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Family business in india

•
•
S
shrinivas kulkarni

Family owned businesses make up a large percentage of businesses in India, with approximately 90% being family owned or controlled. Succession planning is important for continued success but only 15% of Indian family businesses have a robust plan. The major business houses discussed are Tata, Reliance, Birla, and Ambani. They have grown significantly over generations through expansion, acquisitions, and diversification. Maintaining family harmony and establishing clear succession plans and governance structures are keys to ensuring long term survival of family businesses.

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FAMILY OWNED BUSINESS IN INDIA Dr SVK
Entrepreneurial companies often become family-owned businesses
• 'India has third highest number of family-owned businesses’ Family-owned and family-controlled firms account for approximately 90% of all incorporated businesses in the India • Only 15% of Indian family businesses have robust succession plan • In India, 15 of the top 20 business groups are family- owned!
Family business in india
Indian Family Business A family business is a commercial organization in which decision-making is influenced by multiple generations of a family — related by blood or marriage or adoption — who has both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals
BUSINESS HOUSES
Family business in india
GENESIS (1868-1932)  The foundation of the Tata Group was laid in 1868 by Jamsetji Nusserwanji Tata.  The Headquaters of Tata Group is situated in Mumbai, Maharashtra.  Tata Group was firstly established as a trading company. Jamshetji Tata
Pioneers Jamshetji Tata (1887–1904) Sir Darob Tata (1904-1932) Nowroji Sakatwala (1932-1938) J.R.D Tata (1938-1991) Ratan Tata (1991-2012) Cyrus Mistry (2012-2016) Natarajan Chandrasekaran(2017-)
1877 In 1877, The Central India Spinning, Weaving and Manufacturing Company was established in Nagpur. This was the first of the big industrial project undertaken by the Tata Group. 1892 In 1892, Jamsetji Tata established the JN Tata Endowment to encourage Indian scholars to take up higher studies. It was the first of a multitude of philanthropic initiatives. 1903 In 1903, under Jamshetji Tata the most dazzling personality of Tata group, Taj Mahal Hotel was build in Bombay. 1907 The Tata Iron and Steel Company (now Tata Steel) was established to set up India's first iron and steel plant in Jamshedpur in the year 1907. The plant started production in 1912.
Consolidation (1932-1989)  The Tata group ventured into new areas and built on the foundations, in spite of the restriants imposed by a controlled economy.
Expansion (1990 onwards)  The liberalisation of Indian economy unleashed a period of remarkable growth for Tata group, in India and worldwide. And Many More…
FALSE STEP
TATA NANO
Family business in india
land to entice tata to set • Land acquisition controversy Bengal government forcefully acquired agricultural up manufacturing unit. Mamta banergee’s entry and Tata’s exit Farmers of singur, with the support of TMC,force tata to move out.
Speed breaker – Nano on fire!
Family business in india
GENESIS Reliance industries is started in 1966. It is Headquartered in Mumbai, Maharashtra. largest private sector enterprise in India, with businesses in the energy and materials value chain. The largest polyester yarn and fibre producer in the world. Top five to ten producers in the world in major petrochemical products.
