The Secret of Successful Family Businesses
By Nand Kishore Chaudhary
From small tea stalls nestled in remote corners to large corporations headquartered in the tallest skyscrapers in bustling cities, family businesses have always been a part of India’s fabric. In fact, contribution by family businesses to India’s gross domestic product (GDP) amounts to an amazing 79 per cent. Globally, two-thirds of businesses are comprised of family firms.
According to the Family Firm Institute (FFI), almost every type of economy around the world has some form of family owned and operated businesses. In addition:
– Up to 90 per cent of worldwide GDP is generated by family businesses.
– A majority (50 per cent to 80 per cent) of the world’s jobs are created by family businesses.
– Family money is used to create 85 per cent of start-up companies.
– Family businesses account for 70 per cent-95 per cent of all entities in most countries.
It is obvious that family businesses are prevalent and thrive through thick and thin. There are many reasons for this. Family members are very reliable and loyal. This faithfulness to the company is deeply rooted among members because they have seen the business being built up from the very beginning.
The passion that family members bring to business cannot be matched. Anyone who starts a business must be wholly devoted to the cause. Family members become even more attached to an enterprise because it becomes like a child for them, with every member working to nurture and grow the organisation.
Due to this strong bond with the enterprise, all family members become familiar with operations. They understand the business model and vision better than someone who has been hired from the outside. Those who operate family businesses can become consumed by it and that is because the reason they started the operation is because of a strong desire to succeed. They have deep understating of the values and principles.
I was born into family that had small clothing and footwear shops. In a country where the children of business people are expected to follow in their elders’ footsteps, I picked a different path. I went to college and was offered a steady and secure job at a bank upon graduation.
I had to weigh the options: do I make my career within the family business – a place where I often witnessed things I didn’t like, such as how workers were treated or unethical practices in running the business. Or, do I accept the bank job offer – a safe and steady choice but one that did not interest me.
It was a difficult decision but I decided to follow my own path. What began as a solo business enterprise has grown to include my children. Business has proven to be in my blood.
Family businesses succeed because of the unity that is found among members. The business is strengthened immensely through this unbreakable bond. When individuals grow up alongside the business, a strong and solid link is formed. The enterprise becomes a part of one’s soul and core being.
The trust that is present among family members does not exist elsewhere. We can say anything to family and most likely they won’t get too upset. But if they do get angry, it won’t last. There are a lot of hard truths that must be dealt with when operating a large business so being able to speak openly and honestly makes a big difference and offers advantages. No matter what happens among family members, there is a level of trust and understanding that never diminishes.
However, issues can arise because of such strong emotions attached to the business. Intentions may be honourable but in some cases, can lead to clashes and complications.
There are ways to minimise potential conflicts. First, family members should not be pressured to join the company. If the person is not fully attached or committed to the business, then having them join is of no use because the passion is not there.
Those who are keen on joining the business should be trained by professionals who are hired by outside of the family. This ensures that they learn the processes and technicalities of the required work.
Succession can also bring about issues. That is why it is important to have a structured plan in place before any tensions arise. Openly communicate succession plans early on to minimise disruption.
Also, family members should not be elevated to higher positions immediately because this can lead to conflict and resentment. And it can become difficult to retain talented outsiders if they are not given due credit, well-deserved positions and responsibilities.
While problems can arise in family organisations, the benefits outweigh the negatives. Family businesses have long been a part of society and will continue to be a large and contributing part of the global economy.
With the right preparation, training and attitude, operating a family businesses can be a smooth and fulfilling endeavour that makes a lasting impression through successive generations.
The writer is a social entrepreneurs and Founder of Jaipur Rugs