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FAMILY BUSINESS AND LEADERSHIP TRAITS

By

Dr. R. SATYA RAJU, Ph.D.,


PROFESSOR,
DEPARTMENT OF COMMERCE & MANAGEMENT STUDIES,
ANDHRA UNIVERSITY, VISAKHAPATNAM (INDIA)
MOBILE: 94403 56259
EMAIL: rsrapaka@hotmail.com

Paper presented at the First Asian Invitational Conference on Family Business held at
Indian School of Business, Hyderabad during February 1 – 3, 2008

Key words:
Family Business – Ownership and control of the business with family members
Family System – Goal is development and support of family members
Business System – Goal is profit, revenue and growth
Leadership Triad – The leaders, followers and results
EQ – Emotional Quotience
WQ – Wealth Quotience
Executive Summary:
Family business is existing all over the globe. The contribution of this business is
highly significant in different countries including India. Family business is the one that is
owned, run or often conceived by a family member(s). Some of the present world class
companies were established under family business long ago.

The study objectives were: to outline the issues on the concept, contribution,
leadership, challenges of family business and a brief review of literature, to examine the
profile of selected family businesses and the traits of the leaders. The ultimate objective was
to provide a suggestive framework.

Both primary and secondary sources of data was obtained for the study. Books,
records, reports and web sites were consulted for review of literature. 40 entrepreneurs were
interviewed for primary data with a simple structured questionnaire.

The study had interesting observations. Some of them were: the contribution of family
business was quite significant in India and several countries. Some Fortune 500 companies
were established under family business. The family business had some strengths for
sustainable and successful management. The important traits of the successful leaders of the
family business were: commitment, customer orientation, teamwork, sincerity, loyalty, good
relationship, transparency and enjoying business.

Some challenges of the family business were: seniority, rank and gender. Second
generation don’t like to face any change, no proper encouragement from parents, parent
would like to close the business after him, children are good with numbers but not with
people.

Native land, interest in the activity, experience, market opportunity were the main
motivation factors for starting their ventures. The entrepreneurs would like to expand their
business ventures. They also stated how the government should extend it’s support and
encouragement.

There was an excellent cooperation, coordination, love, respect, unity and integrity
among some family members. “We had trust on our elders, youngsters and all family and

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they never act on their own independently, unless we decided in our family get-togethers”
said one of the great entrepreneurs who had been managing the business for the last sixty
years along with his two sons and four grand children. The important traits of the great grand
parents and parents were obtained by their third generation entrepreneurs by birth. There was
some impact on the family due to the changing society. The third generation members require
full freedom, and applying their own thoughts to start new business ventures. Third or fourth
generation enterprises, their contribution and constraints should be examined and some
awards should be given to the promoters of such ventures (First generation entrepreneurs).
The great Indian values and culture should be protected in educating, enlightening,
empowering family members in fulfilling the dream of the nation. The great leadership traits
of Indian family are to be spread to all over the globe and the fragrance of Indian values are
to be spread in the global village. The great institutions like Indian School of Business (ISB),
universities, government bodies should have to focus their attention on the management and
sustainability of family business ventures. Separate management courses on family business
management (MBA – FBM) should be offered for the benefit of third / second generation
entrepreneurs to develop the business as per the changing needs of the society. The
Government of India has to provide some additional incentives for managing and expanding
family business venture. When professionalism is lacking in managing the business, the head
of the family has to search for a suitable person with professional expertise to manage the
business successfully with sustainability and competitiveness to meet the expectations of the
global customers. The national and international associations, institutions, universities and
the organisations concerned need to focus their attention on family business in the new
millennium.

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Abstract:
Family business has been playing a pivotal role in the several economies including
India. Family owned business is one in which two or more extended family members
influence the business through the exercise of kinship ties, management roles and ownership
rights.

Several world class organisations were family business ventures all over the globe.
This study had focused it’s attention on the concept and contribution of family business,
challenges, strengths and weaknesses of family business, a profile of selected organisations
and the traits of the leaders. The suggestions at the end also provide a framework for effective
management of family business.

Introduction:
The most beautiful thread in this world that binds hearts and minds together is the
family. A business would become successful if it has got this, thread of dedicated family
members. A person would become a wonderful business leader if he / she learns great
leadership qualities and core values from God’s own masterpiece – the family. Mother India
– the land of love, affection, morals, principles, values and ethics would certainly rock the
cradle for any value based business and would teach the business how to lead and how to beat
world class companies.

According to several experts, a family business is one that is owned, run and often
conceived by a family member or members. Usually, family businesses are conceived and
run by one member of a family, who may act as a matriarch or patriarch of the family as well
as the business leader. The present world class companies like Ford Motor, Ferrari were
started under family business concerns.