MUKESH D AMBANI Chairman & MD Nita M. Ambani Hital R. Meswani Nikhil R. Meswani P.M.S. Prasad P.K. Kapil R.A. Mashelkar Adil Zainulbhai Mansingh L. Bhakta Dipak C. Jain Dharam Vir Kapur Yogendra P. Trivedi Ashok Misra Raminder S. Gujral Board of Directors
1940 – 1980 The company was co-founded by Dhirubhai Ambani and his brother Champaklal Damani in 1960s as Reliance Commercial Corporation In 1975, company expanded its business into textiles, with "Vimal" becoming its major brand in later years. 1981 – 2000 In the year 1995–96, the company entered the telecom industry through a joint venture with NYNEX, USA and promoted Reliance Telecom Private Limited in India. In 1998–99, RIL introduced packaged LPG in 15 kg cylinders under the brand name Reliance Gas.During 1998–2000, the company completed setup of integrated petrochemical complex at Jamnagar in Gujarat 2001 In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two largest companies in terms of all major financial parameters.In 2001–02, Reliance Petroleum was merged with Reliance Industries. In 2012, RIL set up a joint venture with Russian Company Sibur.for setting up a Butyl rubber plant inJamnagar, Gujarat. The plant is scheduled to be operational in 2015
FALSE STEP
Reliance's failed bid to win LyondellBasell could have put India's richest man firmly on track to becoming the world's richest man THE DEAL
The government has slapped an additional penalty of $792 million on Reliance Industries Ltd (RIL) for producing less than targeted natural gas from its eastern offshore KG-D6 block PENALTY
Family business in india
GENESIS Aditya Birla Group started in 1857. Shiv Narayan Birla started cotton trading operations in the small town of Pilani in Rajasthan. Ghyanshyamdas Birla (GD birla)-1919-he set the manufacturing company. Grandson of G.D.Birla is Aditya Vikram Birla (A.V.Birla)- 1964 Son of A.V.Birla is Kumar Mangalam Birla(K.M.Birla)- 1995. Headquartered in Mumbai. Operates in 33 countries with more than 1,33,000 employees worldwide. US$ 35 billion conglomerate which gets 60 % of its revenues from outside India.
Baldeo Das Birla Gajanan Ashok Yashovardhan Birla Rameshwar Das Birla Madhav Prasad Birla Jugal Kishore Birla Ghyansham Das Birla Lakshmi Niwas Sudarshan Siddharth Krishna Kumar Birla Basant Kumar Birla Aditya Vikram Birla Kumar Mangalam Birla Braj Mohan Ganga Prasad Birla CK Birla Family Tree
1857-1988 The foundation of the Birla Group of Companies is laid by Seth Shiv Narayan Birla – cotton trading operations commence at Pilani, Rajasthan and independence marked the commencement of Grasim Hindalco is incorporated.Joint venture with Hindustan Petroleum Corporation Ltd (to set up a three-million- ton refinery, Mangalore Refineries and Petrochemicals Ltd. 2000-Present Indian Rayon acquired Madura Garments. The Group's cement business was earlier under Grasim Industries and UltraTech Cement. The two entities have now been merged into UltraTech Cement to form India's largest cement company. UltraTech Cement was acquired from L&T in 2004. • Aditya Birla Group is the majority shareholder of Idea Cellular. Idea Cellular was started as a joint venture with the group, AT&T and the Tata Group. After • an IPO on the Indian stock markets, Idea Cellular now accounts for a third of the group's market capitalization. The company is headquartered in Mumbai.
FALSE STEP
DISSATISFACTION  Moneylife Foundation had received complaints from its members that they are not receiving their fixed deposit maturity amounts from two Yash Birla Group companies namely Zenith Birla (India) and Birla Power Solutions
ABORT The Chennai-based Apollo Hospitals called off its joint venture with the Yash Birla Group, citing delays in obtaining approvals. Interestingly, fixed deposits- related issues plagued Zenith Birla (India) and Birla Power Solutions. The latter had problems paying its tax dues as well.
Indian Family Business A family business is a commercial organization in which decision-making is influenced by multiple generations of a family — related by blood or marriage or adoption — who has both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals
DEFINITIONS Family business is a corporation that is entirely owned and managed by members of a single family. Family firm is a corporation that is entirely owned by members of single family. It is also known as company owned, controlled and operated by members of one or several families. Family business is one in which one or more members of one or more families have ownership, interest and significant commitment towards business.
Family business in india
CHARACTERISTICS OF FAMILY BUSINESS Family business are ideal in nature as they are loyal to the principles of the founder and thus ensure uniformity in their operations. Succession is one important decision which determines future effectiveness in terms of company operation. family business comprises of family members in business operations ensuring effective utilization of in house talent in family. Single minded dedication of family members ensures survival of family business through toughest times.
