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Thursday, October 24, 2019
 
 

FUTURE OF THE FAMILY

The business of family

 

Family businesses are flourishing, but they need to get more agile
SIDDHARTH NAHATA | Issue Dated: May 13, 2007
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The business of family Back in 1991 when the floodgates were ope-ned, many business families succumbed to the new age challenges and virtually became extinct.

However, quite a few not only survived but actually became the leaders. Some focussed on core competence while for some it was efficient project management that made the cut. For these companies, offence became the best defence. These companies quickly sensed the changing environment and tuned themselves to the new way. These family-run businesses not only became big shots in the domestic arena but they became the shining face of the Indian business domain across the world. The reach, size, scale and scope of these businesses is increasing by the day and they have conked out the myth that professionally run businesses are better than family run outfits.

The ingredients of the success were improved corporate governance, inclusion of outside professionals in top management, technological upgradation, increasing stake in group companies etc. Even now, the tug of war between Indian business families and professionally run business, is seemed to be favouring family owned businesses. In the Sensex, more than 15 companies are family businesses accounting for more than 50% of the pie. In the National Stock Exchange also, the tale is no different. More than 25 family-owned businesses are in the 50 scrip benchmark index.

However, despite the above facts, family owned businesses are prone to issues like succession planning (Tatas), sibling issues (Bajaj, Ambani etc.) and branch rivalries. Owing to these critical factors family-owned businesses lose some of their shine in the minds of customers, investors and lenders. In the past 20 years, there have been more than 20 corporate feuds in India. The Modis Dalmias, Birlas, Goenkas, pick any, you will find a corporate feud. However, in some cases, sibling rivalries or branch rivalries have acted as a boon for the investors in a sense that after the split they received shares in the both post-split groups, like it happened in the case of Reliance.
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Issue Dated: Feb 5, 2017