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Indian Family Businesses Thrive, Managing Challenges Well Very visibly the transitioning is seen in structure, processes and systems with many firms becoming globally competitive too

By Sambhav Shah

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Accordingly to a recent study (September 2018) Credit Suisse Family 1000, India ranks third in terms of the number of family-owned businesses. The survey also showed more than 50 percent of the top 30 best performings of them in Asia, excluding Japan, are from India. The financial performance such as revenue growth, earnings before interest, tax depreciation, among others was far superior in family-owned businesses versus the non-family owned. Furthermore, the importance of economic value and employment generation of the non-listed firms in the country, the majority of which are family-owned cannot be ignored although they are away from the media's lens and big cities

The nature of these family-owned firms has changed since the bazaar system in the early days. Challenges are numerous that come with family run firms as a fine balance is yet to be struck between business profits along with maintaining of family relationships in numerous cases. Ownership and control, transparency and professional management can become issues many a time. When the patriarch of the family becomes too controlling without professionally managing issues, with no written policies to address them coupled with lack of communication among family members, will be detrimental in the long run. Employees suffer as they bear the brunt of irrational demand of owners and unfair workers' policies. Such firms neither have quality control in place nor are keeping pace with modern technology, hampering the career growth of workers in the bargain.

Professionalism Leads to Long Term Sustenance

Even today a significant number of multi-generation family-owned organizations find it challenging to nurture a completely professional atmosphere in the workplace. Decision making is still the prerogative of the owners who hold the reins of control with the sole aim of preserving the family brand, reputation, goodwill and creating personal wealth. There are some families as they become a part of the larger extended family have to struggle with succession issues and other disputes, leading to partitioning of the firms and setting up separate branches.

However, the younger generation in these families with exposure to global standards, having studied and worked across continents want to change the way their forefathers ran the business. They also desire to get the company listed in India and abroad, looking at JVs and FDIs and want to create more value to the businesses. These changes in mindset among the family members have brought about transition at the workplace, as they begin to hire professional teams to run the enterprises and thereby generating wealth across levels, including employees unlike the earlier times. Very visibly the transitioning is seen in structure, processes and systems with many firms becoming globally competitive too.

Consistent Growth

Family-owned organisations continue to grow and remain a large part of the Indian society and are here to stay. They have most of the time, shown better performance than public and multinational companies by overcoming limitations. Many have understood businesses can no longer operate in a limited ecosystem with dated methodologies, in an era where disruption with digitalization is the trend. They are well aware traditional mindsets of family have no choice but change.

Yes, family-owned firms continue to remain key building blocks of India's economy and societal growth. Measures are taken by owners to include professionals and supporting them in every step which will certainly go a long way producing remarkable results. There are advantages for professionals too on the other hand. By working alongside business owners who started the organization from scratch, the workforce is receiving good exposure to many aspects of running the organization, the risks, mistakes, growth and profits.

When such firms draw a fine balance between old systems and new processes and adapt to new technologies, become more competent, they are easily made role models for other similar organisations to follow. Their business model will be replicated, creating stronger value to these family-owned brands!

Sambhav Shah

CEO, CRESTA School of Management, Science and Arts

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