Effectiveness and existence of family business is determined depending on understanding persisting within the family. Family business may be comprised of one or more then one family in business operations. Family members who are not contributing or not involved in business are part of business. Family business values are reflection of values possessed and followed by family members. Members of family have legal control over business.
IMPORTANCE OF FAMILYBUSINESS Contributing to economic development : family business play crucial role in economic development of most of the countries. Retail sector, small scale industry, and service sector are owned by family business. Spirit of entrepreneurship : family business as contributes towards development and has been successful in country like India it paves way to various families to initiate and bring up new ventures in country. Philanthropy : family business in India along with their development have also concentrated towards welfare of general public by investing on hospitals, educational institutions, constructionof roads etc. E.g. reliance.
Trust Lowers transaction cost : partnership and other forms of business involving outsiders usually leads to conflict in long run. In case of family business as all the parties in family are affected by loss incurred in company do not involve any sought of conflict and difference in point of view arises they try and solve it internally in the family ensuring business is not affected by the same. Small, nimble and quick to react : as managing team size in family business is small compare to other form of business decision making process involves less period of time which helps to take timely decision. Information as source of advantage : as family business is private firm it is not required to take decision in accordance with pressure from other sources and strategies of business need not be revealed to outsiders of business.
3 CIRCLE MODEL OF FAMILYBUSINESS Ownership BusinessFamily
3 CIRCLE OF FAMILY BUSINESS Business system : comprises of start up, expansion, formalization and maturity of business. Family system : youngbusiness family, entering business family, working together etc. Ownership system : controlling owner, sibling partnership, cousin consortium.
GOVERNANCE OF FAMILY BUSINESS There are three components to governance of family business : 1.Perodic assemblies of family 2.Family council meeting : if the size of the family is small in size than members of family can meet on frequent basis, when the operation of the family business expands geographically each team has to choose in representative for every unit who on behalf of every area can meet on regular basis to decode on plans, create policies, and strengthen family business communication. 3.Family constitution : family policies and guiding vision and values that regulate members relationship in business. Developed plan may be detailed or simple in nature but every family is benefited by the same.
SUCCESSION IN FAMILY BUSINESS 1. First family succession plan, then business succession plan : family business plan must recognize and accommodate the needs, goals and objectives of each member of family. Family succession plan has to be developed first as if business plan is designed in advance it proves to be difficult for owner to coordinates goals of family members towards business.
Family business plan should include following dimensions strategies to put business interest ahead of family business. Emphasise merit over family position Income for working members of the family and shareholders. The business environment during transition Treatment of loyal customers Tax consequences.
2.Family first business or business first family : important issue to be determined before beginning family succession plan is whether yours is family first business or business first family. It is often seen that most of the business fail to succeed when managed by second and third generation of business. 3.Succession management : business families take advice of business advisory board who suggest on eligible person for transition. Advisory board are not experts in managing business but are consultants who suggest strategies for effective succession management. https://www.facebook.com/ialwaysthinkprettythi ngs
4.Business valuation : may not be formal written report but is required as part of annual strategic planning process. Reasons for valuing family business are as follows :  Buying or selling shares to employees  Retiring or selling to other family members  Planning gifts for hires  Anticipating estate tax problems  Providing adequate key man insurance coverage  Tracking of business plan towards achievement of results.
5. Buy or sell agreement : is used to transfer share owownership for buy and sell agreement. This agreement is established between related parties and shareholders in family. It is an agreement to transfer a business interest to hires for less than fair market value The agreement is real ; it is part of bona fied business arrangements
KEY POINTS TO BE CONSIDERED BEFORE SUCCESSION PLAN Quick decision on business plan process will provide more alternatives to the process. A child than having right to inherit business should have ability to manage family business. Children's must be encouraged to out of family business so that they have better insight about competition persisting in market and accordingly develop strategies for development of own business. Establishing an outsider as advisor for family business may prove to be risky for which experts in succession planning should be chosen from management team with in the family business.