In India, family owned businesses had a greater role and will continue in future also.
They ate going to become major contributors to the economic development. Family
businesses are basically two types. The first one is the business having only the family
members as principals as well as agents. Usually, outsiders are suspected and sullied. The
second type of business represents with family members and outsiders. Family has a major
stake and controlling power on the business. A family owned business is one in which two or
more extended family members influence the business through the exercise of kinship ties,

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management roles and ownership rights and / or which the owner intends to pass to a family
heir.

In early 2007, the Indian family business billionaires recorded in the Forbes list were:
Lakshmi Mittal, Mukesh Ambani, Anil Ambani, Azim Premji, Kushal Pal Singh, Sunil
Mittal, KM Birla, Shashi & Ravi Ruia. Their net worth was varied from US $ 32.0 billions to
US $ 8.0 billions. Some experts studied the family business from three angles, i.e. a family
owned business, a family owned and managed business and a family owned and led business.
Usually, family business governance is based on periodic assemblies of the family, family
council meetings and constitution of the family.

The objectives:
This study was conducted with the following objectives:
• To outline the issues on the contribution, leadership in family business,
challenges, strengths and weaknesses and a brief review of literature on family
business;
• To examine the profile of families and the leadership traits of selected family
business ventures.
• To offer suggestions for effective management of family business enterprises.

The Methodology:
The study was based on both secondary and primary sources of data. Secondary data
was collected from books, journals, websites and other literature available. Primary data was
collected at random from 40 family business enterprises established in three cities
[Visakhapatnam, Guntur and Hyderabad] of Andhra Pradesh with a structured questionnaire.
The data was analyzed and the results were briefly presented.

The Contribution of Family Business:


A study on family business revealed that about 35 per cent of the Fortune 500
companies were family controlled and family businesses accounted for 50 per cent of the
USA’s GDP and generate 60 per cent of the countries employment and 78 per cent of all new
job creation. Another study outlined that about 75 per cent to 90 per cent of the US
companies were family concerns. The oldest family business firms running with fifth

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generation in USA were: Avadis Zildjian (1623) Laird & Co (1780); George Ruhl & Sons
(1789); Loane Bros (1815); Bevin Brothers Manufacturing Co. (1832); Antorne’s Restaurant
(1840); Verdin Co. (1842); Baumann Safe Co. (1843); AE Schmidt (1850); Hick’s Nurseries
(1853). The principals and agents in these businesses were family members only. Whereas, in
another type of business, the family has majority stake and the remaining is with others.
Some of the businesses were: Wal-Mart; Fiat; Cargill; Ford; News Corp; Hyundai; Nike;
Viacom; Virgin; Reliance Industries; Wipro; etc.

India’s richest business families were: Azim Premji (Wipro); Ambani (Mukesh and
Anil) (Reliance Industries); Sunil Mittal (Bharti); Shiv Nadar (HCL); Dilip Sanghvi (Sun
Pharma); Birla KM (Hindalco, Grasim…); Bajaj Rahul (Bajaj Auto); Hamied Y K (Cipla);
Munjal B (Hero Honda). On October 29, 2007 billionaire Mukesh Ambani became the richest
person in the world, surprising American Software czar Bill Gates, Mexican business tycoon
Carlos Slim Helu and famous investment Guru Warren Buffett1 .

The contribution of family business was also high in India in terms of employment
and income generation and wealth creation. Several visionaries had established their business
ventures at different places of the country and also abroad. Some of them were: Ajim Premji,
Ratan Tata, KM Birla, Brij Mohanlal Mnryal, Parvinder Singh, Dirubhai Ambani, Sunil
Mittal, Ramalinga Raju, Mallikharjun Rao, Sashi Ruai, Anji Reddy, etc.

The successor of the family had become an important factor in family business. Some
join at early age because of compulsion. Some join after 50 years. The visionary leaders of
the family businesses successfully manage all the crises of business including succession
management. Professionalism, good management, active board members, ability to change,
strategic planning are some important factors in the family business.

Sam Johnson of the SC Johnson company who was the recipient of the IMD
Distinguished Family Business Award described not only his values but his vision when he
said, “Every community, where we operate should become a better place because we are
there” Fist Johnson, Sam’s son carries on the tradition, he stated that his father didn’t just talk
values, he lived with them.

