not say much on this, arguing that since this was his first real consulting assignment in Nepal, he would need to find out more about the modalities of such situations.

While the moment-to-moment solutions are vastly different in each context, Paul says that business that have managed to stay around past the second generation average have certain things in common. These include shared values and power, traditions, willingness to learn and grow, attention to maintaining relationships, caring, mutual respect, well-defined interpersonal boundaries and trust. The challenge, he says, is learning to inculcate these values.

The discussion on running successful family enterprises was very likely a wake-up call to Nepali business families, which were fairly well represented at Paul's well-attended seminar. There were a fair number of young business people in the audience, proof that the future of a family business is not something people expect to simply sort itself out anymore, and an acknowledgement of the fact that all businesses, even those that remain in the family need a degree of professionalisation.

Family operations, like all others, have professional managers and staff, whose performance is affected by how the family manages itself. There are no instant formulae to get over conflicts, as Paul was so careful to point out, but there are ways in which they can be better managed. Families must decide how to organise themselves. They have to create a space for dialogue and find the time to talk about business and discuss new ideas. These meetings help identify and prioritise concerns, and set up mechanisms to help manage and safeguard family assets over generations.



LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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