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Leading a family-run business calls for different skill-sets and leadership abilities
By Priya C Nair
Going by definition, a ‘family business' is an enterprise (with an intention of making profit) owned by the member or members of a single family. It is the most common and popular form of business that exists today. Many leading names are family-run. A growing economy like India has more potential in this space. A recent study by PricewaterhouseCoopers - Family Business Survey (FBS) 2012 says that 74 per cent of family businesses in India have witnessed growth in sales figures in the past year against the global average of 65 per cent. So, the outlook is promising.
But, do you think leading a family-owned business is as simple as coming to office one fine day and taking charge? Think again. Taking up the reins of a family business is no cakewalk. There are several challenges in leading a family entity.
"One major challenge for me was living up to the expectations that were set before I joined the business. I was meant to bring a change and revolution in the monotony of our business operations owing to my education and knowledge," says Anirudh Dhoot, director, Videocon. "Hard work was the only way out. I sat and learnt a lot from my seniors, read a lot of management books, met a lot of experienced people, spent sleepless nights and finally overcame most of the hurdles," shares Dhoot.
"There must be a clear strategy in place on the functions of multiple family members and clarity on who is doing what. We had a strategy in place before the second generation came in, so that there is no overlap of responsibilities and even the employees need to be clear on the leadership positioning," feels Mithun Chittilappilly, MD, V-Guard Industries Ltd, a second-generation owner running the family business.
Many a times, family-owned businesses hit the headlines for all the wrong reasons (read: the succession feud). "A leader must proactively plan for leadership succession; there is a need to not only systematically develop the second generation of leadership, but also look beyond family relations to find the right successors. Business leaders must also prepare for potential internal conflicts related to such succession," informs Ashish Arora, founder & MD, HR Anexi. The absence of a competent family member should not be a deterrent for the growth of the business. Organisations must always be open to the idea of bringing in competent talent from outside to lead the firm, though experts suggest that it's vital to weigh the pros against the cons of doing this.
Separating ownership from management is a tricky factor in family-owned businesses. "Family members work on a payroll like any other employee. Before we got listed, we transferred the brand name owned by the family to the company. We have a very strict board of directors and do not have too many dealings with the promoter off the group. We do not talk much of business at home, though we bounce of ideas. We have an informal meeting of family members once in three months for discussions and appraising each other's performance," explains Chittilappilly on how they balance ownership and management.
"A leader must separate the twin phenomena of working IN and ON the business. As a leader of the firm's management, his/her role is to guide executives on managing business performance and help them plan for potential risks and opportunities," suggests Arora.
Making your family entity a success calls for a strong and competent leadership. "In order to manage a business, one must own every aspect of it, take responsibility of all the decisions and also bear the brunt of all the wrongdoings. In order to be a successful owner, one must be a responsible manager," suggests Dhoot. To be a successful leader, it is good to gain some experience outside the family entity, feels Chittilappilly. Before joining a family business, working in any other major organisation will open up new ideas and thought processes beneficial for the family-owned business.
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