Family Business and Leadership Traits

FAMILY BUSINESS AND LEADERSHIP TRAITS

By

Dr. R. SATYA RAJU, Ph.D., PROFESSOR,

DEPARTMENT OF COMMERCE & MANAGEMENT STUDIES,

ANDHRA UNIVERSITY, VISAKHAPATNAM (INDIA)

MOBILE: 94403 56259

EMAIL: [email protected]

Paper presented at the First Asian Invitational Conference on Family Business held at Indian School of Business, Hyderabad during February 1 – 3, 2008

Key words:

Family Business – Ownership and control of the business with family members

Family System – Goal is development and support of family members

Business System – Goal is profit, revenue and growth

Leadership Triad – The leaders, followers and results

EQ – Emotional Quotience

WQ – Wealth Quotience

Executive Summary:

Family business is existing all over the globe. The contribution of this business is

highly significant in different countries including India. Family business is the one that is

owned, run or often conceived by a family member(s). Some of the present world class

companies were established under family business long ago.

The study objectives were: to outline the issues on the concept, contribution,

leadership, challenges of family business and a brief review of literature, to examine the

profile of selected family businesses and the traits of the leaders. The ultimate objective was

to provide a suggestive framework.

Both primary and secondary sources of data was obtained for the study. Books,

records, reports and web sites were consulted for review of literature. 40 entrepreneurs were

interviewed for primary data with a simple structured questionnaire.

The study had interesting observations. Some of them were: the contribution of family

business was quite significant in India and several countries. Some Fortune 500 companies

were established under family business. The family business had some strengths for

sustainable and successful management. The important traits of the successful leaders of the

family business were: commitment, customer orientation, teamwork, sincerity, loyalty, good

relationship, transparency and enjoying business.

Some challenges of the family business were: seniority, rank and gender. Second

generation don’t like to face any change, no proper encouragement from parents, parent

would like to close the business after him, children are good with numbers but not with

people.

Native land, interest in the activity, experience, market opportunity were the main

motivation factors for starting their ventures. The entrepreneurs would like to expand their

business ventures. They also stated how the government should extend it’s support and

encouragement.

There was an excellent cooperation, coordination, love, respect, unity and integrity

among some family members. “We had trust on our elders, youngsters and all family and

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they never act on their own independently, unless we decided in our family get-togethers”

said one of the great entrepreneurs who had been managing the business for the last sixty

years along with his two sons and four grand children. The important traits of the great grand

parents and parents were obtained by their third generation entrepreneurs by birth. There was

some impact on the family due to the changing society. The third generation members require

full freedom, and applying their own thoughts to start new business ventures. Third or fourth

generation enterprises, their contribution and constraints should be examined and some

awards should be given to the promoters of such ventures (First generation entrepreneurs).

The great Indian values and culture should be protected in educating, enlightening,

empowering family members in fulfilling the dream of the nation. The great leadership traits

of Indian family are to be spread to all over the globe and the fragrance of Indian values are

to be spread in the global village. The great institutions like Indian School of Business (ISB),

universities, government bodies should have to focus their attention on the management and

sustainability of family business ventures. Separate management courses on family business

management (MBA – FBM) should be offered for the benefit of third / second generation

entrepreneurs to develop the business as per the changing needs of the society. The

Government of India has to provide some additional incentives for managing and expanding

family business venture. When professionalism is lacking in managing the business, the head

of the family has to search for a suitable person with professional expertise to manage the

business successfully with sustainability and competitiveness to meet the expectations of the

global customers. The national and international associations, institutions, universities and

the organisations concerned need to focus their attention on family business in the new

millennium.

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Abstract:

Family business has been playing a pivotal role in the several economies including

India. Family owned business is one in which two or more extended family members

influence the business through the exercise of kinship ties, management roles and ownership

rights.

Several world class organisations were family business ventures all over the globe.

This study had focused it’s attention on the concept and contribution of family business,

challenges, strengths and weaknesses of family business, a profile of selected organisations

and the traits of the leaders. The suggestions at the end also provide a framework for effective

management of family business.

Introduction:

The most beautiful thread in this world that binds hearts and minds together is the

family. A business would become successful if it has got this, thread of dedicated family

members. A person would become a wonderful business leader if he / she learns great

leadership qualities and core values from God’s own masterpiece – the family. Mother India

– the land of love, affection, morals, principles, values and ethics would certainly rock the

cradle for any value based business and would teach the business how to lead and how to beat

world class companies.

According to several experts, a family business is one that is owned, run and often

conceived by a family member or members. Usually, family businesses are conceived and

run by one member of a family, who may act as a matriarch or patriarch of the family as well

as the business leader. The present world class companies like Ford Motor, Ferrari were

started under family business concerns.

