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    Indian Family Business

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    YashShah
    Family businesses face conflicts between business growth and preserving family wealth as they expand beyond the first generation. Key challenges include succession planning, ownership structure, recruiting non-family professionals, and developing complex strategies and governance as the family and business systems become more sophisticated over multiple generations. However, most family businesses do not survive beyond three generations as ownership and management are not properly transitioned according to studies. This document examines how Indian family businesses evolve their family and business management capabilities over generations and the importance of succession planning to sustain the business beyond three generations.

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    Indian Family Business

    Uploaded by

    YashShah
    125 views2 pages
    Family businesses face conflicts between business growth and preserving family wealth as they expand beyond the first generation. Key challenges include succession planning, ownership structure, recruiting non-family professionals, and developing complex strategies and governance as the family and business systems become more sophisticated over multiple generations. However, most family businesses do not survive beyond three generations as ownership and management are not properly transitioned according to studies. This document examines how Indian family businesses evolve their family and business management capabilities over generations and the importance of succession planning to sustain the business beyond three generations.

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    third generation

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    Family businesses face conflicts between business growth and preserving family wealth as they expand beyond the first generation. Key challenges include succession planning, ownership structure, recruiting non-family professionals, and developing complex strategies and governance as the family and business systems become more sophisticated over multiple generations. However, most family businesses do not survive beyond three generations as ownership and management are not properly transitioned according to studies. This document examines how Indian family businesses evolve their family and business management capabilities over generations and the importance of succession planning to sustain the business beyond three generations.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    125 views2 pages

    Indian Family Business

    Uploaded by

    YashShah
    Family businesses face conflicts between business growth and preserving family wealth as they expand beyond the first generation. Key challenges include succession planning, ownership structure, recruiting non-family professionals, and developing complex strategies and governance as the family and business systems become more sophisticated over multiple generations. However, most family businesses do not survive beyond three generations as ownership and management are not properly transitioned according to studies. This document examines how Indian family businesses evolve their family and business management capabilities over generations and the importance of succession planning to sustain the business beyond three generations.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Indian Family Business: Their survival beyond three generations

    A major dilemma many of them have faced particularly in the last decade since economic liberalization
    began is to choose between combinations of risks and returns of business growth and conservation of
    wealth of the family.
    Family businesses are fascinating because of the mutual dependence of two ecosystems (family and
    business) that have inherently conflicting characteristics. Some of the key dimensions that determine
    the cohesiveness of both the family and business are: succession planning, remuneration and rewards
    planning, recruitment and rewards for non-family professionals, retirement and estate planning,
    induction and grooming, ownership structure, preserving wealth, resolving conflicts, business vision,
    strategy and governance, family vision, strategy and governance.
    Family businesses are found to split up like amoeba as they grow, and very few of them survive beyond
    three generations, supporting the age old saying, shirt sleeve to shirt sleeve in three generations
    (Carlock and Ward 2001, McCulloch 2004).
    In most developing countries, including India, it still remains a black box; academics and industry
    observers were puzzled to witness the recent break up in the second generation of the Ambani family,
    the largest private sector group worth over US $ 20 billion.
    Stage I
    Simple Strategy
    Simple structure
    Simple System, Processes
    Small team
    Hands on
    Generation I
    Limited Strategy
    Simple Structure
    Informal Systems, Processes
    Small size

    Familys business
    management capabilities
    transformation

    Familys family management


    capabilities transformation

    Stage III & IV


    Complex strategy
    Complex structure (Stage III/IV)
    Complex systems, processes
    Conscious value inculcation
    Generation III & beyond
    Complex
    interrelationships
    (structure)
    Value
    centered
    strategy
    implementation
    Complex systems

    Return of the father in 18 month


    Although ownership and management succession are the key concerns of a large number of business
    families, they do not devote enough attention to the process involved. Studies (Watts and Yucker, 2004)
    have reported that families hesitate to address this issue. Succession dilemma is also closely related to
    the family policy on entry of new generation, retirement of incumbents and mechanisms for resolving
    conflicts.
    As discussed by Paisner (1999), developing a sustainable mechanism for business ownership that does
    not lead to inequitable wealth distribution and avoid amoebic type break up, is also an important area
    of concern. Paisners idea of a trust route seems to be good, but needs to be empirically validated.

    Families are united over generations by their vision, values and emotional bondage.
    There exist an unwritten rule in all the families studied here that daughters-in-law do not get involved in
    business while daughters anyway, go to their in-laws house. The current generation shows signs of this
    rule changing, slowly.
    Competitiveness to survive and grow depends on the organizational capabilities, which flow from the
    family directly and from the resources hired from outside. The need to hire non family resources to build
    organizations is well recognized. However, an area of conflict is the decision on the roles and
    responsibilities of outside professionals.
    Ten Commandments of family business
    Succession Planning

    Hence, the focus is on the way family and business dynamics function in the fourth generation and not
    how the families built the businesses over the generations. We study the generic growth strategies
    followed and the influence of the family and professionals in it. Building on the agency theory, we
    explain the nature of relationship existing between family and non-family professionals active in
    business. We also examine the process of entry and succession planned in these families, and the
    possible explanations for the emerging pattern.

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