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Family businesses must bridge 3 gaps for clean succession: PwC

Apr 15 2014, 18:26 IST
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PwC surveyed 200 next generation family members who are likely to take over their family businesses. Reuters PwC surveyed 200 next generation family members who are likely to take over their family businesses. Reuters
SummaryPwC surveyed 200 next generation family members who are likely to take over their family businesses.

In order to ensure clean succession, family businesses need to bridge three key gaps in their organisations -- generation, credibility and communication, a PwC report says.

The transition from one generation to the next is a potential fault-line, which can make or break the business, according to the PwC report.

PwC surveyed more than 200 next generation family members who are likely to take over their family businesses.

Globally, only 12 per cent of family firms make it to the third generation and only 1 per cent beyond the fifth, it said.

"Indian family businesses can take some guidance from how their counterparts globally (mainly in Europe) have passed the baton from one generation to another," PwC India Private & Entrepreneurial leader Indraneel R Chaudhury said.

Family businesses are a key component of the Indian economy and many are grappling with issues like the generation gap between family members; communication gaps between generations who own and manage the business, and the next generation trying to prove themselves to family and colleagues, Chaudhury added.

On the issue of credibility, the study showed that 88 per cent of the next generation say they have to work harder than others in the firm to prove themselves to both colleagues and customers and 59 per cent said gaining the respect of co-workers is one of their biggest challenges.

Family businesses have to manage personal as well as professional relationships and this brings with it the possibility of conflict, the report said.

As per the report, 22 per cent of the next generation are concerned about working with family members and understanding the family dynamic. It is also important that as management shifts from one generation to the next, the older generation needs to understand the difference between 'influence' and 'control'.

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