The Peacemaker

A scene in Guru, a film directed by Mani Ratnam, has the protagonist Gurukant Desai facing an enquiry commission alongside his wife Sujata, who is asked the reasons for her presence. She replies that she is an initial promoter of the company and a 50% partner in the company.

This scene, like the rest of the film, upholds familial bonds as sacrosanct. Naturally then, the role of the life partner seamlessly flows into being a partner in the company and an equal party to the fate that befalls the business. Sujata, steadfast in her faith as a devoted wife offers unconditional support to Desai as he faces the trials and tribulations of life.

Sujata acts as a psychological ballast to her husband as Gurukant goes on to expand the business. She is playing the role of what today is known as chief emotional officer.

Family First

At their core, family businesses are families first, and it is easy to assume that they uphold values of love, trust, respect and unconditional support. But if that was indeed the case then family businesses should have been sailing along smoothly, where each member would do their part to help it prosper. But here is the thing with family businesses, they have a great propensity to run into trouble. Why you ask?

Well to begin with relationships in these family businesses are not always cordial. Not everyone is on the same page and to complicate matters further they are not entirely professional either. You cannot just walk away from the business. Because there are emotions at play—deep and at times disconcerting ones.

“Emotions do not always stem from reasons so there is no point in looking for rational explanations in family strifes. What makes someone take offence, an injustice, favouritism, unfairness shown by a patriarch can cause deep hurts that linger, simmer and can boil over into conflicts,” says Janmejaya Sinha, chairman of India practice at BCG, a consultancy.

As family businesses go beyond two generations, they become complex; family members need to work on their shared values and emotions. Take for instance the Ambanis. Kokilaben (on whom the character of Sujata in Guru is said to be loosely based) had to step in and calm things down between her two sons, Mukesh and Anil; the family split in 2005 (see Fractured Families).

Family-led and family-managed businesses which contribute 25%–49% of GDP comprise a large chunk of companies listed on the Indian bourses, states a 2020 BCG report. The number of family businesses is even greater in the medium and small business segments. Given their significant contribution to the Indian economy, what makes them tick is a question that warrants attention.

Emotions at Play

In a book titled Untangling Conflict: An Introspective Guide for Families in Businesses, by Janmejaya Sinha, Carol Liao, Ryoji Kimura and Brittany Montgomery there is an entire chapter on soft issues in family businesses. This, says Sinha, “was singularly held to be the most important chapter in the book by all the 31 families who participated in the study”.

Massive disruptions can happen due to seemingly trivial issues arising out of hurt sentiments and misunderstanding and although there is an immediate acceptance about the importance of soft issues discussions around managing them are nascent. Inter-generational family business conglomerates put in place structures of governance such as family councils, assemblies and charters to manage critical issues around succession, distribution of dividends and management.

But when it comes to emotions and softer issues, these conglomerates fall short. Family businesses would therefore do well to address these undercurrents as that would go a long way to determine its longevity.

There is no one formula that applies to all when it comes to navigating such feuds in family businesses. The causes behind these could also vary. It could simply be different perceptions or disagreements around values or even  conflicting personalities.

“It is only possible to discuss these when someone in the family has the emotional intelligence to navigate the issues at hand and is invested in creating strong bonds among the members. It is also imperative that this person is trusted by those involved and has high level of integrity and no vested interests,” says Sougata Ray, chair, executive director and professor of strategy of  the Thomas Schmidheiny Centre for Family Enterprise at Indian School of Business (ISB).

A 2023 study by Family Firm Institute on Chief Emotional Officers in Asia’s Collectivist Culture states that as families grow and change there is a need for a chief emotional officer who can help mediate conflicts that may arise due to clashes in personality, changing value systems or violation of written and unwritten rules. It goes on to state that this is an informal position filled by either a family member or an adviser close to the family.

Fitting the Bill

A good emotional officer requires a high degree of emotional maturity, trustworthiness, respect for family traditions and values besides having good communication skills and an ability to maintain boundaries.

Women in collectivist cultures are seen as being “empaths” and a natural at upholding the family’s interests above their own. This probably explains why wives and mothers seem to step in when conflicts surface. The patriarchal framework values their sacrifices in holding a family together, at times over and above their competence as business leaders and decision makers.

As family businesses go, they need to periodically review and strategise to leverage the best of talents that they have. This involves addressing and adapting to the shifting socio-cultural norms and demographic changes within the family and in society at large. Going beyond limiting ideas of ageism, gender stereotypes, rules of primogeniture and keeping it all within the family, all of which may at times be counterproductive to doing good business.

A chief emotional officer can really make a difference here, as they can play an important role in creating space for conversation around the changing needs of the family, at times beyond what traditional norms dictate. Business folklore has it that when Harsh Mariwala, chairman of consumer goods major Marico, had a difference of opinion with his father Charandas Mariwala, his youngest uncle stepped in as an interlocutor. His advantage was that he had a great rapport with the son and was also a trusted confidant of the father.

The more the family is in sync with the personality and talents of its members, the easier it becomes for it to avoid conflicts and sustain itself as a business. It is always better if such recognitions come from within the family as the identity and image of the family is closely tied to the ways in which the family business functions. This is so because they are personally invested in the reputation of the business, shows research at the ISB’s Thomas Schmidheiny Centre for Family Enterprise.

Family businesses are best illustrated through an inverted pyramid where the family is at the apex, followed by the family council, owners, owners' council, board and the chair. So essentially, investors and their perception about the business stems from how the family takes a call around managing inheritance and distribution of roles among its members.

Mehul Bheda, partner at Dhruva Advisors, a consultancy, says, “It is really the family’s call and investors do not generally interfere. The only thing that may be of concern to them is that if there is a member who is fully involved in the business but is not getting their share as that could create problems.”

In order to keep the peace, many family businesses have pivoted to employing external assistance to resolve disputes. External assistance in mediating disputes, allowed under the Mediation Act of 2023, involves a trained mediator listening to both sides of the argument. If all goes well in mediation, it can possibly help avoid court cases or at least put emotional outbursts aside before judicial proceedings. While there is merit to employing professional mediators, many family businesses want to keep their disputes within the family, underscoring the need for a chief emotional officer.

Slaves to Tradition

While Indian family businesses are keeping in step with consumer trends and pivoting accordingly, one thing seems constant: Entrenched patriarchy, which refuses to empower women by giving them board seats or decision-making roles. Even when the woman is sharp and has the potential to add heft to the group as was the case with the Murugappa Group.

Valli Arunachalam, the eldest daughter of the late M.V. Murugappan, chairman of the group, took family members to court when refused a seat on the board of Ambadi Investments, the holding company of the group.

Arunachalam had alleged that she was denied a seat on the board while her male cousins organically stepped into their roles owing to the patriarchal norms which guided the inheritance prospect of the company.

Speaking to Outlook Business she says, “The sacrifices a woman makes for the family to prosper, how she anchors the family through challenging times and her uncanny ability to understand people and their difficulties...These are qualities that every leader possesses, and they come naturally to women. Any family business would prosper more robustly with the unique qualities and perspectives that women bring to the table.”

The long-standing dispute was settled out of court last year.

Ray of ISB says that in case of smaller families a close friend or colleague could become a family confidant. The value of emotional labour is often underplayed but it can never be emphasised enough as family businesses aspire to create their legacies.