In India, family owned businesses had a greater role and will continue in future also.

They ate going to become major contributors to the economic development. Family

businesses are basically two types. The first one is the business having only the family

members as principals as well as agents. Usually, outsiders are suspected and sullied. The

second type of business represents with family members and outsiders. Family has a major

stake and controlling power on the business. A family owned business is one in which two or

more extended family members influence the business through the exercise of kinship ties,

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management roles and ownership rights and / or which the owner intends to pass to a family

heir.

In early 2007, the Indian family business billionaires recorded in the Forbes list were:

Lakshmi Mittal, Mukesh Ambani, Anil Ambani, Azim Premji, Kushal Pal Singh, Sunil

Mittal, KM Birla, Shashi & Ravi Ruia. Their net worth was varied from US $ 32.0 billions to

US $ 8.0 billions. Some experts studied the family business from three angles, i.e. a family

owned business, a family owned and managed business and a family owned and led business.

Usually, family business governance is based on periodic assemblies of the family, family

council meetings and constitution of the family.

The objectives:

This study was conducted with the following objectives:

• To outline the issues on the contribution, leadership in family business,

challenges, strengths and weaknesses and a brief review of literature on family

business;

• To examine the profile of families and the leadership traits of selected family

business ventures.

• To offer suggestions for effective management of family business enterprises.

The Methodology:

The study was based on both secondary and primary sources of data. Secondary data

was collected from books, journals, websites and other literature available. Primary data was

collected at random from 40 family business enterprises established in three cities

[Visakhapatnam, Guntur and Hyderabad] of Andhra Pradesh with a structured questionnaire.

The data was analyzed and the results were briefly presented.

The Contribution of Family Business:

A study on family business revealed that about 35 per cent of the Fortune 500

companies were family controlled and family businesses accounted for 50 per cent of the

USA’s GDP and generate 60 per cent of the countries employment and 78 per cent of all new

job creation. Another study outlined that about 75 per cent to 90 per cent of the US

companies were family concerns. The oldest family business firms running with fifth

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generation in USA were: Avadis Zildjian (1623) Laird & Co (1780); George Ruhl & Sons

(1789); Loane Bros (1815); Bevin Brothers Manufacturing Co. (1832); Antorne’s Restaurant

(1840); Verdin Co. (1842); Baumann Safe Co. (1843); AE Schmidt (1850); Hick’s Nurseries

(1853). The principals and agents in these businesses were family members only. Whereas, in

another type of business, the family has majority stake and the remaining is with others.

Some of the businesses were: Wal-Mart; Fiat; Cargill; Ford; News Corp; Hyundai; Nike;

Viacom; Virgin; Reliance Industries; Wipro; etc.

India’s richest business families were: Azim Premji (Wipro); Ambani (Mukesh and

Anil) (Reliance Industries); Sunil Mittal (Bharti); Shiv Nadar (HCL); Dilip Sanghvi (Sun

Pharma); Birla KM (Hindalco, Grasim…); Bajaj Rahul (Bajaj Auto); Hamied Y K (Cipla);

Munjal B (Hero Honda). On October 29, 2007 billionaire Mukesh Ambani became the richest

person in the world, surprising American Software czar Bill Gates, Mexican business tycoon

Carlos Slim Helu and famous investment Guru Warren Buffett1.

The contribution of family business was also high in India in terms of employment

and income generation and wealth creation. Several visionaries had established their business

ventures at different places of the country and also abroad. Some of them were: Ajim Premji,

Ratan Tata, KM Birla, Brij Mohanlal Mnryal, Parvinder Singh, Dirubhai Ambani, Sunil

Mittal, Ramalinga Raju, Mallikharjun Rao, Sashi Ruai, Anji Reddy, etc.

The successor of the family had become an important factor in family business. Some

join at early age because of compulsion. Some join after 50 years. The visionary leaders of

the family businesses successfully manage all the crises of business including succession

management. Professionalism, good management, active board members, ability to change,

strategic planning are some important factors in the family business.

Sam Johnson of the SC Johnson company who was the recipient of the IMD

Distinguished Family Business Award described not only his values but his vision when he

said, “Every community, where we operate should become a better place because we are

there” Fist Johnson, Sam’s son carries on the tradition, he stated that his father didn’t just talk

values, he lived with them.

