By IANS
Ahmedabad : Family-owned businesses in India need to see business and family as two separate “entities” and re-engineer their operations in order to grow as big trees in today’s competitive environment, a management expert said here.
This advice was given by Professor K Ramachandran, associate dean of Indian School of Business (ISB), to a group owners of small-scale business enterprises in an interactive session held at the Ahmedabad Management Association here.
Worldwide family owned business are growing and they are proving to be more profitable than those that are widely held by the public. Indian family owned businesses cannot afford to swim against the tide, he added.
Listing factors behind family businesses failure, Ramachandran said the foremost among them was the lack of communication and vision and openness. The people at the top are unable to perceive changes taking place within the organisation which often come without warning.
There is ego and mixing up of professional relationships. Often the emotions tend to rule decisions. There is lack of acceptance of shared values among family members. The tendency is not to fix problems but play it safe by bushing them under the carpet, he said.
To succeed family owned business should focus on rightful governance. The emphasis should be on managing dilemmas over decisions and apparent conflict in outcomes. The challenge is not who governs, but how. The boards of the companies should be such that it should have high quality people capable. This in turn could attract talent at the operational level.
He commended the practice of family owned businesses creating and adhering to a family constitution, providing rules, regulations, rights and responsibilities of family members including financial matters. Such an instrument can sustain governance in families.
Family managed concerns having more than one business should avoid situations like each family member vitally concerned about one’s own realm without any thought about the prospects of the group as a whole. This can be overcome by structuring a growth plan with a common minimum programme. Each organisation should have respected auditors.
While the business concerns could have chairmen from the family, at the operational level they should be run by professional managing directors. Also there should be a rotational policy as has been one in Hindustan UniLevers. For managing the wealth created, it will be appropriate a finance office which will be served by experts. Several investment banks are keen to render the service.
To manage differences within the family, professional counsellors could be appointed who can resolve issues dispassionately, Ramachandran added.