How can family businesses look forward to the future?

18th May 2018
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What is required is to provide scions with the knowledge of the possibilities of global opportunities and the methods of upgrading their management competencies, generate a desire to transform into world class entities and facilitate their action in this direction.

It is estimated that family businesses constitute almost 90 percent of the businesses in India. Over the last four decades, they have evolved phenomenally.

Despite serious capital constraints, inadequate infrastructure, non-availability of high skilled manpower, obstructive system of bank finance, chocking regulatory requirements and compliances, high level of corruption and poor legal support systems, family businesses have grown.

In fact, they are the backbone of the India story.

Operating within all these constraints has been a blessing in disguise. Indian family businesses have emerged as masters in crisis management, with almost supercomputer-like abilities to manage all aspects of the businesses efficiently.

Large companies are thriving on the shoulders of family businesses be as their vendors, distributors, transport contractors or service providers primarily because of their efficiency and abilities to survive with extremely fringe resources.  To illustrate, the 12 large auto companies in India are supported by more than 500 ancillaries in organised sector and more than 10,000 firms in small scale sector.

Bizarre paradox

With the changes sweeping the globe, incredible business opportunities are emerging, as described by Thomas Friedman in his book, The World is Flat. Riding on technology and globalization, businesses can multiply manifold within a short time. Unfortunately, precisely at this time, instead of embracing these opportunities, many of the Indian family businesses are in reverse gear. And there are reasons for that.

Firstly, with the unique context of the Indian business scenario, many family businessmen are in the middle ages now. Most of the businesses had their beginning in the late seventies and early eighties.

In the first decade of this century almost all of them grew exceptionally and have reached a level where they have plateaued.

On one hand their traditional skillset and competences are not enough to manage the possible growth and on the other hand they are witnessing the squeeze of declining margins and escalating costs. It is not uncommon to hear many of them saying ‘now there is no fun in the business, as it used to be’.

Secondly, because of their age and the changing context, many of them are tired. They have become philosophical. You can hear many of them questioning the need to grow more ’we have everything, we have enough money, why should we expand or grow more.’

Thirdly, a large number of them are undergoing the generational transition challenge. Historically many of them have not paid much attention on the grooming and inducting of their sons and daughters and are now at a loss about how to handle the situation.

Benchmarking against their own abilities, they find the young generation lazy, lacking depth, unwilling to work hard and missing the abilities required to take the business forward.

The young generation on the other hand is even more puzzled. Many of them have poor communication skills with the older generation and are lost within the environment where startups are glamorous and appeals to them to ‘follow your passion’. But they do not know how to identify their passion. Whatever is in trend seems to become the passion. They want to do something of their own without even knowing what it entails. They feel dwarfed in front of the superman-like abilities of their father and are unsure whether they will ever be able to meet the expectations.

Possible solution

As per the classical KSA theory, what is required is to provide them with the knowledge of the possibilities of global opportunities and the methods of upgrading their management competencies, generate a desire to transform into world class entities and facilitate their action in this direction. How can this be brought about?

The answer lies in specialised management programmes – like GFMB, Global Family Managed Business - tailored to address their specific context. Such programmes designed for the scions could provide them with knowledge of the cutting edge management theories and could have components of practical applications on real time basis. These programmes must be different from conventional MBA programmes since the latter are more tuned to prepare managers for the corporate sector and often miss out on the elements unique to family businesses.

A typical MBA programme is geared for preparing functional specialist whereas scions of family managed businessses require a reasonable grasp of all functional areas. Their own business becomes the live case study and laboratories for the scions as they begin to relate their classroom learning with the realities of daily business situations. They need to be given exposure to global business scenarios and opportunities.in regions like Middle East and Far East.

At the same time, they need systematic learning about new technologies like AI, VR, Big data, NLP, cognitive science, IOT, etc. and the scope of applications of these technologies in their family business.

Interactions with global business leaders and ongoing industrial visits in countries like Dubai, Korea, Japan apart from leading industries in India can open their perspectives and trigger desire for transforming their business.

They need training in skills of expressing and extracting information, in communicating value to the customers, in working out win-win solutions and in becoming a reference for their team. Finally, they need to learn to develop humility to learn from their parents, gratitude for the role of family in their life and their responsibility to take the family legacy to higher glory.

Teaming up the wisdom of the old with the dynamism of the young

As a result of such a unique management programme, the scions gear up to learn and leverage on the wisdom of the parents, learn under their shadow and then with their own knowledge, desire and competencies take their family business to exponential growth. The secret lies in addressing the generational conflict within family businesses and converting that into unique and strong bonds, building complementation not only for continuity but for placing the family businesses into the next orbit.

References

  1. http://www.familybusinessunited.com/opinions/perspectives/understanding-family-business-in-india-perspective/
  2. https://www.slideshare.net/sudhanshugargirevna/auto-autoancillariessector

 (Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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