1 Retailer – 2007, Vol. 2, No. 7, December pp. 36

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Some challenges of Family Business are:

• Seniority, rank and gender;

• Children don’t like to face challenges (they raise in wealth culture);

• No proper encouragement by parents;

• The desire of the parent to close the business after him / her;

• The younger child possesses better skills than that of the elder;

• Brothers and sisters often reluctant to grant authority to their siblings;

• Children are very good with numbers but not with people;

• Ignoring succession planning and also choosing the successor among three or

four;

The distinction between Family System and Business System is explained briefly as

under:

Area of Conflict Family System Business System Goals Development and support of

family members Profits, revenues, efficiency, growth

Relations Deeply personal Semi personal / Impersonal Rules Informal Written and formal Evaluation Members rewarded No systematic evaluation Succession Caused by death, divorce,

voluntary willingness Caused by retirement

Authority Based on family position or seniority

Based on formal position

Commitment Life time; based on identity with the family

Short term, based on rewards received

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The Strengths and Weaknesses of Family Business are given as follows:

Parameter Strength Weakness Infrastructure Informal, flexible

Entrepreneurial Innovative

Unclear Confusing Lack of organizational chart

Roles Flexible Multiple Quick decisions

Role conflict Nepotism Dual roles

Leadership Creative Ambitious Entrepreneurial

Autocratic

Family involvement High commitment Loyal Shared values Family Dream

Can’t keep family issues out of business Inability to between family and business needs Rivalry

Succession Training can begin early Inability to choose successor Governance / Ownership Family owned high degree of

control No outsiders on boards High premium on privacy

Culture Can have creative culture Rich integrity of goals

Emotional, Inefficient Resistance to change Risk for conflicts

Leadership in Family:

Leadership skill is highly required for entrepreneurs. The leaders and followers work

together for achieving results. The triad can be shown as follows:

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As per the study by Raymond Institute in 2003, about 88 per cent of family owned

businesses plan to stay in the family; 47 per cent expect leadership in the next five years, 42

per cent did it choose successors, 13 per cent family members said that the CEO would never

retire. There is a serious failure to plan for leadership transition in family businesses. Some

requests that come to key resources sound like this: “I always thought my son would run this

company but I just think he can’t. He’s a very good with numbers but not with people”.

Distinction between Entrepreneur and Leadership skills is given under:

Skill set Entrepreneur Leader Intelligence Above average Not necessarily above average Energy High Moderate Listening Skills Fair to poor Good Ability to Dementor Average Good Energy High for some period Grows over some time Emotional Intelligence Average Good Willingness to Take Risks High Moderate Dealing with Crises Good Great Control Needs High Moderate Ability to Delegate Poor Good Networking Skills Poor to great Good to great

The annexures I to IV would give the growth of family business, India’s richest

family businesses, splits, potential heirs of family business.

The head and children in the Family Business should have to possess some qualities.

Some of them are:

• EQ: (Emotional Quotience / Intelligence) Self control, self awareness, motivation,

empathy and social skills.

• TQ (Team Quotience / Intelligence) = EQ plus the ability to negotiate and

communicate with others, to deal effectively with conflicts; make collective decisions

in a team; to listen and collaborate.

• FQ (Financial Quotience / Intelligence) = Earning, saving, managing, spending and

giving money wisely.

• WQ (Wealth Quotience / Intelligence) = FQ plus appreciating the meaning of wealth,

managing financial relationships, and using wealth wisely.

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• IQ (Intelligence Quotience)

• SQ (Spiritual Quotience)

• CQ (Creativity Quotience)

Review of Research:

There is a considerable currency of literature available on family business. Several

studies were conducted abroad and very few were conducted in India. The leadership, family

business and understanding dynamics of the family business was outlined in a publication of

ICFAI2. A profile of India’s family owned businesses relating to Apollo Tyres, Arvind Mills,

Ballapur Industries, Essar Steel and Gujarat Ambuja was examined in detail in another

publication3. Tips for managing challenges of family business were outlined by Jane Hilburt

Davis4.

The issues relating to managing for the long run for competitive advantage from great

family Businesses were outlined by Miller Danny et. al.5. They stated that the starting tips for

family firms on their way to getting great were: following passion, using initiative, do sweat

the small stuff; communicating face to face, making decisions with people. Jane examined

the solutions for family business problems6. Comparison of family business system and

business system was outlined in another study7.

Another interesting publication briefly outlined that corporate India was increasingly

finding various ways and means of settling or pre-empting family disputes. Family

constitutions, codes of conduct, mediation by society, private equity intervention by society,

private equity intervention and new lines of business were among the routes being explored8.

Fifty years of Indian entrepreneurship textile and agro based industry to new services

oriented economy was explained by another writer9.

