Succession in Family Business – Part 1

Banking On Banks

A key benefit of CorporateConnections™ is Learning & Development. Business leaders need continuous executive education to stay ahead and the quality of education must be aligned to the demanding nature of the economy and competitive forces. I present to you a 2-part article outlining my take-aways from this very interesting and informative webinar. This is the first part; you may read the second part here.

CorporateConnections™ strives to bring professionals of high calibre and expertise to conduct seminars, workshops and training sessions devoted to a set of curated subjects. The recently held talk by Professor Neharika Vohra is one such educational event that members of CC found immensely valuable.

Prof. Neharika Vohra has a PhD in Social Psychology from the University of Manitoba and is presently a senior faculty at IIM Ahmedabad which is ranked highly in the top business management school of India. Her specialization in Organizational Behaviour and her research spans a wide spectrum and to name a few; Cross-cultural behaviour, Gender Issues in the workplace, Change management, and Performance improvements through people. She honoured us with a talk, on her recent research on family managed businesses, titled: Succession in Family Business: A Non-Western Model.

The 90-minute talk was based on the research conducted across a cross-section of India’s notable Marwari community famed for the organization and operation of family-managed business enterprises. This is a large and influential business community and Marwari owned companies account for 11% of the market capitalization of Bombay Stock Exchange and most noteworthy are the Birlas. In light of the fact that very few academic types of research has been conducted on the practices of the community, the research was done by Prof. Neharika Vohra, and her PhD research student Agarwala is considered a significant milestone.

A few CorporateConnections™ members are part of family-owned businesses founded by their forefathers while many other members have children who are coming of age and maybe getting ready to take over the reins of the business founded by their parents. The subject was of interest to both kinds of members and hence the research was increasingly important to manage the present and chart the future. And although the context was that of a Marwari community, undoubtedly a lot of characteristics found resonance with other business community as well.

We present a brief summary of her talk.

Key Characteristics of Family Businesses (Marwari Context)

Family + Business + Community

A key characteristic of family businesses is the inseparable intertwining between the family unit and the business entity. Together this unity works within the nurturing confines of the community. All three are essential for the sustainment and success of a family run business.

Dominance and Control

Another feature is the intention of the dominant coalition within the family to retain control. Sons of one brother and their progeny who have formed a strong coalition will work to keep control of the family business and try to marginalize other factions.

Evolving Goals

The family business is not a static being pursuing a simple and singular goal. Instead, it is very dynamic and nimble with goals that evolve with the situation. The family members are actively reacting to the environment and opportunity to keep the momentum.

Multiple Forces

At play are multiple forces that push and pull to keep the family members together and bound towards a shared purpose. They may have simultaneous roles and a shared lifelong history and commitment which gives them mutual respect and privacy as needed.

Women at home

Women have a very limited role in a Marwari run family business, which the research has highlighted. All the shares are with the menfolk, and they may derive the benefits by the holding of their husband, but personally they do not have a share or a role. However, as a mother, women act as a cushion and a sounding board for son-father grievances.

Cultural Code

The code of conduct is deeply ingrained in the community that calls for respect of the elders, family first, and joint living. The members are taken care of, irrespective of their contribution and skills and there is strong support for entrepreneurial activities and ventures.

Father-Son Relationship

The cornerstone of the family managed business is the Father-Son relationship and it has been well entrenched in the community too. It is a parent-child relationship, where the father is the leader and the son is the sub-ordinate but very important to note that they are co-owners irrespective of this hierarchy. The relationship must work efficiently for the success of the son, and this is well understood.