INDIAN FAMILY BUSINESS

GROUP

INTRODUCTION

Family-owned firms are organizations where two or more extended family members influence the directions of the business through the exercise of kinship ties, management roles, or ownership rights.

PREVALENCE OF FAMILY BUSINESS

Family owned businesses exist all over the world Oldest: Kongo Gumi of Japan was founded in 578 AD and is currently managed by the 30th generation Over 80% of world business is controlled by families employ around 50% of world work force They contribute around 40 to 50% in world GNP Some of the largest wealth creators and businesses are family owned like Wal Mart sad picture is that only 15 to 20% of family businesses survive till the third generation

INDIAN FAMILY BUSINESS-EVOLUTION

Todays Indian Industrialists rose from the bazaar Their roots in industry are relatively recent, going back largely to the First World War. Before that they were traders and moneylenders engaged in the hustle and bustle of the bazaar

INDIAN FAMILY BUSINESS-EVOLUTION

Even in Bombay and Ahmedabad in western India, where the cotton textile mills came up earlier in the last half of the 19th century, it was the trading communities who became industrialists Aggarwals and Guptas in the North, the Chettiars in the South, the Parsees, Gujarati Jains and Banias, Muslim Khojas and Memons in the West, and Marwaris all over India

CONT

Initially they were in small business which required small investments letting the families manage the business on there own But once they entered into manufacturing sector(industry), they felt the need of heavy investments To spread the risk, therefore, the families setting up industrial undertakings ,enlisted the cooperation of others, usually close friends or relatives, and allotted to them blocks of shares Thus was born a system of corporate management that was a strange combination of joint stock principle and family control

All critical decisions about the firms were taken by the promoting families, euphemistically termed managing agents. R.K. Hazari, a well-known industrial economist, had concluded after an exhaustive analysis that most of the prominent industrial firms on the contours of Indian business during the 1950s, were in the hands of just 18 Indian families and two British houses.

AFTER INDEPENDENCE

Three major developments disturbed the tranquil situation that earlier prevailed on the business horizon. These developments were: 1) The nations resolve to accelerate the pace of economic development held out a attractive invitation to the private sector 2) Both the Union and various state governments set up a number of financial institutions to provide industrial finance to private sector companies. 3) The joint family system, once the bedrock of the Indian social structure, began to increasingly experience severe strains, thanks to growing urbanization and westernization.

CHARACTERISTICS OF INDIAN FAMILY BUSINESS:

Loyalty Family relationship Male Dominated Passing the Baton: Grooming the new generation, Steady growth of stake

TATA FAMILY TREE

FAMILY VALUES-TATA

Its the family values nurtured by the Tata family and the family unity which it has shown since the first generation has propelled Tata to the status they enjoy, not only in the business world but also in the society. There are many families earning fortunes but the trust and respect enjoyed by the Tatas is unmatched in the history. Tatas enjoy there respect and trust worthiness because they have shown a way to manage your business without spilling the family beans in the public and nurturing a highly principled value system in the family.

RELIANCE GROUP:

The great visionary, Mr. Dhirubhai Ambani, who loved to dream big and to attain them ,lacked the vision to carve a succession plan for such a giant corporation. He passed away without providing the company with clear cut succession route. May be that he never thought that even such huge empire will fall short of the aspirations of his two little Ambanis He failed to understand the strategic importance of planning the succession in advance

CHALLENGES/PROBLEMS IN FAMILY BUSINESS:

Family Emotions: Emotional outbursts are many in family-owned businesses and the quarrels and ill feelings of relatives have a way of spreading out to include non-family employees. It is very difficult to keep the bickering from interfering with work and the company becomes divided into warring camps. Recommendation: if the head of the family encourages open communication among Family members and has a system of mentoring every member who enters the family Business then issues can be controlled

Family or Business what comes first: There should be a clear demarcation between the family and the business. Succession Planning and fair to all approach: Succession planning is something which every family business must do well in advance, most appropriately in the first generation itself. Succession planning must not mean dividing the pie among the family members but it must mean finding a role of each family member in the group without having to divide the group Retaining non-family professionals: The business should decide over a crystal Clear HR-Policy based on performance and commitment of every employee (family and non-family). The vision should be to nurture and develop talent wherever spotted

MANAGING THE FAMILY BUSINESS STRATEGICALLY:

Family and business are two different systems having different environments, needs, values, perception etc. There should be a genuine effort to synergize the two institutions of family and business. And this effort can be made effective only when the family is dedicated towards the welfare and global growth of the business. Two Different Systems Family System Business System

FAMILY COUNCIL:

Mission and values: The council contains members of the family (frequently including in-laws, young adults and family members with no connection to the business). Family members develop a habit of avoiding issues, denying problems, and keeping secrets from each other The key family members gather to find answer to such questions a succession planning, pie share, role of members in the business etc. Next generation development plan Guidelines for family involvement Ownership and transfer policy

BUSINESS COUNCIL

The business council includes both, key family members and professional experts these experts are vital in the sense that they can give objective opinion towards a problem without being biased. It encourages transparency in the company and rational decisions are taken to propel the company towards the heights of value chain Business Decisions Capital Needs (Family and Business) Leadership Team Succession Succession Governance

CONCLUSION:

Family is the fundamental unit of every other

institution. Business evolved due to symbiotic interaction Between family and society (itself made of families).This symbiosis can be made eternal by strategically managing both the institutions (Family and Business) ensuring that family remains united and business is given full autonomy to chart its way according to the changing needs of the time.

REFERENCES

http://www.scribd.com/doc/17787209/Indian-Family-Managed-Business http://www.scribd.com/doc/53631861/Understanding-the-Family-Business http://www.forbes.com/2010/10/22/forbes-india-indian-family-businesses-turn-toprofessionals_2.html http://www.isb.edu/FamilyBusiness/File/challengesfacedbyindian.pdf