2 ICFAI (2007) “Effective Executive”, vol. IX, No. 5 3 ICFAI (2002), “India’s family Oriented Businesses”, Hyderabad 4 www.familybusinessconsulting.com 5 Miller, Danny and Lebreton Miller, Isabel (2005), “Managing for the Long Run: Lesson in Competitive Advantage from Great Family Businesses”, Harvard Business School Press, Boston. 6 Jane Hilburt Davis, www.familybusinessconsulting.com 7 www.familybusinessconsulting.com 8 Business World (2007), “Lessons from the Banyan Tree Beyond the Family Fued”, the Author, Mumbai, 17 December, pp. 28 – 32 9 Business Gyan (2007), “50 Years of Indian Entrepreneurship”, the Author, Bangalore, pp. 69 – 71

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Gurucharandas outlined the structure of Indian business, competitive advantage of

joint family business, the characteristics of successful Indian company and the problems of

family business at different stages10. The colours of decision making in family business, at

the three thresholds of involvement as members of the Board, the CEO entrepreneur were

stated by Vinay Bharat Ram11.

The change and continuity of family business houses such as the Tatas, Birlas, Modis,

Sarabhais, Bangurs, Singhamas, Mafatlals, Srirams, Thapars, Walchands and Goenkas was

examined by Dwijendra12. The success factors, trends in the growth of scions, and other

related family business issues were presented in an other article13. According to Gita Piramal,

the family business management was based on taking risk and the role of leadership was

significant in the crisis14. The family business in India revealed chequered past and uncertain

future15. Several interesting case studies on family business were conducted by

Ramachandan16. The role of leadership and the family business, an interview with John

Davis were explained in an other publication17. Family business growth intelligence,

understanding dynamics of family business were also presented in the publication18.

Another publication of the Harvard had covered interesting issues on family business.

The study had covered great businesses, examined several issues and concluded with the four

C’s. They were: Continuity (pursuing the dream) Community (building a cohesive team),

Connection (open ended, mutually beneficial relationship with business partners) Command

(acting independently quickly and in original ways). The tips given at the end were: follow

your passion, use your initiative, do sweat the small stuff, time stagger your objectives, get

people on your side, communicate face to face, make decisions for people19.

The Study Observations:

10 Gurucharan Das (1999), “Family Business: A symposium on the role of the family in Indian Business” October, pp. 2 – 16 11 Vinay Bharat Ram (1999) “The Colours of Decision Making” Family Business Symposium, pp. 17–25 12 Dwijendra Tripati (1999), “Change and Continuity” pp. 26 – 30 13 Sudipt Dutt (11999), “Boys to Men” Family Business Symposium, pp. 31 – 36 14 Gita Perumal (1999), “A Crisis of Leadership” Family Business Symposium, pp. 43 – 49 15 Ninan T N (1999), “Chequered past and uncertain future” Family Business Symposium, pp 50 – 56 16 Ramachandran K (2006 – 2007), “Case studies of Family Business” Indian School of Business (Mimeo) 17 Effective Executive (2007), The ICFAI University Press, Hyderabad 18 Ibid. 19 Miller Danny & Labreton Miller Isabel (2005), Managing for the Long Run – Lesson in Competitive Advantage from Great Family Businesses”, HBS Press, Boston

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The present study was conducted on family business entrepreneurs. About 50 family

business entrepreneurs were interviewed with a simple questionnaire. 40 questionnaires were

received with the required data. Ten were not obtained due to busy schedule of the

entrepreneurs. The observations were presented briefly as follows.

About one-third of the enterprises were above 50 years. These enterprises were started

by their grand parents or great grand parents of the present generation entrepreneurs

(Table–1). Two enterprises were started by the first generation entrepreneurs.

The family business enterprises were under the management of proprietary (13 per

cent) a, partnership (50 per cent) and Hindu undivided family (37 per cent). All the

enterprises were under the control and management of their respective family heads and other

family members (Table–2). An interesting observation was over 50 per cent of the enterprises

were third generation and about one third second generation enterprises. One enterprise was

fourth generation enterprise (Table–3). The family business enterprises were mostly run by

Hindus (80 per cent) followed by Muslims (8 per cent), Christians (5 per cent) and others (7

per cent) (Table–4).

The nature of business enterprises covered in the study were: printing, food

processing, textiles and ready-mades, real estate & construction, modern retail (Malls), Books

and stationery and jewellery. All activities covered equally except food processing enterprises

(Table–5). The total employment provided by all the selected enterprises was over 8,000.

Only 10 enterprises employed over 5,000 employees. Out of the total, over 3000 were

women. Thus it had created employment opportunity to both men and women (Table–6). The

native land of the heads of the families was Visakhapatnam, Hyderabad, Guntur, other places

of Andhra and other States (Table–7).

The founders of the business enterprises were 45 per cent grand parents and 35 per

cent parents. The parents and grand parents were working with the business enterprises to

guide and train their children or grand children (Table–8). In every enterprise, active

involvement of family members was observed. Two to five members of the family members

had been working with family business enterprises (Table–9). All the members of the family

were not involved. In some activities, spouses, daughters, sons, grand parents and cousins in

the family were not associated with the family business (Table–10).

