Family businesses in India are evolving
Family businesses in India are evolving unique models that blend rigid rules with flexibility.
Since this BT cover dated January 7, 1998, Indian family businesses have moved from survival issues to putting in place governance systems
Happy families are all alike, wrote Leo Tolstoy in Anna Karenina, (but) every unhappy family is unhappy in its own way. Indian family businesses, however, have turned this sentiment on its head: the successful families often follow dissimilar models, while the reasons for dissent within those that have faced internal schisms are often the same.
One feature, however, unites them all - they are more conscious now of the survival challenges such families face. They have been thinking seriously about issues relating to governance and succession. "There is a global statistic that hits you in the face," says Puneet Dalmia, Managing Director of Dalmia Cements. "Whenever there is a generational shift in a family business, the chances are more than 50 per cent it will not survive in the same way or form."
"There is a lot of self-discovery happening," adds Kavil Ramachandran, Thomas Schmidheiny Professor of Family Business at the Indian School of Business, Hyderabad. "Our business families are in the process of evolving their own models."
Taking a cue from the West, quite a few successful Indian business families have formulated family constitutions to guide their actions. Four of the five featured here - the GMR Group, the Emami Group, the Dalmias and SRF - have done so. But others, equally successful, oppose such constitutions, believing regular dialogue between family members involved in the business is far more crucial. They swear by family council meetings and regular family lunches to ensure smooth functioning.
Some believe family members should not interfere in the business at all for it to prosper. Others are equally vehement that a 'hands off' policy is suicidal. But some kind of policy has to be in place. "Issues in any family business are universal. One is well advised to have a policy before the need arises," says John L. Ward, consultant to leading businesses in India.
With a patriarch or malik - whom everyone must defer to - at the head of many family businesses in India, conflicts can take on peculiar cultural hues. But the patriarch too is changing, having realised that keeping the family together is as important as growing the business.
One feature, however, unites them all - they are more conscious now of the survival challenges such families face. They have been thinking seriously about issues relating to governance and succession. "There is a global statistic that hits you in the face," says Puneet Dalmia, Managing Director of Dalmia Cements. "Whenever there is a generational shift in a family business, the chances are more than 50 per cent it will not survive in the same way or form."
| Family involvement in the business is deeper in India than in the West Emotional balance between family members is key to business success Patriarchs are becoming increasingly democratic in their decision-making The younger generation sees the business as a professional entity |
Taking a cue from the West, quite a few successful Indian business families have formulated family constitutions to guide their actions. Four of the five featured here - the GMR Group, the Emami Group, the Dalmias and SRF - have done so. But others, equally successful, oppose such constitutions, believing regular dialogue between family members involved in the business is far more crucial. They swear by family council meetings and regular family lunches to ensure smooth functioning.
| More on family businesses at www.businesstoday.in/family-governance |
With a patriarch or malik - whom everyone must defer to - at the head of many family businesses in India, conflicts can take on peculiar cultural hues. But the patriarch too is changing, having realised that keeping the family together is as important as growing the business.