1
Retailer – 2007, Vol. 2, No. 7, December pp. 36

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Some challenges of Family Business are:
• Seniority, rank and gender;
• Children don’t like to face challenges (they raise in wealth culture);
• No proper encouragement by parents;
• The desire of the parent to close the business after him / her;
• The younger child possesses better skills than that of the elder;
• Brothers and sisters often reluctant to grant authority to their siblings;
• Children are very good with numbers but not with people;
• Ignoring succession planning and also choosing the successor among three or
four;

The distinction between Family System and Business System is explained briefly as
under:
Area of Conflict Family System Business System
Goals Development and support of Profits, revenues, efficiency,
family members growth
Relations Deeply personal Semi personal / Impersonal
Rules Informal Written and formal
Evaluation Members rewarded No systematic evaluation
Succession Caused by death, divorce, Caused by retirement
voluntary willingness
Authority Based on family position or Based on formal position
seniority
Commitment Life time; based on identity with Short term, based on rewards
the family received

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The Strengths and Weaknesses of Family Business are given as follows:
Parameter Strength Weakness
Infrastructure Informal, flexible Unclear
Entrepreneurial Confusing
Innovative Lack of organizational chart
Roles Flexible Role conflict
Multiple Nepotism
Quick decisions Dual roles
Leadership Creative Autocratic
Ambitious
Entrepreneurial
Family involvement High commitment Can’t keep family issues out of
Loyal business
Shared values Inability to between family and
Family Dream business needs
Rivalry
Succession Training can begin early Inability to choose successor
Governance / Ownership Family owned high degree of No outsiders on boards
control High premium on privacy
Culture Can have creative culture Emotional, Inefficient
Rich integrity of goals Resistance to change
Risk for conflicts

Leadership in Family:
Leadership skill is highly required for entrepreneurs. The leaders and followers work
together for achieving results. The triad can be shown as follows:

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As per the study by Raymond Institute in 2003, about 88 per cent of family owned
businesses plan to stay in the family; 47 per cent expect leadership in the next five years, 42
per cent did it choose successors, 13 per cent family members said that the CEO would never
retire. There is a serious failure to plan for leadership transition in family businesses. Some
requests that come to key resources sound like this: “I always thought my son would run this
company but I just think he can’t. He’s a very good with numbers but not with people”.

Distinction between Entrepreneur and Leadership skills is given under:


Skill set Entrepreneur Leader
Intelligence Above average Not necessarily above average
Energy High Moderate
Listening Skills Fair to poor Good
Ability to Dementor Average Good
Energy High for some period Grows over some time
Emotional Intelligence Average Good
Willingness to Take Risks High Moderate
Dealing with Crises Good Great
Control Needs High Moderate
Ability to Delegate Poor Good
Networking Skills Poor to great Good to great

The annexures I to IV would give the growth of family business, India’s richest
family businesses, splits, potential heirs of family business.

The head and children in the Family Business should have to possess some qualities.
Some of them are:
• EQ: (Emotional Quotience / Intelligence) Self control, self awareness, motivation,
empathy and social skills.
• TQ (Team Quotience / Intelligence) = EQ plus the ability to negotiate and
communicate with others, to deal effectively with conflicts; make collective decisions
in a team; to listen and collaborate.
• FQ (Financial Quotience / Intelligence) = Earning, saving, managing, spending and
giving money wisely.
• WQ (Wealth Quotience / Intelligence) = FQ plus appreciating the meaning of wealth,
managing financial relationships, and using wealth wisely.

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• IQ (Intelligence Quotience)
• SQ (Spiritual Quotience)
• CQ (Creativity Quotience)

Review of Research:
There is a considerable currency of literature available on family business. Several
studies were conducted abroad and very few were conducted in India. The leadership, family
business and understanding dynamics of the family business was outlined in a publication of
ICFAI 2 . A profile of India’s family owned businesses relating to Apollo Tyres, Arvind Mills,
Ballapur Industries, Essar Steel and Gujarat Ambuja was examined in detail in another
publication 3 . Tips for managing challenges of family business were outlined by Jane Hilburt
Davis 4 .

The issues relating to managing for the long run for competitive advantage from great
family Businesses were outlined by Miller Danny et. al. 5 . They stated that the starting tips for
family firms on their way to getting great were: following passion, using initiative, do sweat
the small stuff; communicating face to face, making decisions with people. Jane examined
the solutions for family business problems 6 . Comparison of family business system and
business system was outlined in another study 7 .

Another interesting publication briefly outlined that corporate India was increasingly
finding various ways and means of settling or pre-empting family disputes. Family
constitutions, codes of conduct, mediation by society, private equity intervention by society,
private equity intervention and new lines of business were among the routes being explored 8 .
Fifty years of Indian entrepreneurship textile and agro based industry to new services
oriented economy was explained by another writer 9 .

2
ICFAI (2007) “Effective Executive”, vol. IX, No. 5
3
ICFAI (2002), “India’s family Oriented Businesses”, Hyderabad
4
www.familybusinessconsulting.com
5
Miller, Danny and Lebreton Miller, Isabel (2005), “Managing for the Long Run: Lesson in Competitive
Advantage from Great Family Businesses”, Harvard Business School Press, Boston.
6
Jane Hilburt Davis, www.familybusinessconsulting.com
7
www.familybusinessconsulting.com
8
Business World (2007), “Lessons from the Banyan Tree Beyond the Family Fued”, the Author, Mumbai, 17
December, pp. 28 – 32
9
Business Gyan (2007), “50 Years of Indian Entrepreneurship”, the Author, Bangalore, pp. 69 – 71

10
Gurucharandas outlined the structure of Indian business, competitive advantage of
joint family business, the characteristics of successful Indian company and the problems of
family business at different stages 10 . The colours of decision making in family business, at
the three thresholds of involvement as members of the Board, the CEO entrepreneur were
stated by Vinay Bharat Ram 11 .

