Most businesses in India and the rest of the world are owned and often managed by business families. Managing a family business offers a number of unique challenges; one of them is the process of professionalizing business operations. The situation gets complicated as non-family executives (NFEs) are introduced at various stages in the life of a business by family executives (FE), who themselves have to grapple with a number of unique issues because of dynamism on the family front.

For the first time, this fascinating area has been studied in India from a top management perspective. This report discusses the findings and conclusions from a series of in-depth discussions the author had with 64 top management executives (27FEs and 37 NFEs) covering 27 very large Indian companies.

The study has covered a lot of ground and brought substantial new insight into the challenges of professionalisation. Two key building blocks identified for success are managing the following.

No Man’s Land
Family CTC

It is not easy to define boundaries of responsibilities between FEs and NFEs, especially for critical decisions with their possible differences in perspectives and priorities for the organization. Naturally, there is some undefined area in such relationships, called the No Man’s Land. A major factor that determines success in attracting and retaining high quality professionals is in managing the No Man’s Land. As found in this study, NFEs are guided by structure, systems, and processes; they are somewhat uncomfortable in making critical decisions in less structured environments. FEs are comfortable with both, but often prefer some amount of flexibility and are comfortable in unstructured environments. Both FEs and NFEs perceive the world from their angles. Since it is impossible to define the boundaries completely, there exists some No Man’s Land.

This report has listed a number of tips for both FEs and NFEs to succeed in managing this Land.

The differences in the perspectives of NFEs and FEs are reflected in the essence of professionalisation as understood by FEs and NFEs. For instance, while FEs believe that it means performance and outcome, NFEs view it in terms of existence of systems and processes for decision making. For FEs, integrity is at the heart of professionalisation, whereas NFEs believe they have it. Both FEs and NFEs agree on one thing; the nature of NFE’s passion is largely directed towards working in any structure-systems-process driven environment and not necessarily to any particular organisation, whereas for FEs, the passion is obviously towards their company.

The study found a need to look at compensation to NFEs more holistically from their stand point, as against the current approach to look at from a CTC (Cost to company) angle. We call it Family CTC. The decision of a NFE to join and stay in an organization is driven by the individual’s assessment of the overall costs and benefits in monetary and non-monetary terms, both in short and long terms. Very often career decisions are made intuitively, without detailed calculations.

Though family business as an entity has a number of deficiencies, NFEs think it still a better place to work since decision making is faster and appreciation for individual capabilities is high. Interestingly, NFEs acknowledge that family businesses do encourage them to experiment and take initiatives, but in practice they hesitate. This is primarily due to the ‘fear of failure’ attitude of NFEs. FEs have a major task on hand in creating an atmosphere of encouragement, confidence building and entrepreneurship to tap the best potential out of NFEs. Many NFEs do not open up, but resign themselves to their fate.

A key capability required in FE is humility, the ability to control one’s ego. Unfortunately, very few of the FEs studied recognise the significance of managing their ego at home and the work place for the success of their business, still fewer practice it.

The key capabilities needed in a NFE are integrity and ability to build confidence in FEs to entrust responsibilities.

The study found that professionalisation is at a nascent stage in India, and a lot depends on the initiatives shown by FEs in achieving it. FEs have to identify the factors creating the No Man’s Land, and constantly try to clarify the roles and responsibilities positively. Some of the experiences of companies that have been successful in this endeavour are discussed in the report.

The report also covers the role of other family members, management succession, and board of directors in the context of professionalisation. Besides, it underlines the need for structured induction of FEs and NFEs in any organisation. The process of successful professionalisation would call for mentors to help develop the right attitudes and skills in both FEs and NFEs.