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There are many misconceptions about family business. Perhaps the most pervasive is
the "mom and pop" image that the very word, "family business", engenders. Although
many small and micro businesses are family-owned and operated, there is evidence
that family firms are also fast growth firms and very large successful firms.

Broadly, family business has been defined as a business that is owned and managed
(i.e., controlled) by one or more family members (Handler, 1989; Hollander & Elman,
1988).

A more detailed definition is provided by Davis and Tagiuri (1982). They define family
firms as: "...organizations where two or more extended family members influence the
direction of the business through the exercise of kinship ties, management roles, or
ownership rights."

Moreover, Gallo (1994) has asserted that family businesses are essentially the same in
every country in the world relative to their problems, issues, and interests.

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÷amily businesses in India initially started in the 1890s as a means to promote
import substitution and attain economic freedom from the British. These
enterprises were an integral part of India͛s freedom struggle, and as part of the
Š
 movement, got special treatment and subsidies from the government.
The businesses consolidated their positions as near monopolies under the
protective environment of the licence raj and their inefficiencies did not get
exposed to the indefatigable market realities. Some of the prominent business
families during the 1960s were the Modis, Thapars, Shrirams, Singhanias, Birlas,
Wadias and Godrej.

Initially they were traders who became industrailist Aggarwals andguptas in North,
Chettairs in south, parsis, gujarti͛s & jains in west & and marwaris.

ËWorld͛s most famous brand are from family firms ʹ Marriot, Disney, ÷ord, Nestle
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ù High level of respect and ù ack strategically planned
trust Management succession

ù Continuity of Business Only 30% of ÷amily

tradition and values Businesses have written
strategic plans ʹ ß
  
ù Operational flexibility in
decision making process
ù Informal channels of
communication
ù Sense of identity, pride and ù Emotional Involvement
legacy.
 Dynamic of family business in india

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CHAENGES ÷ACED BY ÷AMIY BUSINESS

GENERATION GAP & SIBING RIVARY

CONTINUITY.
ROE O÷ KINSHIP
OWNERSHIP AND MANAGEMENT GETS PASSES ON WITH PASSAGE O÷ TIME.
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freedom, independence, and control. In addition, they also offer many lifestyle benefits such as flexibility,
prestige, community pride, and creativity. ÷amily businesses normally provide for closer contact with

 
 are less bureaucratic, have a built-in trust factor with established relationships, and provide for
hands-on training and early exposure of the next generation to the business.

On the other hand, family businesses also bring a unique set of challenges. ÷amily businesses are often
recognized in the popular press as a source of difficulty when it comes to  issues, identity
development, and sibling relationships.

Succession becomes an issue when the senior generation does not allow the junior generation the necessary
room to grow, effectively develop, and eventually assume the leadership of the business. Often business
relationships among siblings or between parent and child deteriorate due to an underlying difficulty in
communication within the family. This behavior erupts into criticism, judgments, conservatism, lack of
support, and lack of trustͶall elements that affect the business.
 ife Cycle of ÷amily Enterprise
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 What is succession planning?

͙it is a O
ŠŠ that ensures the continuation

of a business through the generations.

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 Step 1. What Succession Is and Is
Not
Š  Š  
w A process w An event
w About family, people and w One person͛s problem
relationships
w About ownership, w About minimizing taxes
management and estate
w About what is fair w About equity
w Driven by the family w Driven by technical issues
that are handled by
values, wants and lawyers, accountants, etc.
concerns
 Step 2: Discovering Expectations
w Should involve all family member (whether in
the business or not)
w Assumptions at any stage about other͛s wants
or expectations should not be made
w Say no to secrecy!
 Step 3: Examine Options

Key Questions:
> What role, if any, will family members play in the
succession plan?
> What can we do to treat all offspring fairly?
> How can I prepare for either a different role in the
business or for retirement?
> How will the transfer of ownership be handled?
> How will the successor(s) be trained?
> How will the change in roles be communicated to
stakeholders?
Step 4: Create a Succession Plan

w Plan for transferring management

w Plan for transferring property
w Contingency plan for managing
disruptive events
 Choosing the Successor

w m     

   
> Education
> Experience
> Personal characteristics
> Skills required
> Job responsibilities
 Grooming the Successor
w How do you provide opportunities to make
decisions, take risks, and develop
management skills?
> Initial evaluation
> Management training
> Career growth
> Regular feedback
> Timetable (allow 5 years to 15 years)
 ÷amily-Business Conflict


 

 


 



   


 
 
 
Checklist for Succession
Pressure on ÷amily Business
Checklist for Identifying a Successor
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