The change and continuity of family business houses such as the Tatas, Birlas, Modis,
Sarabhais, Bangurs, Singhamas, Mafatlals, Srirams, Thapars, Walchands and Goenkas was
examined by Dwijendra 12 . The success factors, trends in the growth of scions, and other
related family business issues were presented in an other article 13 . According to Gita Piramal,
the family business management was based on taking risk and the role of leadership was
significant in the crisis 14 . The family business in India revealed chequered past and uncertain
future 15 . Several interesting case studies on family business were conducted by
Ramachandan 16 . The role of leadership and the family business, an interview with John
Davis were explained in an other publication 17 . Family business growth intelligence,
understanding dynamics of family business were also presented in the publication 18 .

Another publication of the Harvard had covered interesting issues on family business.
The study had covered great businesses, examined several issues and concluded with the four
C’s. They were: Continuity (pursuing the dream) Community (building a cohesive team),
Connection (open ended, mutually beneficial relationship with business partners) Command
(acting independently quickly and in original ways). The tips given at the end were: follow
your passion, use your initiative, do sweat the small stuff, time stagger your objectives, get
people on your side, communicate face to face, make decisions for people 19 .

The Study Observations:

10
Gurucharan Das (1999), “Family Business: A symposium on the role of the family in Indian Business”
October, pp. 2 – 16
11
Vinay Bharat Ram (1999) “The Colours of Decision Making” Family Business Symposium, pp. 17–25
12
Dwijendra Tripati (1999), “Change and Continuity” pp. 26 – 30
13
Sudipt Dutt (11999), “Boys to Men” Family Business Symposium, pp. 31 – 36
14
Gita Perumal (1999), “A Crisis of Leadership” Family Business Symposium, pp. 43 – 49
15
Ninan T N (1999), “Chequered past and uncertain future” Family Business Symposium, pp 50 – 56
16
Ramachandran K (2006 – 2007), “Case studies of Family Business” Indian School of Business (Mimeo)
17
Effective Executive (2007), The ICFAI University Press, Hyderabad
18
Ibid.
19
Miller Danny & Labreton Miller Isabel (2005), Managing for the Long Run – Lesson in Competitive
Advantage from Great Family Businesses”, HBS Press, Boston

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The present study was conducted on family business entrepreneurs. About 50 family
business entrepreneurs were interviewed with a simple questionnaire. 40 questionnaires were
received with the required data. Ten were not obtained due to busy schedule of the
entrepreneurs. The observations were presented briefly as follows.

About one-third of the enterprises were above 50 years. These enterprises were started
by their grand parents or great grand parents of the present generation entrepreneurs
(Table–1). Two enterprises were started by the first generation entrepreneurs.

The family business enterprises were under the management of proprietary (13 per
cent) a, partnership (50 per cent) and Hindu undivided family (37 per cent). All the
enterprises were under the control and management of their respective family heads and other
family members (Table–2). An interesting observation was over 50 per cent of the enterprises
were third generation and about one third second generation enterprises. One enterprise was
fourth generation enterprise (Table–3). The family business enterprises were mostly run by
Hindus (80 per cent) followed by Muslims (8 per cent), Christians (5 per cent) and others (7
per cent) (Table–4).

The nature of business enterprises covered in the study were: printing, food
processing, textiles and ready-mades, real estate & construction, modern retail (Malls), Books
and stationery and jewellery. All activities covered equally except food processing enterprises
(Table–5). The total employment provided by all the selected enterprises was over 8,000.
Only 10 enterprises employed over 5,000 employees. Out of the total, over 3000 were
women. Thus it had created employment opportunity to both men and women (Table–6). The
native land of the heads of the families was Visakhapatnam, Hyderabad, Guntur, other places
of Andhra and other States (Table–7).

The founders of the business enterprises were 45 per cent grand parents and 35 per
cent parents. The parents and grand parents were working with the business enterprises to
guide and train their children or grand children (Table–8). In every enterprise, active
involvement of family members was observed. Two to five members of the family members
had been working with family business enterprises (Table–9). All the members of the family
were not involved. In some activities, spouses, daughters, sons, grand parents and cousins in
the family were not associated with the family business (Table–10).

