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Family Owned vs MNC:

How does it impact a

CFO’s life?

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With over 90% of the businesses run in India

promoted, owned or managed by families, is it possible for

an ‘outside professional’ to play the role of CFO?

Do such businesses require a ‘professional CFO’ in

the first place? Is it possible for a CFO to operate

independently and yet win the trust of family promoters?

How can a CFO from a structured corporate environment

make a tangible difference to family managed companies?

Soumitra Bose, an ex-Lever Finance Director, shares

his experience of having made the transition from a

leading Professionally Managed Global Consumer Goods

major to India’s largest Family Owned/ Managed Flavour

and Fragrance Company as their Group CFO.

Soumitra Bose is a Chartered & Management

Accountant with global and cross-functional experience in

top notch Consumer Goods businesses in India, Middle

East & UK. Soumitra spent the first 28 years of his career

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with various MNCs, primarily with Unilever where his last

position was Finance Director of the Foods Business in

the UK. He then moved to India as Group CFO of a

leading family owned Flavour and Fragrance business.

Soumitra is currently with a large family owned

confectionery MNC as their CFO & Head of IT, Legal &

Corporate Services and is based in Bangladesh.

Blog

My career as a CFO has now completed a full circle,

working initially with MNCs for 28 years, transitioning

through Indian family run businesses and ultimately joining

a family run MNC. The move from a proven process driven

global business to a local organization having ad-hoc

policies which gets twisted or reversed at the drop of a hat

can be sometimes frustrating but highly interesting

journey.

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The attraction of a CFO to work in a family run

business is the opportunity to engage in a wide variety of

business & finance projects that are not available in a

typical MNC operating company. Family owned

businesses offer an environment of less hierarchy, access

to the real decision makers and hence lower bureaucracy.

While this is well recognized, the organization culture is

very different from an MNC – the culture here is the family

– you either love it or hate it. Treading the middle path

may give some reprieve but does not provide any long

lasting comfort. I once asked a senior candidate in an

interview – how do you manage conflict with the owners?

His response was to go back and believe that the owner

must be right and build his own rationalization around it.

This left me speechless! The reason I am hired in a family

owned business is the professionalism I bring in and not

the other way round! Pleasing and appeasing will not give

one any respect and the key to win in family run

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businesses is to win that in the early days. To gain this

recognition, there may not be a set process to follow. Such

trust building will not happen overnight – however, once

done, it gives a solid foundation of a long lasting

relationship. It is critical for the CFO to become part of the

family, earning trust and building relationships that go

beyond the business.

The other important consideration is the value system

that we inculcate over our career – compromising this

makes you vulnerable. To me, this is the biggest hurdle

of working in a family owned business – if you are able to

relate to the family values or drive your values and be

accepted, you survive, you are true to your conscience. If

there is a conflict here, the results can be devastating –

you will find yourself in an unwanted place of work or you

will compromise, which is even worse. Unlike an MNC,

where there is generally a higher “court of appeal” for

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conflict resolution, such options are usually limited in a

family business.

The above general principles apply not only to the

organization internally but with external stakeholders as

well. The suppliers, customers, bankers, consultants and

sometimes the private equity shareholders look at you and

deal with you, the CFO in a family owned business,

differently from a CFO of a MNC. In a typical family

owned business where the owners make all the decisions,

being seen as only a so-called “munimji” can be really

frustrating. Our job is to bring our professionalism in the

decision making process – to become business partners

and a conduit between these external stakeholders and

the family, not a passive listener! I recollect a statement

made by one of our selling agents (who had also inherited

a family run business) in our first meeting – “we do not

want to bring the multinational culture here” – I was

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irritated and had to remind him that’s my raisin d’etre in

the organization. Over the subsequent months, when I

was able to demonstrate that MNC culture is not only the

so-called slow decision making process, but an attention

to detail, developing sustainable policies and procedures

and balancing the company objectives with their individual

goals, I believe I could change his perception. Here again,

respecting the past while bringing in organizational

changes is a pre-requisite.

So what are the key transformational processes the

CFO needs to follow in a family run business? I would

like to summarize this to the following six:

1. Build your own team

The first job is to get a finance team which moves

from “ do what you are told” culture to a team which is

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empowered and self-motivated. For this purpose, identify

the low performers and offer them opportunities to

develop. If that does not succeed, counsel them out and

replace them with high potential people. The challenge

however will remain to attract and retain such resources.

2. Instinctive to informed choices

In most family run businesses the gut feel works quite

well with the family members leading the businesses. This

has come from experience, having being involved with the

business from an early age. As a result, very little effort is

put in developing MIS Reports on various facets of the

business operation. The CFO’s job is to build a

comprehensive MIS reporting system to assist the

professional team (and also the owners) to make more

informed choices and build strategies.

3. Control the cash

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As in any other business, the key is to ensure that

cash flow is controlled in a manner whereby leakages if

any, are plugged and financial decisions are taken

objectively rather than on impulse. For this purpose,

setting up a rigorous system of cash flow forecast is

essential which needs to be closely monitored on a regular

basis.

4. Use IT as enabler

As the business gets modernized, IT can play a

crucial role in enabling business processes and decision

making. Very often this requires a significant initial and

on-going investment without an apparent quick payback

and hence not appealing to family owned businesses. The

CFO, who most often doubles up as the CIO in such

businesses, should clearly set up the IT roadmap along

with his colleagues to ensure that the business uses

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technology for delivering the long term goals of the

business.

5. Get the specialists

Usually smaller family run businesses are unable to

attract the ‘A+ specialists’, as career progression here may

not follow the desired pace for them. The key here is to

recruit them as consultants in their specialized fields who

will not only bridge this gap but also help to bring in the

best practices in business to the organization.

6. Respect confidentiality

Most family run business owners are paranoid about

confidentiality of information – be it margin or profitability,

product or process formulation or any other business IP.

The CFO should respect this requirement and ensure

information security across the business.

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The CFO in a family owned business needs to get his

hands dirty and actually do things himself in contrast to his

counterparts in MNCs who spend 99% of their time in

decision making only. However, the outcome can be

immensely satisfying – the CFO here can be justifiably

proud of the business transformation he has enabled to

bring in – strategy, structure, professionalism,

accountability and discipline. He is the key change

maker..

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