Family Managed Businesses (FMB) are the lifeline of India’s economy. Almost 90% of Indian businesses are family-owned, which makes the rest of the business community largely dependent on them. Be it as their vendors, transporters, contractors or distributors; non-family corporations collaborate with family firms on various levels.
There is a famous cliché, which is quoted frequently and seems to have been accepted as a universal truth: The first generation builds, the second generation consolidates, and the third generation destroys the family business. Long term sustenance of FMB depends on the smooth survival across generations. In essence the most important areas of concern for the success of FMBs are as follows:
-Induction & Grooming
-Conflict Resolution Mechanism
-Business Vision, Strategy & Governance
-Business efficiency and effectiveness
-Family Vision, Strategy & Governance
-Resistance to Change
-Issues due to difference of opinion in Generations
All the above-mentioned issues in FMB are nothing but a unique set of management related issues that stem from the overlap of family and business concerns. Strategic planning around both business and family goals is vital to successful family business. Since most of the conflict arises due to disparity in business and family goals, planning is required to align these goals and formulate a strategy to achieve the organizational goal.
Resistance to change is another major roadblock that needs to be addressed. The goal should be to establish an organizational transformational framework that supports continuous improvement. Linking the appropriate execution plan to the strategy and implementing the same, is where the core FMB team should focus as well.
The ultimate goal of the family and business should be to create an improved work environment that is customer centered, flexible, efficient, and affordable.
FMB should understand there is no perfect strategy to achieve growth; it has to be continuous improvement. You have to be dissatisfied with what you are doing, there has to be paranoia and you have to be introspective enough to continuously improve. FMB should adopt Total Quality Management and a continuous improvement attitude to create a partnership form of organization rather than a paternalistic one.
The objective should be to create a productive organization. The principle should be – “If you cannot improve productivity, there is no reason for a business to exist.” Where does economic growth come from? It comes from improvement in productivity and that creates wealth, which, in turn, creates employment; and then those very employees buy goods creating further growth.
Written By: Faber Mayuri Pandya
Faber Mayuri Pandya is Head Research & Analytics and one of the core members of Faber Infinite Consulting, with operations in Asia Pacific, Africa & Middle East. She holds a masters degree in Marketing Management with her 1st degree being in IT Engineering.