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TABLE – 1: RESPONSE REGARDING PERIOD OF EXISTENCE OF FAMILY
BUSINESS
Particulars Number Per cent
Below 10 years - ---
11 – 20 years 2 5.00
21 – 30 years 2 5.00
31 – 40 years 12 30.00
41 – 50 years 10 25.00
Above 50 years 14 35.00
TOTAL 40 100.00
Source: Field Study

TABLE – 2: RESPONSE REGARDING TYPE OF OWNERSHIP:


Particulars Number Per cent
Proprietary 5 12.50
Partnership 20 50.00
HUF 15 37.50
TOTAL 40 100.00
Source: Field Study

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TABLE – 3: RESPONSE REGARDING GENERATION OF ENTREPRENEURS:
Particulars Number Per cent
First generation 2 5.00
Second generation 15 37.50
Third generation 22 55.00
Fourth generation 1 2.50
TOTAL 40 100.00
Source: Field Study

TABLE – 4: RESPONSE REGARDING RELIGION OF ENTREPRENEURS


Particulars Number Per cent
Hindu 32 80.00
Muslim 3 7.50
Christian 2 5.00
Others 3 7.50
TOTAL 40 100.00
Source: Field Study

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TABLE – 5: RESPONSE REGARDING ACTIVITY OF THE FAMILY ENTERPRISE
Particulars Number Per cent
Printing 5 12.50
Food Processing 10 25.00
Textiles & Ready-mades 5 12.50
Real Estate & Construction 5 12.50
Modern Retail (Malls) 5 12.50
Books & Stationery 5 12.50
Jewellery 5 12.50
TOTAL 40 100.00
Source: Field Study

TABLE – 6: RESPONSE REGARDING EMPLOYMENT IN THE ENTERPRISES


Particulars Number Per cent
Below 50 5 12.50
51 – 100 10 25.00
101 – 200 15 37.50
201 – 500 6 15.00
Above 500 4 10.00
TOTAL 40 100.00
Source: Field Study

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TABLE – 7: RESPONSE REGARDING NATIVITY OF THE FAMILY BUSINESS
HEADS
Particulars Number Per cent
Visakhapatnam 25 62.50
Hyderabad 2 5.00
Guntur 3 7.50
Other Places 5 12.50
Other States 5 12.50
TOTAL 40 100.00
Source: Field Study

TABLE – 8: RESPONSE REGARDING FOUNDERS CONNECTION WITH THE


FAMILY
Particulars Number Per cent
Present entrepreneurs 6 15.00
Parent 14 35.00
Grand Parent 18 45.00
Great Grand Parent 2 5.00
TOTAL 40 100.00
Source: Field Study

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TABLE – 9: RESPONSE REGARDING NO. OF PERSONS ACTIVITY INVOLVED
IN BUSINESS
Particulars Number of Per cent
enterprises
Two persons 10 25.00
Three persons 12 30.00
Four persons 8 20.00
Five persons 10 25.00
More than five persons --- ---
TOTAL 40 100.00
Source: Field Study

TABLE – 10: RESPONSE REGARDING FAMILY MEMBERS NOT INVOLVED IN


BUSINESS
Particulars Number of Per cent
enterprises
Spouses 5 25.00
Sons 2 5.00
Daughters 5 12.50
Grand parents 10 25.00
Any other 18 45.00
TOTAL 40 100.00
Source: Field Study

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Decision making was done by the head of the family in several cases. Sometimes,
selected members in the family were taking decisions. In few cases, all the members in the
family participated in decision making process (Table–11). Most of the decisions (80 per
cent) had accepted by all but very few decisions (20 per cent) had some conflict. It was only
due to the modern thinking of the present generation and traditional outlook of the grand
parents or parents (Table–12).

Vision and goals of the family business enterprises were quite interesting. They had a
noble vision to be good citizens and social consciousness (60 per cent) followed by serving
society (15 per cent) to become great (15 per cent) and fulfilling their parental ambition (10
per cent) (Table–13). They would like to spend a lot towards charitable purpose. More than
50 per cent of the families are spending a substantial amount from 5 to 10 per cent of their
profits towards charity. Health care and education were the main charitable activities (Table–
14).

There was some locked up wealth of the family enterprises. They did it for their grand
children education abroad or marriage of their grand daughters. In some families they didn’t
lock up any amount of wealth. They were utilizing for productive purpose of their business
ventures (Table–15).

The traits of the entrepreneurs were ascertained. Most of them opined that
commitment, customer orientation, teamwork and loyalty, sincerity and loyalty were the main
traits of the entrepreneurs. Some other important traits were good relationship, employee
friendly, effective communication and transparency, and enjoying business (Table–16). The
entrepreneurs advise to the new generation entrepreneurs was to take risk in the changing
business scenario. They also advised them to be committed, building teams, fulfilling their
dreams into reality and courageous. (Table–17).