 Conducting family meeting on regular basis will help establish and keep the family focused on rules, goals and objective  Develop non business interest  Develop financial resources that are independent of business  Evaluate component successor : which requires to assess whether person to be chosen as successor has potential to lead the business, will he be accepted by all members in family, check his willingness to control the business.  Person who will be chosen as successor should be give an appropriate standard to be achieved which will help him deign effective strategy and have yardstick to compare his actual performance with expected one.
Family business in india
Problems 1. The interests of a family member may not be aligned with the interest of the business. 2. The interests of the entire family may not be balanced with the interests of their business. 3. the interest of one family member may not be aligned with another family member 4. Who will take over the business? 5. No exit plan or lack of succession planning 6. Sibling rivalry 7. Pressure to hire family members (Nepotism) 8. Separating Business from Personal Feelings 9. Letting Emotions Run the Business 10. Losing Non-Family Employees 11. Raising capital
APPROACHES TO AVOID CONFLICTS IN FAMILY BUSINESS Coping approach : which involves adopting to negotiation among family members try and resolve conflict and agree on common terms. Arbitrary approach : in this approach the elder person of the family will be allotted with the power to frame rules and control business activity. But this approach has not proven to be successful as most of the time elder person in family may not prove to be effective manager for business. Managed approach : this approach states that person who has ability to maintain better relationship with key individuals of business and have ability to understand business and manage the same should be appointed as lead person for the business.
Measures to overcome family business challenges and problems 1. Family Constitution or Governance 2. Developing a Succession Plan 3. Family Gathering and Get Together 4. Appointing an outside Board of Advisors 5. Training and orientation 6. Know Your Purpose 7. “Treat each other with grace and respect,” 8. Keep the Lines of Communication Open
RULES TO SAVE FAMILYBUSINESS Formulate policy frame work rules Families must serve the business Future outlook Accountability addressing the issue Addressing the issue Creating shared vision Rule 1 Rule 2 Rule 3 Rule 4 Rule 5 Rule 6
What makes Indian family business special ?
Huge emotional connect
Some international Family Businesses
Family business in india

More Related Content

Family business in india

  • 1. FAMILY OWNED BUSINESS IN INDIA Dr SVK
  • 2. Entrepreneurial companies often become family-owned businesses
  • 3. • 'India has third highest number of family-owned businesses’ Family-owned and family-controlled firms account for approximately 90% of all incorporated businesses in the India • Only 15% of Indian family businesses have robust succession plan • In India, 15 of the top 20 business groups are family- owned!
  • 5. Indian Family Business A family business is a commercial organization in which decision-making is influenced by multiple generations of a family — related by blood or marriage or adoption — who has both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals
  • 8. GENESIS (1868-1932)  The foundation of the Tata Group was laid in 1868 by Jamsetji Nusserwanji Tata.  The Headquaters of Tata Group is situated in Mumbai, Maharashtra.  Tata Group was firstly established as a trading company. Jamshetji Tata
  • 9. Pioneers Jamshetji Tata (1887–1904) Sir Darob Tata (1904-1932) Nowroji Sakatwala (1932-1938) J.R.D Tata (1938-1991) Ratan Tata (1991-2012) Cyrus Mistry (2012-2016) Natarajan Chandrasekaran(2017-)
  • 10. 1877 In 1877, The Central India Spinning, Weaving and Manufacturing Company was established in Nagpur. This was the first of the big industrial project undertaken by the Tata Group. 1892 In 1892, Jamsetji Tata established the JN Tata Endowment to encourage Indian scholars to take up higher studies. It was the first of a multitude of philanthropic initiatives. 1903 In 1903, under Jamshetji Tata the most dazzling personality of Tata group, Taj Mahal Hotel was build in Bombay. 1907 The Tata Iron and Steel Company (now Tata Steel) was established to set up India's first iron and steel plant in Jamshedpur in the year 1907. The plant started production in 1912.