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TABLE – 1: RESPONSE REGARDING PERIOD OF EXISTENCE OF FAMILY

BUSINESS

Particulars Number Per cent

Below 10 years - ---

11 – 20 years 2 5.00

21 – 30 years 2 5.00

31 – 40 years 12 30.00

41 – 50 years 10 25.00

Above 50 years 14 35.00

TOTAL 40 100.00

Source: Field Study

TABLE – 2: RESPONSE REGARDING TYPE OF OWNERSHIP:


Proprietary 5 12.50

Partnership 20 50.00

HUF 15 37.50

TOTAL 40 100.00

Source: Field Study

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TABLE – 3: RESPONSE REGARDING GENERATION OF ENTREPRENEURS:


First generation 2 5.00

Second generation 15 37.50

Third generation 22 55.00

Fourth generation 1 2.50

TOTAL 40 100.00

Source: Field Study

TABLE – 4: RESPONSE REGARDING RELIGION OF ENTREPRENEURS


Hindu 32 80.00

Muslim 3 7.50

Christian 2 5.00

Others 3 7.50

TOTAL 40 100.00

Source: Field Study

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TABLE – 5: RESPONSE REGARDING ACTIVITY OF THE FAMILY ENTERPRISE


Printing 5 12.50

Food Processing 10 25.00

Textiles & Ready-mades 5 12.50

Real Estate & Construction 5 12.50

Modern Retail (Malls) 5 12.50

Books & Stationery 5 12.50

Jewellery 5 12.50

TOTAL 40 100.00

Source: Field Study

TABLE – 6: RESPONSE REGARDING EMPLOYMENT IN THE ENTERPRISES


Below 50 5 12.50

51 – 100 10 25.00

101 – 200 15 37.50

201 – 500 6 15.00

Above 500 4 10.00

TOTAL 40 100.00

Source: Field Study

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TABLE – 7: RESPONSE REGARDING NATIVITY OF THE FAMILY BUSINESS

HEADS


Visakhapatnam 25 62.50

Hyderabad 2 5.00

Guntur 3 7.50

Other Places 5 12.50

Other States 5 12.50

TOTAL 40 100.00

Source: Field Study

TABLE – 8: RESPONSE REGARDING FOUNDERS CONNECTION WITH THE

FAMILY


Present entrepreneurs 6 15.00

Parent 14 35.00

Grand Parent 18 45.00

Great Grand Parent 2 5.00

TOTAL 40 100.00

Source: Field Study

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TABLE – 9: RESPONSE REGARDING NO. OF PERSONS ACTIVITY INVOLVED

IN BUSINESS

Particulars Number of enterprises

Per cent

Two persons 10 25.00

Three persons 12 30.00

Four persons 8 20.00

Five persons 10 25.00

More than five persons --- ---

TOTAL 40 100.00

Source: Field Study

TABLE – 10: RESPONSE REGARDING FAMILY MEMBERS NOT INVOLVED IN

BUSINESS


Per cent

Spouses 5 25.00

Sons 2 5.00

Daughters 5 12.50

Grand parents 10 25.00

Any other 18 45.00

TOTAL 40 100.00

Source: Field Study

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Decision making was done by the head of the family in several cases. Sometimes,

selected members in the family were taking decisions. In few cases, all the members in the

family participated in decision making process (Table–11). Most of the decisions (80 per

cent) had accepted by all but very few decisions (20 per cent) had some conflict. It was only

due to the modern thinking of the present generation and traditional outlook of the grand

parents or parents (Table–12).

Vision and goals of the family business enterprises were quite interesting. They had a

noble vision to be good citizens and social consciousness (60 per cent) followed by serving

society (15 per cent) to become great (15 per cent) and fulfilling their parental ambition (10

per cent) (Table–13). They would like to spend a lot towards charitable purpose. More than

50 per cent of the families are spending a substantial amount from 5 to 10 per cent of their

profits towards charity. Health care and education were the main charitable activities (Table–

14).

There was some locked up wealth of the family enterprises. They did it for their grand

children education abroad or marriage of their grand daughters. In some families they didn’t

lock up any amount of wealth. They were utilizing for productive purpose of their business

ventures (Table–15).

The traits of the entrepreneurs were ascertained. Most of them opined that

commitment, customer orientation, teamwork and loyalty, sincerity and loyalty were the main

traits of the entrepreneurs. Some other important traits were good relationship, employee

friendly, effective communication and transparency, and enjoying business (Table–16). The

entrepreneurs advise to the new generation entrepreneurs was to take risk in the changing

business scenario. They also advised them to be committed, building teams, fulfilling their

dreams into reality and courageous. (Table–17).