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TABLE – 11: RESPONSE REGARDING DECISION MAKING PROCESS IN THE
BUSINESS
Particulars Number Per cent
Head of the family 28 70.00
All the members 2 5.00
Selected members 10 25.00
TOTAL 40 100.00
Source: Field Study

TABLE – 12: RESPONSE REGARDING AREAS OF CONFLICT


Particulars Number Per cent
None 32 80.00
Sometimes 8 20.00
TOTAL 40 100.00
Source: Field Study

19
TABLE – 13: RESPONSE REGARDING FAMILY VISION AND GOALS
Particulars Number Per cent
To be good citizens and social consciousness 24 60.00
To serve society 6 15.00
To become great 6 15.00
To fulfill parental ambition 4 10.00
TOTAL 40 100.00
Source: Field Study

TABLE – 14: RESPONSE REGARDING AREAS OF CHARITY EXTENDED


Particulars Number Per cent
Health care 15 37.50
Education 16 40.00
Others 9 22.50
TOTAL 40 100.00
Source: Field Study

20
TABLE – 15: RESPONSE REGARDING LOCKED UP WEALTH OF THE FAMILY
Particulars Number Per cent
Locked up wealth 15 37.50
Not locked up 10 25.00
Locked for children wedding / education 15 37.50
TOTAL 40 100.00
Source: Field Study

TABLE – 16: RESPONSE REGARDING TRAITS POSSESSED BY THE


ENTREPRENEURS [BASED ON RESPONSES]
Particulars Number Per cent Rank
Commitment 40 100.00 1
Enjoying business 20 50.00 3
Customer orientation 40 100.00 1
Good partner supplier relationship 30 75.00 2
Employee friendly 30 75.00 2
Teamwork 40 100.00 1
Effective communication and transparency 30 75.00 2
Sincerity 40 100.00 1
Loyalty 40 100.00 1
Source: Field Study

21
TABLE – 17: RESPONSE REGARDING ADVISE TO NEW ENTREPRENEURS TO
OBTAIN TRAINING
Particulars Number Per cent
Commitment 15 37.50
Building teams 5 12.50
Courage 2 5.00
Risk taking 16 40.00
Turning dreams into reality 2 5.00
TOTAL 40 100.00
Source: Field Study

TABLE – 18: RESPONSE REGARDING MOTIVATIONAL PATTERN


Particulars Number Per cent
Market opportunity 5 12.50
Interest in field 10 25.00
Experience 10 25.00
Native land 15 37.50
TOTAL 40 100.00
Source: Field Study

22
Motivational factors for starting the ventures were: native land (38 per cent), interest
in the activity (25 per cent), experience (35 per cent) and market opportunity (12 per cent).
They had land and buildings and support for starting their ventures at their native lands
(Table–18). The location of the business was fully satisfactory for 70 per cent of the
entrepreneurs. The rest (30 per cent) had partial satisfaction and no satisfaction. The reason
was shifting the business from one centre to another centre in the city (Table–19). It is
heartening to note that all the enterprises had been managing well and generating profits.
Twenty per cent of them had profits of above rupees one crore per annum. About 50 per cent
of them had about, Rs. 10 lakhs to Rs. one crore (Table – 20). The entrepreneurs (62 per cent)
would like to expand their respective enterprises with the profits generated and reserves they
had. About 38 per cent had some plans to introduce new technology (Table–21).

More than half of the entrepreneurs interviewed stated that they would like to start
some new activity for expansion. The rest opined that they introduce new products in future
(Table–22). The entrepreneurs stated that they need some assistance from the government. In
some places development of infrastructure was the main factor. Extending some concessions,
tax exemption and encouragement to expand the business, export incentives were some of the
expectations of the entrepreneurs from the Government of India (Table–23).

The strengths of the business enterprises expressed by the entrepreneurs were: strong
team work with family members (45 per cent) followed by offering value added services (25
per cent) customer loyalty and changing technology (25 per cent) financial soundness. The
main weaknesses were unable to predict future. The growing market for business was an
opportunity. The threats were: price war or competitiveness and changing technology
frequently (Table – 24).

The entrepreneurs used to have family meetings / get-togethers monthly twice or more
(38 per cent). One fourth of them had monthly meetings to discuss various issues on
managing business (Table–25). About 63 per cent of them had succession planning and
would like to have from their respective families (Table–26).