  • 11. Consolidation (1932-1989)  The Tata group ventured into new areas and built on the foundations, in spite of the restriants imposed by a controlled economy.
  • 12. Expansion (1990 onwards)  The liberalisation of Indian economy unleashed a period of remarkable growth for Tata group, in India and worldwide. And Many More…
  • 16. land to entice tata to set • Land acquisition controversy Bengal government forcefully acquired agricultural up manufacturing unit. Mamta banergee’s entry and Tata’s exit Farmers of singur, with the support of TMC,force tata to move out.
  • 17. Speed breaker – Nano on fire!
  • 19. GENESIS Reliance industries is started in 1966. It is Headquartered in Mumbai, Maharashtra. largest private sector enterprise in India, with businesses in the energy and materials value chain. The largest polyester yarn and fibre producer in the world. Top five to ten producers in the world in major petrochemical products.
  • 20. MUKESH D AMBANI Chairman & MD Nita M. Ambani Hital R. Meswani Nikhil R. Meswani P.M.S. Prasad P.K. Kapil R.A. Mashelkar Adil Zainulbhai Mansingh L. Bhakta Dipak C. Jain Dharam Vir Kapur Yogendra P. Trivedi Ashok Misra Raminder S. Gujral Board of Directors
  • 21. 1940 – 1980 The company was co-founded by Dhirubhai Ambani and his brother Champaklal Damani in 1960s as Reliance Commercial Corporation In 1975, company expanded its business into textiles, with "Vimal" becoming its major brand in later years. 1981 – 2000 In the year 1995–96, the company entered the telecom industry through a joint venture with NYNEX, USA and promoted Reliance Telecom Private Limited in India. In 1998–99, RIL introduced packaged LPG in 15 kg cylinders under the brand name Reliance Gas.During 1998–2000, the company completed setup of integrated petrochemical complex at Jamnagar in Gujarat 2001 In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two largest companies in terms of all major financial parameters.In 2001–02, Reliance Petroleum was merged with Reliance Industries. In 2012, RIL set up a joint venture with Russian Company Sibur.for setting up a Butyl rubber plant inJamnagar, Gujarat. The plant is scheduled to be operational in 2015
  • 23. Reliance's failed bid to win LyondellBasell could have put India's richest man firmly on track to becoming the world's richest man THE DEAL
  • 24. The government has slapped an additional penalty of $792 million on Reliance Industries Ltd (RIL) for producing less than targeted natural gas from its eastern offshore KG-D6 block PENALTY
  • 26. GENESIS Aditya Birla Group started in 1857. Shiv Narayan Birla started cotton trading operations in the small town of Pilani in Rajasthan. Ghyanshyamdas Birla (GD birla)-1919-he set the manufacturing company. Grandson of G.D.Birla is Aditya Vikram Birla (A.V.Birla)- 1964 Son of A.V.Birla is Kumar Mangalam Birla(K.M.Birla)- 1995. Headquartered in Mumbai. Operates in 33 countries with more than 1,33,000 employees worldwide. US$ 35 billion conglomerate which gets 60 % of its revenues from outside India.
  • 27. Baldeo Das Birla Gajanan Ashok Yashovardhan Birla Rameshwar Das Birla Madhav Prasad Birla Jugal Kishore Birla Ghyansham Das Birla Lakshmi Niwas Sudarshan Siddharth Krishna Kumar Birla Basant Kumar Birla Aditya Vikram Birla Kumar Mangalam Birla Braj Mohan Ganga Prasad Birla CK Birla Family Tree
  • 28. 1857-1988 The foundation of the Birla Group of Companies is laid by Seth Shiv Narayan Birla – cotton trading operations commence at Pilani, Rajasthan and independence marked the commencement of Grasim Hindalco is incorporated.Joint venture with Hindustan Petroleum Corporation Ltd (to set up a three-million- ton refinery, Mangalore Refineries and Petrochemicals Ltd. 2000-Present Indian Rayon acquired Madura Garments. The Group's cement business was earlier under Grasim Industries and UltraTech Cement. The two entities have now been merged into UltraTech Cement to form India's largest cement company. UltraTech Cement was acquired from L&T in 2004. • Aditya Birla Group is the majority shareholder of Idea Cellular. Idea Cellular was started as a joint venture with the group, AT&T and the Tata Group. After • an IPO on the Indian stock markets, Idea Cellular now accounts for a third of the group's market capitalization. The company is headquartered in Mumbai.