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TABLE – 11: RESPONSE REGARDING DECISION MAKING PROCESS IN THE

BUSINESS


Head of the family 28 70.00

All the members 2 5.00

Selected members 10 25.00

TOTAL 40 100.00

Source: Field Study

TABLE – 12: RESPONSE REGARDING AREAS OF CONFLICT


None 32 80.00

Sometimes 8 20.00

TOTAL 40 100.00

Source: Field Study

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TABLE – 13: RESPONSE REGARDING FAMILY VISION AND GOALS


To be good citizens and social consciousness 24 60.00

To serve society 6 15.00

To become great 6 15.00

To fulfill parental ambition 4 10.00

TOTAL 40 100.00

Source: Field Study

TABLE – 14: RESPONSE REGARDING AREAS OF CHARITY EXTENDED


Health care 15 37.50

Education 16 40.00

Others 9 22.50

TOTAL 40 100.00

Source: Field Study

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TABLE – 15: RESPONSE REGARDING LOCKED UP WEALTH OF THE FAMILY


Locked up wealth 15 37.50

Not locked up 10 25.00

Locked for children wedding / education 15 37.50

TOTAL 40 100.00

Source: Field Study

TABLE – 16: RESPONSE REGARDING TRAITS POSSESSED BY THE

ENTREPRENEURS [BASED ON RESPONSES]

Particulars Number Per cent Rank

Commitment 40 100.00 1

Enjoying business 20 50.00 3

Customer orientation 40 100.00 1

Good partner supplier relationship 30 75.00 2

Employee friendly 30 75.00 2

Teamwork 40 100.00 1

Effective communication and transparency 30 75.00 2

Sincerity 40 100.00 1

Loyalty 40 100.00 1

Source: Field Study

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TABLE – 17: RESPONSE REGARDING ADVISE TO NEW ENTREPRENEURS TO

OBTAIN TRAINING


Commitment 15 37.50

Building teams 5 12.50

Courage 2 5.00

Risk taking 16 40.00

Turning dreams into reality 2 5.00

TOTAL 40 100.00

Source: Field Study

TABLE – 18: RESPONSE REGARDING MOTIVATIONAL PATTERN


Market opportunity 5 12.50

Interest in field 10 25.00

Experience 10 25.00

Native land 15 37.50

TOTAL 40 100.00

Source: Field Study

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Motivational factors for starting the ventures were: native land (38 per cent), interest

in the activity (25 per cent), experience (35 per cent) and market opportunity (12 per cent).

They had land and buildings and support for starting their ventures at their native lands

(Table–18). The location of the business was fully satisfactory for 70 per cent of the

entrepreneurs. The rest (30 per cent) had partial satisfaction and no satisfaction. The reason

was shifting the business from one centre to another centre in the city (Table–19). It is

heartening to note that all the enterprises had been managing well and generating profits.

Twenty per cent of them had profits of above rupees one crore per annum. About 50 per cent

of them had about, Rs. 10 lakhs to Rs. one crore (Table – 20). The entrepreneurs (62 per cent)

would like to expand their respective enterprises with the profits generated and reserves they

had. About 38 per cent had some plans to introduce new technology (Table–21).

More than half of the entrepreneurs interviewed stated that they would like to start

some new activity for expansion. The rest opined that they introduce new products in future

(Table–22). The entrepreneurs stated that they need some assistance from the government. In

some places development of infrastructure was the main factor. Extending some concessions,

tax exemption and encouragement to expand the business, export incentives were some of the

expectations of the entrepreneurs from the Government of India (Table–23).

The strengths of the business enterprises expressed by the entrepreneurs were: strong

team work with family members (45 per cent) followed by offering value added services (25

per cent) customer loyalty and changing technology (25 per cent) financial soundness. The

main weaknesses were unable to predict future. The growing market for business was an

opportunity. The threats were: price war or competitiveness and changing technology

frequently (Table – 24).

The entrepreneurs used to have family meetings / get-togethers monthly twice or more

(38 per cent). One fourth of them had monthly meetings to discuss various issues on

managing business (Table–25). About 63 per cent of them had succession planning and

would like to have from their respective families (Table–26).