23
TABLE – 19: RESPONSE REGARDING SATISFACTION REGARDING BUSINESS
LOCATION
Particulars Number Per cent
Fully 28 70.00
Partially 6 15.00
Not satisfied 6 15.00
TOTAL 40 100.00
Source: Field Study

TABLE – 20: RESPONSE REGARDING PROFITABILITY OF THE ENTERPRISES


PER ANNUM
Particulars Number Per cent
Below Rs. 10 lakhs 12 30.00
Rs. 10 lakhs – Rs. 50 lakhs 15 37.50
Rs. 50 lakhs – Rs. 1 Crore 5 12.50
Above Rs. 1 Crore 8 20.00
TOTAL 40 100.00
Source: Field Study

24
TABLE – 21: RESPONSE REGARDING MODERNIZATION OF OPERATIONS
Particulars Number Per cent
Expansion 25 62.50
New technology 15 37.50
TOTAL 40 100.00
Source: Field Study

TABLE – 22: RESPONSE REGARDING FURTHER PLANS FOR EXPANSION


Particulars Number Per cent
New activity 22 55.00
New products 18 45.00
TOTAL 40 100.00
Source: Field Study

25
TABLE – 23: RESPONSE REGARDING ASSISTANCE REQUIRED FROM
GOVERNMENT
Particulars Number Per cent
Infrastructure 15 37.50
Concessions 5 12.50
Tax exemption 5 12.50
Encouragement 5 12.50
Export incentives 10 25.00
TOTAL 40 100.00
Source: Field Study

TABLE – 24: RESPONSE REGARDING SWOT ANALYSIS OF FAMILY


BUSINESSS
Particulars Number Total
Strengths
- Strong teamwork 18
- Financial soundness 2
40
- Changing technology 5
- Customer loyalty 5
- Offering value added services 10
Weaknesses
40
- Predicting future 40
Opportunities
40
- Growing markets 40
Threats
- Price war 20 40
- Changing technology 20
Source: Field Study

26
TABLE 25: RESPONSE REGARDING FAMILY GOVERNANCE
Particulars Number Per cent
Monthly once 10 25.00
Month twice or more 15 37.50
Quarterly once 8 20.00
Half-yearly once 5 12.50
Annually once 2 5.00
TOTAL 40 100.00
Source: Field Study

TABLE 26: RESPONSE REGARDING SUCCESSION PLANNING OF FAMILY


BUSINESS
Particulars Number of Per cent
enterprises
Yes 25 62.50
No 9 22.50
Can’t say 3 7.50
Looking for outsider 3 7.50
TOTAL 40 100.00
Source: Field Study

27
Suggestions:
Several studies revealed some interesting insights. The study is an additional
contribution to the existing literature on family business. In Asian countries an important
strength is family bondage. The members of the family usually had it and always try to
continue the bondage for ever. As per the study also there was an excellent cooperation,
coordination, love, respect, unity and integrity among some family members. “We had trust
on our elders, youngsters and all family and they never act on their own independently,
unless we decided in our family get-togethers” said one of the great entrepreneurs who had
been managing the business for the last sixty years along with his two sons and four grand
children. The important traits of the great grand parents and parents were obtained by their
third generation entrepreneurs by birth. There was some impact on the family due to the
changing society. The third generation members require full freedom, and applying their own
thoughts to start new business ventures. Third or fourth generation enterprises, their
contribution and constraints should be examined and some awards should be given to the
promoters of such ventures (First generation entrepreneurs). The great Indian values and
culture should be protected in educating, enlightening, empowering family members in
fulfilling the dream of the nation. The great leadership traits of Indian family are to be spread
to all over the globe and the fragrance of Indian values are to be spread in the global village.

The great institutions like Indian School of Business (ISB), universities, government
bodies should have to focus their attention on the management and sustainability of family
business ventures. Separate management courses on family business management (MBA –
FBM) should be offered for the benefit of third / second generation entrepreneurs to develop
the business as per the changing needs of the society. The Government of India has to
provide some additional incentives for managing and expanding family business venture.
When professionalism is lacking in managing the business, the head of the family has to
search for a suitable person with professional expertise to manage the business successfully
with sustainability and competitiveness to meet the expectations of the global customers. The
national and international associations, institutions, universities and the organisations
concerned need to focus their attention on family business in the new millennium.

28
ANNEXURE – I

GROWTH OF FAMILY BUSINESS

300000 New
services
oriented
250000 economy
Entry of
200000 large private
corporates
Export
150000 oriented
industry
Import
100000 Ancillary substitution
Textile and to heavy SSIs
agro-based industry
50000 industry

0
1950 - 51 1960 - 61 1970 - 71 1980 - 81 1990 - 91 2000 - 01

Source: Business World, December 2007

29
ANNEXURE – II

INDIA’S RICHEST BUSINESS FAMILIES


(Rs. in Crores)
Value of stake as on
Rank Promoting family (Head) Company
June 21, 2005
1 Premji (Azim Premji) Wipro 43,872.48
2 Ambani (Mukesh & Anil) Reliance Industries 43,087.34
3 Mittal (Sunil Mittal) Bharti Tele-Ventures 20,526.65
4 Nadir (Shiv Nadar) HCL Technologies 8,676.64
HCL Infosystems 1,747.79
10,424.43
5 Sanghvi (Dilip Sanghvi) Sun Pharma 7,435.36
6 Singh (Malvinder Singh) Ranbaxy 7,209.87
7 Birla (K M Birla) Hindalco 2,998.36
Grasim 2,474.77
Indian Rayon 774.77
Indo-Gulf Fertilizers 330.53
6,578.43
8 Bajaj (Rahul Bajaj) Bajaj Auto 4,284.70
9 Hamied (Y K Hamied) Cipla 4,088.52
10 Munjal (B M Munjal) Hero Honda 3,784.07
Source: Business Today, 14 August 2005