  • 30. DISSATISFACTION  Moneylife Foundation had received complaints from its members that they are not receiving their fixed deposit maturity amounts from two Yash Birla Group companies namely Zenith Birla (India) and Birla Power Solutions
  • 31. ABORT The Chennai-based Apollo Hospitals called off its joint venture with the Yash Birla Group, citing delays in obtaining approvals. Interestingly, fixed deposits- related issues plagued Zenith Birla (India) and Birla Power Solutions. The latter had problems paying its tax dues as well.
  • 32. Indian Family Business A family business is a commercial organization in which decision-making is influenced by multiple generations of a family — related by blood or marriage or adoption — who has both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals
  • 33. DEFINITIONS Family business is a corporation that is entirely owned and managed by members of a single family. Family firm is a corporation that is entirely owned by members of single family. It is also known as company owned, controlled and operated by members of one or several families. Family business is one in which one or more members of one or more families have ownership, interest and significant commitment towards business.
  • 35. CHARACTERISTICS OF FAMILY BUSINESS Family business are ideal in nature as they are loyal to the principles of the founder and thus ensure uniformity in their operations. Succession is one important decision which determines future effectiveness in terms of company operation. family business comprises of family members in business operations ensuring effective utilization of in house talent in family. Single minded dedication of family members ensures survival of family business through toughest times.
  • 36. Effectiveness and existence of family business is determined depending on understanding persisting within the family. Family business may be comprised of one or more then one family in business operations. Family members who are not contributing or not involved in business are part of business. Family business values are reflection of values possessed and followed by family members. Members of family have legal control over business.
  • 37. IMPORTANCE OF FAMILYBUSINESS Contributing to economic development : family business play crucial role in economic development of most of the countries. Retail sector, small scale industry, and service sector are owned by family business. Spirit of entrepreneurship : family business as contributes towards development and has been successful in country like India it paves way to various families to initiate and bring up new ventures in country. Philanthropy : family business in India along with their development have also concentrated towards welfare of general public by investing on hospitals, educational institutions, constructionof roads etc. E.g. reliance.
  • 38. Trust Lowers transaction cost : partnership and other forms of business involving outsiders usually leads to conflict in long run. In case of family business as all the parties in family are affected by loss incurred in company do not involve any sought of conflict and difference in point of view arises they try and solve it internally in the family ensuring business is not affected by the same. Small, nimble and quick to react : as managing team size in family business is small compare to other form of business decision making process involves less period of time which helps to take timely decision. Information as source of advantage : as family business is private firm it is not required to take decision in accordance with pressure from other sources and strategies of business need not be revealed to outsiders of business.
  • 39. 3 CIRCLE MODEL OF FAMILYBUSINESS Ownership BusinessFamily
  • 40. 3 CIRCLE OF FAMILY BUSINESS Business system : comprises of start up, expansion, formalization and maturity of business. Family system : youngbusiness family, entering business family, working together etc. Ownership system : controlling owner, sibling partnership, cousin consortium.
  • 41. GOVERNANCE OF FAMILY BUSINESS There are three components to governance of family business : 1.Perodic assemblies of family 2.Family council meeting : if the size of the family is small in size than members of family can meet on frequent basis, when the operation of the family business expands geographically each team has to choose in representative for every unit who on behalf of every area can meet on regular basis to decode on plans, create policies, and strengthen family business communication. 3.Family constitution : family policies and guiding vision and values that regulate members relationship in business. Developed plan may be detailed or simple in nature but every family is benefited by the same.
