What is a Family Business?

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Dil Dhadakne Do

Case Breakdown: Movie Dil Dhadakne Do

The scene that you just saw shows Kabir Mehra (played by Ranveer Singh)  having a conversation with his parents, which is turning into an argument. His parents want him to join the Family business, while he does not want to do so as his interests lie elsewhere. He recommends his sister, Ayesha Mehra (played by Priyanka Chopra) to join the business as she has the business acumen to do so.

In this blog, Learning Perspectives will explore the meaning of family business.

What is a Family Business?

Family businesses form a major and crucial segment of many nations around the world (Miller & Le Breton-Miller, 2005). A rather large number of businesses are being controlled and managed by families in India. In India, Family businesses have been running for ages. Keeping ownership within the family is deeply rooted in mindset. These businesses demonstrate quick decision-making and a larger focus on relationship building.

According to a report published by PWC, it revealed that 76% of Indian family businesses believe that the family and business strategies are completely aligned. This report also indicated that 89% of Indian family businesses feel that they have a clear sense of the agreed values and purpose as a company, compared to 79% globally. 90% of the businesses surveyed stated that values and purpose helped define the vision for the company. Nearly an equal number (88%) say that values have always been present in the family and stem from those who own the business.

The most famous Family Businesses in India are as follows:

TATA Group: Founded in 1868 by Jamsetji Tata in Mumbai.

Godrej Group: Founded in 1897 by Ardeshir Godrej and

Pirojsha Burjorji Godrej. Aditya Birla Group: Founded in 1857 by Seth Shiv Narayan Birla.

Advantages of a Family Business:

  • Resilient Leadership– One of the most essential advantages of a family-owned business is leadership. The founder sets the business on a strong foundation and then other leaders are groomed through succession planning. Most of these businesses have resilient leaders who have seen many setbacks yet become stronger.
  • Stability and Commitment– These businesses are stable in nature. Top management stays in similar positions unless they themselves want to change. They provide stability to the business by providing strong leadership and effective decision-making. Most of the family members involved in the business are accountable for their actions. Hence they are committed to the business. There is a high level of commitment as they all have a shared vision and goals.
  • Succession Planning– According to the PWC report, 60% of family businesses in India and 57% globally plan to pass on management and/or ownership to the next generation. This requires succession planning. For the next generation to take on the baton, there are certain crucial elements that next-gen needs to undergo. Out of 100 businesses that are set up, 60 stay in business through the second generation, 32 in the third generation, and only 16 last by the time the business reaches the fourth generation. Therefore succession planning is imperative. Succession planning means a strategy adopted to pass on the leadership roles to the next generation. For instance, giving the next generation mentoring and training, Engaging them in business, and helping them work as a leader on their own.

    Every business goes through phases of uncertainty. Building businesses with values is important. Family values translate to business values and companies’ mission & vision.

  • References:

    https://www.pwc.in/assets/pdfs/research-insights/fbs/2019/pwc-india-family-business-survey-2019.pdf

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