30
ANNEXURE – III

SPLITS IN FAMILY BUSINESS

Turnover Assets
Family Name Companies
(Rs. Crore) (Rs. Crore)
Mukesh Ambani Reliance Industries 1,18,353.71 99,532.77
Anil Ambani Adlabs Films 331.64 302.23
Reliance Capital 887.00 298.63
AMBANI

Reliance Communication 12,756.30 20,625.82


Reliance Energy 5,769.33 5,898.36
Reliance Natural Resources 150.68 470.91
Reliance Power 2.25 67.27
Shishir Bajaj Bajaj Hindusthan 1,525.08 1,285.34
BAJAJ

Rahul Bajaj Bajaj Auto 10,639.14 3,178.54

Ratan Jindal Jindal Stainless 5,196.57 3,325.97


JINDAL

Naveen Jindal Jindal Steel and Power 3,899.81 4,929.03


Sajjan Jindal JSW Steel 9,337.34 10,512.76
Prithviraj Jindal Jindal Saw 5,318.79 958.71
Vinay Bharat Ram DCM 97.99 107.54
Tilak Dhar DCM Shriram Industries 743.68 226.81
DCM

Ajay Shriram and DCM Shriram Consolidated 2,872.16 2,145.61


Vikram Shriram
Siddharth Shriram SIEL 188.73 231.25
Source: Business World, 17 December 2007

31
ANNEXURE – IV

POTENTIAL HEIRS OF FAMILY BUSINESS

Turnover Assets
Business Group Patriarch Potential heirs Companies
(Rs. crore) (Rs. crore)
Essar (Rulas) Shashi Rula and Ravi Rula Prashant Rula and Anshuman Essar Oil 473.98 303.86
Rula, Smiti Rula and Rewant Essar Shipping 1,024.30 1,919.10
Rula Essar Steel 9,000.46 13,554.19
Godrej Adi Godrej Tanya Dubash, Pirojsha Geometric 175.32 120.10
Godrej and Nisa Godrej Godrej Consumer Products 796.66 243.65
Godrej Industries 710.81 542.58
Videocon V. N. Dhoot, Rajkumar Dhoot Anirudh Dhoot and Videocon Appliances 1,170.58 1,303.25
and Pradeepkumar Dhoot Saurabh Dhoot Videocon Industries 8,691.75 7,178.45
Wadia Nusli Wadia Ness Wadia and Bombay Burmah 221.70 152.53
Jehangir Wadia Bombay Dyeing 492.35 654.58
Source: Business World, 17 December 2007

32
References:
1) Business Gyan (2007), “50 Years of Indian Entrepreneurship”, The Author,
Bangalore, pp. 69 – 71.
2) Business World (2007) “Lessons from the Banyan Tree Beyond the Family Fued”,
The Author, Mumbai, 17 December, pp 28 – 32.
3) Dwijendra Tripati (1999), “Change and Continuity” pp. 26 – 30
4) Effective Executive (2007) The ICFAI University Press, Hyderabad.
5) Gita Piramal (1999), “A Crisis of Leadership”, Family Business Symposium, pp 43 –
49.
6) Gurucharan Das (1999) “Family Business: A symposium on the role of the family in
Indian Business” October, pp 2 – 16.
7) Ibid.
8) ICFAI (2002), “India’s Family Owned Businesses”, Hyderabad.
9) ICFAI (2007), “Effective Executive”, Vol. IX, No. 5.
10) Jane Hilburt Davis, www.familybusinessconsulting.com
11) Miller Danny & Labreton Miller Isabel (2005), “Managing for the Long Run – Lesson
in Competitive Advantage from Great Family Businesses”, HBS Press, Boston.
12) Miller, Danny and Lebreton Miller, Isabel (2005), “Managing for the Long Run:
Lesson in Competitive Advantage from Great Family Businesses”, Harvard Business
School Press, Boston.
13) Ninan T N (1999), “Chequered Past and Uncertain Future” Family Business
Symposium, pp. 50 – 56.
14) Ramachandran K (2006 & 2007), “Case Studies on Family Business”, Indian School
of Business (Mimeo).
15) Retailer – 2007, Vol. 2, No. 7, December, pp. 36
16) Sudipt Dutt (1999), “Boys to Men”, Family Business Symposium, pp 31 – 36.
17) Vinay Bharat Ram (1999) “The Colours of Decision Making”, Family Business
Symposium, Op. cit., pp 17 – 25.
18) www.familybusinessconsulting.com

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