  • 42. SUCCESSION IN FAMILY BUSINESS 1. First family succession plan, then business succession plan : family business plan must recognize and accommodate the needs, goals and objectives of each member of family. Family succession plan has to be developed first as if business plan is designed in advance it proves to be difficult for owner to coordinates goals of family members towards business.
  • 43. Family business plan should include following dimensions strategies to put business interest ahead of family business. Emphasise merit over family position Income for working members of the family and shareholders. The business environment during transition Treatment of loyal customers Tax consequences.
  • 44. 2.Family first business or business first family : important issue to be determined before beginning family succession plan is whether yours is family first business or business first family. It is often seen that most of the business fail to succeed when managed by second and third generation of business. 3.Succession management : business families take advice of business advisory board who suggest on eligible person for transition. Advisory board are not experts in managing business but are consultants who suggest strategies for effective succession management. https://www.facebook.com/ialwaysthinkprettythi ngs
  • 45. 4.Business valuation : may not be formal written report but is required as part of annual strategic planning process. Reasons for valuing family business are as follows :  Buying or selling shares to employees  Retiring or selling to other family members  Planning gifts for hires  Anticipating estate tax problems  Providing adequate key man insurance coverage  Tracking of business plan towards achievement of results.
  • 46. 5. Buy or sell agreement : is used to transfer share owownership for buy and sell agreement. This agreement is established between related parties and shareholders in family. It is an agreement to transfer a business interest to hires for less than fair market value The agreement is real ; it is part of bona fied business arrangements
  • 47. KEY POINTS TO BE CONSIDERED BEFORE SUCCESSION PLAN Quick decision on business plan process will provide more alternatives to the process. A child than having right to inherit business should have ability to manage family business. Children's must be encouraged to out of family business so that they have better insight about competition persisting in market and accordingly develop strategies for development of own business. Establishing an outsider as advisor for family business may prove to be risky for which experts in succession planning should be chosen from management team with in the family business.
  • 48.  Conducting family meeting on regular basis will help establish and keep the family focused on rules, goals and objective  Develop non business interest  Develop financial resources that are independent of business  Evaluate component successor : which requires to assess whether person to be chosen as successor has potential to lead the business, will he be accepted by all members in family, check his willingness to control the business.  Person who will be chosen as successor should be give an appropriate standard to be achieved which will help him deign effective strategy and have yardstick to compare his actual performance with expected one.
  • 50. Problems 1. The interests of a family member may not be aligned with the interest of the business. 2. The interests of the entire family may not be balanced with the interests of their business. 3. the interest of one family member may not be aligned with another family member 4. Who will take over the business? 5. No exit plan or lack of succession planning 6. Sibling rivalry 7. Pressure to hire family members (Nepotism) 8. Separating Business from Personal Feelings 9. Letting Emotions Run the Business 10. Losing Non-Family Employees 11. Raising capital
  • 51. APPROACHES TO AVOID CONFLICTS IN FAMILY BUSINESS Coping approach : which involves adopting to negotiation among family members try and resolve conflict and agree on common terms. Arbitrary approach : in this approach the elder person of the family will be allotted with the power to frame rules and control business activity. But this approach has not proven to be successful as most of the time elder person in family may not prove to be effective manager for business. Managed approach : this approach states that person who has ability to maintain better relationship with key individuals of business and have ability to understand business and manage the same should be appointed as lead person for the business.
  • 52. Measures to overcome family business challenges and problems 1. Family Constitution or Governance 2. Developing a Succession Plan 3. Family Gathering and Get Together 4. Appointing an outside Board of Advisors 5. Training and orientation 6. Know Your Purpose 7. “Treat each other with grace and respect,” 8. Keep the Lines of Communication Open
  • 53. RULES TO SAVE FAMILYBUSINESS Formulate policy frame work rules Families must serve the business Future outlook Accountability addressing the issue Addressing the issue Creating shared vision Rule 1 Rule 2 Rule 3 Rule 4 Rule 5 Rule 6
  • 54. What makes Indian family business special ?