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TABLE – 19: RESPONSE REGARDING SATISFACTION REGARDING BUSINESS

LOCATION


Fully 28 70.00

Partially 6 15.00

Not satisfied 6 15.00

TOTAL 40 100.00

Source: Field Study

TABLE – 20: RESPONSE REGARDING PROFITABILITY OF THE ENTERPRISES

PER ANNUM


Below Rs. 10 lakhs 12 30.00

Rs. 10 lakhs – Rs. 50 lakhs 15 37.50

Rs. 50 lakhs – Rs. 1 Crore 5 12.50

Above Rs. 1 Crore 8 20.00

TOTAL 40 100.00

Source: Field Study

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TABLE – 21: RESPONSE REGARDING MODERNIZATION OF OPERATIONS


Expansion 25 62.50

New technology 15 37.50

TOTAL 40 100.00

Source: Field Study

TABLE – 22: RESPONSE REGARDING FURTHER PLANS FOR EXPANSION


New activity 22 55.00

New products 18 45.00

TOTAL 40 100.00

Source: Field Study

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TABLE – 23: RESPONSE REGARDING ASSISTANCE REQUIRED FROM

GOVERNMENT


Infrastructure 15 37.50

Concessions 5 12.50

Tax exemption 5 12.50

Encouragement 5 12.50

Export incentives 10 25.00

TOTAL 40 100.00

Source: Field Study

TABLE – 24: RESPONSE REGARDING SWOT ANALYSIS OF FAMILY

BUSINESSS

Particulars Number Total

Strengths

- Strong teamwork

- Financial soundness

- Changing technology

- Customer loyalty

- Offering value added services

18

2

5

5

10

40

Weaknesses

- Predicting future

40 40

Opportunities

- Growing markets

40 40

Threats

- Price war

- Changing technology

20

20

40

Source: Field Study

26

TABLE 25: RESPONSE REGARDING FAMILY GOVERNANCE


Monthly once 10 25.00

Month twice or more 15 37.50

Quarterly once 8 20.00

Half-yearly once 5 12.50

Annually once 2 5.00

TOTAL 40 100.00

Source: Field Study

TABLE 26: RESPONSE REGARDING SUCCESSION PLANNING OF FAMILY

BUSINESS


Per cent

Yes 25 62.50

No 9 22.50

Can’t say 3 7.50

Looking for outsider 3 7.50

TOTAL 40 100.00

Source: Field Study

27

Suggestions:

Several studies revealed some interesting insights. The study is an additional

contribution to the existing literature on family business. In Asian countries an important

strength is family bondage. The members of the family usually had it and always try to

continue the bondage for ever. As per the study also there was an excellent cooperation,

coordination, love, respect, unity and integrity among some family members. “We had trust

on our elders, youngsters and all family and they never act on their own independently,

unless we decided in our family get-togethers” said one of the great entrepreneurs who had

been managing the business for the last sixty years along with his two sons and four grand

children. The important traits of the great grand parents and parents were obtained by their

third generation entrepreneurs by birth. There was some impact on the family due to the

changing society. The third generation members require full freedom, and applying their own

thoughts to start new business ventures. Third or fourth generation enterprises, their

contribution and constraints should be examined and some awards should be given to the

promoters of such ventures (First generation entrepreneurs). The great Indian values and

culture should be protected in educating, enlightening, empowering family members in

fulfilling the dream of the nation. The great leadership traits of Indian family are to be spread

to all over the globe and the fragrance of Indian values are to be spread in the global village.

The great institutions like Indian School of Business (ISB), universities, government

bodies should have to focus their attention on the management and sustainability of family

business ventures. Separate management courses on family business management (MBA –

FBM) should be offered for the benefit of third / second generation entrepreneurs to develop

the business as per the changing needs of the society. The Government of India has to

provide some additional incentives for managing and expanding family business venture.

When professionalism is lacking in managing the business, the head of the family has to

search for a suitable person with professional expertise to manage the business successfully

with sustainability and competitiveness to meet the expectations of the global customers. The

national and international associations, institutions, universities and the organisations

concerned need to focus their attention on family business in the new millennium.

28

ANNEXURE – I

GROWTH OF FAMILY BUSINESS

0

50000

100000

150000

200000

250000

300000

1950 - 51 1960 - 61 1970 - 71 1980 - 81 1990 - 91 2000 - 01

New services oriented economy

Entry of large private corporates

Export oriented industry

Import substitution

SSIs Ancillary to heavy industry

Textile and agro-based

industry

Source: Business World, December 2007

29

ANNEXURE – II

INDIA’S RICHEST BUSINESS FAMILIES

(Rs. in Crores)

Rank Promoting family (Head) Company Value of stake as on

June 21, 2005

1 Premji (Azim Premji) Wipro 43,872.48

2 Ambani (Mukesh & Anil) Reliance Industries 43,087.34

3 Mittal (Sunil Mittal) Bharti Tele-Ventures 20,526.65

4 Nadir (Shiv Nadar) HCL Technologies

HCL Infosystems

8,676.64

1,747.79

10,424.43

5 Sanghvi (Dilip Sanghvi) Sun Pharma 7,435.36

6 Singh (Malvinder Singh) Ranbaxy 7,209.87

7 Birla (K M Birla) Hindalco

Grasim

Indian Rayon

Indo-Gulf Fertilizers

2,998.36

2,474.77

774.77

330.53

6,578.43

8 Bajaj (Rahul Bajaj) Bajaj Auto 4,284.70

9 Hamied (Y K Hamied) Cipla 4,088.52

10 Munjal (B M Munjal) Hero Honda 3,784.07

Source: Business Today, 14 August 2005

30

31

ANNEXURE – III

SPLITS IN FAMILY BUSINESS

Family Name Companies Turnover

(Rs. Crore)

