There are visible signs of fragility in family businesses’ togetherness, says a new study by the Indian School of Business (ISB).
“Indian family businesses often do not realise the need for policies and so do not make them. Crisis and disaster are natural, especially when the younger generation is not on the same page. Family businesses should proactively develop policies and processes to keep the concept of togetherness,” advises the study.
The Thomas Schmidheiny Centre for Family Enterprise at ISB conducted a multi-stage research study. The study probed 40 matched pairs of seniors and juniors within the same business on several issues. The majority of seniors probed were above 50 and belonged to the first generation of the family while most juniors were below 30 and belonged to the second generation.
According to Kavil Ramachandran, executive director, Thomas Schmidheiny Centre for Family Enterprise, the top 15 companies in the country are family-controlled. The study found that family togetherness is a multi-layered concept, that is, the meaning of family togetherness had different connotations in the contexts of family, business operations and trans-generational strategic matters. Though members of business families remain firmly together in social matters, their ties weaken when it comes to matters of business operations and long-term strategic issues of succession, retirement, wealth management and distribution. The study found that togetherness in Indian family firms was fragile, with senior and junior generations divided on many issues.
A major area of inter-generational differences was the lack of policy framework for trans-generational issues of ownership and transfers, developing strategic direction of the business, starting new ventures, allocation of roles and responsibilities to family members and reward to family members for their contribution to business.