Indian Family Managed Business; History,advantages,evolution,challenges

Family Managed Business: Indian Perspective Presented by:

Anuranjan

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Family Business  Closely-Held firm whose ownership and policy making are dominated by members of an “emotional kinship group”  Legal Right to the Firm  Legal Right to the Firm’s profits

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The Bad News

33% survive to 2nd Generation 15% survive to 3rd Generation

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A Brief History/Facts: Indian Family Business  Traders/money lenders switched to industry-late 19th century  Aggarwals and Guptas in the North, the Chettiars in the South, the Parsees, Gujarati Jains and Banias, Muslim Khojas and Memons in the West, and Marwaris all over India  1950 - 18 Indian and 2 British Family owned 95% business Tata, Birla, Kirloskar, Shriram, Walchand, Thapar, Mafatlal Mahindra, Ramkrishnan, Singhania, Lalbhai, Dalmia-Sahu Jain……. YMT's College Of Management

 Changing business environment and society  Corporate Management  461/500 top companies are family controlled

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Characteristics of Indian Family Business  Loyalty  Family Relationship  Male dominated  Active and non active members YMT's College Of Management

Passing the Baton  Grooming the new generation  Steady growth of stake  Gradually reach the top

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Two cases in point TATA Group RELIANCE Group

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Ownership Structures of Tata Sons Stakeholder TATA Trust TATA Group Affiliates P.S. Mistry TATA Family

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Stake FY 95

Stake FY 05

78.0%

65.9%

Less than 1% 17.5% 3.5%

12.8% 18,4% 2.9%

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Family Tree Of Reliance Group

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Advantages with Family Businesses

Common Values Strong Commitment Stability Loyalty YMT's College Of Management

How they control their Empire!

 CROSS HOLDING  PYRAMIDICAL STRUCTURE

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Restructured Tata Major Group Companies

Tata Sons Stake in Group Company FY95

FY96

FY05

Tata Iron &Steel

2.3

8.5

19.5

Tata Motors

1.8

2.7

21.9

Tata Power

5.6

6.3

28.7

Tata Chemicals

7.9

8.2

15.2

Indian Hotels

13.3

13.3

12.9

Tata Tea

7.6

8.6

15.8

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challenges/Problems and Recommendation: One on One Challenge/Problem 1:  Family Emotions: Ego clashes, sibling rivalry, feeling of being left out…

Recommendation 1:  Open Communication  Mentoring the Members YMT's College Of Management

Challenge/Problem 2:  Family or Business what comes first?

Recommendation 2:  Sit together and decide the way

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Challenge/Problem 3:  Succession Planning and fair to all approach

Recommendation 3:  Plan in Advance  Divide Role not the Family/Group  cotton and jute mills of Birla! YMT's College Of Management

Challenge/Problem 4:  Retaining non-family Professionals:

Recommendation 4:  Universal HR Policy:

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Strategic Management “the Family Way”

Two Different Systems Family system

Business System

7. Emotional Concerns

3. Business Performance

9. Family Needs

5. Business Demands

11.Maintaining Stability

7. Managing Change

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Divide and Rule! Family council

Business Council

 Mission and Values

 Business decisions

 Next Generation Development Plan

 Capital Needs (Family and business)

 Guidelines for Family Involvement

 Leadership team succession

 Ownership and Transfer Policy

 Succession Governance

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Conclusion “Family is the fundamental unit of every other institution. Business evolved due to symbiotic interaction Between family and society (itself made of families). This symbiosis can be made eternal by strategically managing both the institutions (Family and Business) ensuring that family remains united and business is given full autonomy to chart its way according to the changing needs of the time.”

Thank You!

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