EMERGENCE OF INDIAN FAMILY BUSINESSES:

India enjoys a rich and glorious history of family-owned businesses. Family business in India has been in practice for a long, is slowly and gradually changing its nature and structure over the period. During the early days, trading and money lending were done in bazaars through shops (Dukaans), owned and confined to a few communities from Northern India, perceived to be money minded. They were also called Seths or Sahukaars (the rich).

In India, families still dominantly control the majority of businesses. 90% of the businesses in India – whether SMEs or large conglomerates are still owned, controlled, and managed by families.

India ranks third in terms of the number of family-owned businesses. More than 50% of the top-performing businesses in Asia, excluding Japan are from India.

Large corporate business houses like TATAs, Ambanis, Godrej, Bajaj, Hindujas, Ruias, Mittlas, Thapars, Adanis, Birlas, Jindals, Mahindras, and many more are still controlled by the respective families, whereas the role of the family patriarch is very important and respected, which is quite similar to the Emperor Model in a family business.

Family-owned organizations continue to grow and are a large part of Indian society. They form the backbone of the Indian economy and societal growth.

The financial performance of family owned businesses such as revenue growth, gross margins, earnings before interest, tax depreciation, reserves is far better than the non-family owned businesses.

Though family-owned businesses face challenges, they have time and again shown better performances than public and multinational companies by finding ways to overcome the limitations and surviving the odds. The financial performance of family-owned businesses such as revenue growth, gross margins, earnings before interest, tax depreciation, and reserves is far better than that non- family-owned businesses.

CHALLENGES IN INDIAN FAMILY BUSINESSES:

In the fast-paced era of disruptive technologies and digitization, family businesses can no longer continue to operate with old traditions and methodologies. Traditional mindsets need to change for the better.

The operational methodology in the businesses has changed for its own survival. The changes caused changes in the family dynamics and the businesses as well.

With the increase in the business size, the business families found it di cult to manage the operations and mobilize resources for continuity. As a result, the financial control of the businesses gradually started shifting from the promoters to the financial institutions.

Family firms need to find a good balance between profits and maintaining family relationships. Over a period of time, ownership, management, and creating professionalization with great transparency become quite challenging.

Lack of communication between family members, too much control by the family patriarch, no written or agreed family policies, etc. can become detrimental to the business in the long run. The career growth of the family members and the employees is hampered.

Many family businesses were incorporated in the late 1980s and early 1990s when economic reforms were introduced. As of date, most business founders and themselves are on the brink of retirement with no planned succession either from within the family or outside.

More than 50% of the global family CEOs do not have a formal retirement plan and around 75% of global family businesses do not have a formal family business succession plan. This has led to acrimonious relationships and bad or delayed decision-making within the family.

Many business families have separated and partitioned for internal peace and better management control. Some succeeded and branched out bigger and better, while some failed and totally collapsed

Since the 1970s the family businesses have been splitting quite rapidly. Birlas, Tata, Modis, Walchands, Singhanias, Mafatlals, Shrirams, Thapars, Sarabhais, Goenkas, and Ambanis, have gone through the splits.

WHAT MAKES FAMILY-RUN ORGANIZATIONS THRIVE IN INDIA?

Most family rms were born out of the business activities that started post-independence or during the economic reforms during the 1980s-1990s. So, family-owned businesses are still young. However, they are changing the way they are controlled, managed, and governed.

Families in business are really concerned about wealth creation and protection, social status, family reputation, and goodwill. To ensure this, self-discipline and self-governance are high, leading to sound foundations and good monitoring of the business.

Family constitution, Governance Structure, and family council play an important role in keeping the family aligned.

Family firms are now readily accepting professionals on board. The professional help on Family Constitutions, Family Councils, Structures, Roles and responsibilities, performance-driven rewards, and recognitions for the employees and families are being addressed. Increased participation and involvement in encouraged across all levels without any gender bias.

Strategic Planning, Decision making, Risk Analysis, Capability and Capacity Building, Talent Management, Wealth Sharing through equity, etc. Under the guidance of the Business Coach are being seriously considered and practiced.

In medium to large-size business houses, professional teams are engaged to run the business on a day-to-day basis under the guidance and strategies of the Board of Directors. Good governance creates a good business image and produces better results.

The next generation is now well educated, being exposed to global practices. They along with the available in-house talent are trained to professionally manage the business, which lays the foundation for continuity and creating a legacy.

Indian families have a huge emotional connection along with business aspirations. The commitment and passion for the business are outstanding. The next generation involves and participates in the business with a more progressive outlook with all the energy. Along with the business expansion, and wealth creation with the support of the next-gen, the older family members feel greatly satisfied and happy.