Assets

(Rs. Crore)

AM

BA

NI

Mukesh Ambani

Anil Ambani

Reliance Industries

Adlabs Films

Reliance Capital

Reliance Communication

Reliance Energy

Reliance Natural Resources

Reliance Power

1,18,353.71

331.64

887.00

12,756.30

5,769.33

150.68

2.25

99,532.77

302.23

298.63

20,625.82

5,898.36

470.91

67.27

BA

JAJ Shishir Bajaj

Rahul Bajaj

Bajaj Hindusthan

Bajaj Auto

1,525.08

10,639.14

1,285.34

3,178.54

JIN

DA

L

Ratan Jindal

Naveen Jindal

Sajjan Jindal

Prithviraj Jindal

Jindal Stainless

Jindal Steel and Power

JSW Steel

Jindal Saw

5,196.57

3,899.81

9,337.34

5,318.79

3,325.97

4,929.03

10,512.76

958.71

DC

M

Vinay Bharat Ram

Tilak Dhar

Ajay Shriram and

Vikram Shriram

Siddharth Shriram

DCM

DCM Shriram Industries

DCM Shriram Consolidated

SIEL

97.99

743.68

2,872.16

188.73

107.54

226.81

2,145.61

231.25

Source: Business World, 17 December 2007

ANNEXURE – IV

Business Group Patriarch Potential heirs Companies Turnover

(Rs. crore)

Assets

(Rs. crore)

Essar (Rulas) Shashi Rula and Ravi Rula Prashant Rula and Anshuman

Rula, Smiti Rula and Rewant

Rula

Essar Oil

Essar Shipping

Essar Steel

473.98

1,024.30

9,000.46

303.86

1,919.10

13,554.19

Godrej Adi Godrej Tanya Dubash, Pirojsha

Godrej and Nisa Godrej

Geometric

Godrej Consumer Products

Godrej Industries

175.32

796.66

710.81

120.10

243.65

542.58

Videocon V. N. Dhoot, Rajkumar Dhoot

and Pradeepkumar Dhoot

Anirudh Dhoot and

Saurabh Dhoot

Videocon Appliances

Videocon Industries

1,170.58

8,691.75

1,303.25

7,178.45

Wadia Nusli Wadia Ness Wadia and

Jehangir Wadia

Bombay Burmah

Bombay Dyeing

221.70

492.35

152.53

654.58

POTENTIAL HEIRS OF FAMILY BUSINESS

32

Source: Business World, 17 December 2007

References:

1) Business Gyan (2007), “50 Years of Indian Entrepreneurship”, The Author,

Bangalore, pp. 69 – 71.

2) Business World (2007) “Lessons from the Banyan Tree Beyond the Family Fued”,

The Author, Mumbai, 17 December, pp 28 – 32.

3) Dwijendra Tripati (1999), “Change and Continuity” pp. 26 – 30

4) Effective Executive (2007) The ICFAI University Press, Hyderabad.

5) Gita Piramal (1999), “A Crisis of Leadership”, Family Business Symposium, pp 43 –

49.

6) Gurucharan Das (1999) “Family Business: A symposium on the role of the family in

Indian Business” October, pp 2 – 16.

7) Ibid.

8) ICFAI (2002), “India’s Family Owned Businesses”, Hyderabad.

9) ICFAI (2007), “Effective Executive”, Vol. IX, No. 5.

10) Jane Hilburt Davis, www.familybusinessconsulting.com

11) Miller Danny & Labreton Miller Isabel (2005), “Managing for the Long Run – Lesson

in Competitive Advantage from Great Family Businesses”, HBS Press, Boston.

12) Miller, Danny and Lebreton Miller, Isabel (2005), “Managing for the Long Run:

Lesson in Competitive Advantage from Great Family Businesses”, Harvard Business

School Press, Boston.

13) Ninan T N (1999), “Chequered Past and Uncertain Future” Family Business

Symposium, pp. 50 – 56.

14) Ramachandran K (2006 & 2007), “Case Studies on Family Business”, Indian School

of Business (Mimeo).

15) Retailer – 2007, Vol. 2, No. 7, December, pp. 36

16) Sudipt Dutt (1999), “Boys to Men”, Family Business Symposium, pp 31 – 36.

17) Vinay Bharat Ram (1999) “The Colours of Decision Making”, Family Business

Symposium, Op. cit., pp 17 – 25.

18) www.familybusinessconsulting.com

33

Documents

Family Business and Leadership Traits