Perks and Problems of Indian Family Businesses
By Pratik Mantri
India is a country where family owned businesses are much respected, better governed and contribute immensely to the country’s economic and societal growth. Over the past two decades, the performance of family businesses has been better than either public sector or even multinational companies.
Family businesses have always been an integral part of the economy and society in our country. Largely founded on the joint family principle of ownership and management, their contribution has always remained very high. The obvious importance of family business in India – the Indian economy is majorly driven by entrepreneurial capitalism. In India, Fifteen of the top 20 business groups in 2016 are family-owned. Together, they controlled nearly Rs 26 lakh crore ($390 billion) of assets at the end of FY16, accounting for 84 per cent of the combined assets of the top 20 business groups. Globally, in some countries, many of the largest publicly listed firms are family-owned.
Family businesses clearly have an enormous potential to create a winning brand provided they are able to efficiently organise and streamline their performance, and earn the trust of their customers and employees.
The perks of being in a family business are the visibility and exposure that one gets into every aspect of running the company. You will have to be directly in touch with many stakeholders like vendors, landlords, government and customers. Another advantage is the constant knowledge transfer one can get from their predecessors and ancestors who have set up the business from scratch and understand its pulse. Even then you have to find your own way of doing business as dated methodologies and legacy systems will not help sustain an organisation to prosper in today’s time. While one must learn from the company’s past, the successes and failures of the previous generation, one should learn to draw a balance between the old and the new to steer the company clear of obstacles thrown by a fast evolving, highly consumerised and digital economy.
Another benefit of running a family business would be the ease in taking risky decisions. There is no conflict between your personal interests and organizational interests. But when you take a risky decision, you should have a strong logic behind it. Otherwise the existing system may not be able to cope with it.
The key areas where family run firms continue to face unique challenges are Family Wealth Management, Managing Family Relationships and Professionalization.
Relationship between parents and children or among siblings has a tendency to deteriorate due to communication problems. Family problems may spill over into the workplace. There may be times when the interests of a family member conflict with the interests of the business.
Indian family businesses enjoy various advantages due to their inherent characteristics and a social culture that supports their structures. However, these advantages can be destroyed if the family is not united.
To cite a personal anecdote, when I started my career at Mantri Developers, like any other employee and as per the company policies I went through all the HR formalities and had to adhere to everything that was asked by the system. It was difficult but essential that I stick to my professional best during office hours and then be my casual self when at home. Another challenge in a family business is that you are constantly subjected to comparisons. People start looking up to you and their expectations become really high the moment you step in and take the charge but one must understand is that it takes time, patience and acceptance from your co-workers to build an ecosystem that augments growth, something which took many years for your predecessors to achieve. Moreover, real estate as an industry has become a lot more organised only in the last decade, people here work on trust and it definitely is not an overnight process to gain the same and show quick results.
When it is a family business, though you have the option to look after any department, it is important that you find your niche where you can further strengthen your core capabilities and deliver. I figured out that I can do customer relations and technology better. So I focus on these two and delegate the other aspects to others. After all it is a team effort.
One of the popular myths about family businesses is that they are unable to adapt easily to increasing competition and technological progress. But as the new generation steps in, the family businesses subsequently have the advantage of entrepreneurial spirit and flexibility.
Family-owned businesses are often perceived to be ideal because family members can be great team support and they form a loyal foundation for the company, they also tend to exhibit more dedication towards fulfilling a common goal. Most of the family run businesses are known for the ethics that they follow and it naturally creates a legacy for the coming generation to continue.
When the family members have a common vision, well defined roles, open communication, and transparent systems of operations then the business can survive any test of time.
Indian family businesses have moved far ahead and now have a global presence. While the previous generations have laid the foundation of the business, the new generations have become instrumental in strengthening the same and are capably forging ahead, bringing in impactful and positive changes not only at the company level but industry at large.
The writer is Director, Mantri Developers Pvt. Ltd