A lot of research goes into the Digital India Podcast and Web Marketing Academy’s FIR podcast show. If we got into all of it on the podcast, we could go on and on for hours. However, that does not mean that you should not have access to all the rich resources we unearth in the research process. So we thought, why not share the research with you – give you the opportunity to learn more?
Here goes – all the research behind the content for Podcast Episode #016: Family Businesses Continue To Woo India Inc
In this episode, we talked about family businesses in India, their contribution to the country’s economy and start-up culture, the good and bad of running family owned businesses, the uniqueness of such a business, employment generation, wealth creation, need for corporate governance, and lots more.
Listen to the podcast to get it all.
History of family owned businesses in India
Deep rooted cultural values, a joint-family structure; so many reasons make India the bedrock of family owned businesses. Right from the Indus Valley Civilization to modern times, family businesses in India are thriving and growing at an aggressive rate. Do you know that the world’s oldest family owned business comes from India – House of Mewar? It was founded in 734AD and has been unbroken for 76 generations! Check out The Raja’s Rules: Timeless Continuity Tips from the World’s Oldest Family Business for more.
Also read about India’s 10 oldest family businesses.
Some stats on Indian family businesses
According to the Private and Entrepreneurial (P&E) Client’s Family Business Survey 2012 by PriceWaterHouseCoopers Pvt. Ltd. (PwC):
- 27% of the sales today are global and are expected to rise to 34% in the next five years
- 78% family enterprises support community initiatives
- 78% go out of their way to help and retain staff in bad conditions
- 80% enable employments in the area of operation
- 96% of the Indian family businesses have non-family members on their board as compared to the global average of 64%
- 64% have non-family staff owning shares, as compared to the global average of 31%
Contribution of family businesses to India’s economy
Family businesses account for almost 85% of businesses in the country; they contribute nearly 60-70% of GDP (Boston Consulting Group). Two out of every three listed company in India is family owned. In fact, India has the largest block of family owned businesses in Asia.
According to the CII’s Family Business Network (India chapter), the gross output of these family-run businesses accounts for 90% of India’s industrial output, 79% of organized private sector employment, and 27% of overall employment, superseded only by the government and Public Sector Undertakings, companies in which the government own the majority of the equity.
Read up on PwC’s Family Business Survey 2012-13 for case studies on DB Corp and other large businesses. And there’s this great article on The Hindu Business Line – Family Managed Businesses are the Unsung Heroes of the Indian Economy – with Adi Godrej, Chairman, Godrej Group’s say on the matter.
Family owned businesses are also investing in Indian start-ups in a big way. So far this year, Indian family offices, led by PremjiInvest, have already invested about $200 million across stages, according to Venture Intelligence.
Read more on this:
- This is how big family-run businesses will ensure that startups keep sprouting all across India
- Big family businesses like Reliance, Birla showing more interest in startups in the digital space
Unique advantages of family run businesses – for owners, employees and customers
Running a family business is far from easy. You need the right balance of professional–familial skills and capabilities. Yet, family run businesses strike a chord with employees and customers. That’s because family businesses are (typically):
- driven by passion and strong values
- free of nepotism and bureaucracy
- agile decision makers
- employee friendly and secure (very low attrition rate)
- united in the goal to preserve and grow the family name
- built on customer relationships
- very focused on local customer needs
- guided by the deep industry insight of seniors
- enriched by the disparate ideas that come from at least two generations
- focused on the long-term
- frugal in good and bad times
- How personal relationship in family owned business is powerful?
- What makes family business unique?
- What five features of family firms offer unique advantages?
Challenges faced by family owned companies
From little or no financial support from the government to family splits and squabbles, family businesses have their own set of challenges, such as:
- lack of corporate governance
- lack of innovation – 56% face this
- proper succession planning
- attracting the right skills and talent
- addressing the need for new technologies
- conflict management
Some of these issues are being addressed by family businesses with a Family Constitution – a written document which specifies the rights, responsibilities and norms for working as well as non-working family members. The constitution protects the interests of the family in the long term. This requires conscious decisions to beat increased complexities and competition which did not exist some ten years ago.
Community & Support for family businesses
There is a wealth of resources and help available to family owned businesses – education, community forums, and support groups. Here are some:
- Family businesses reaching out to professionals for help
- Consulting firm McKinsey is looking to offer in India its knowledge and expertise in family businesses.
- KPMG Family Business Community (blog & social network started in August 2013) shares insight, experience, research, and point of views on what matters to family enterprises in the day-to-day running of their business. They cover topics including governance, assurance, succession and next generation, exit strategies, wealth preservation, philanthropy and growth.
- FMBLinks, an initiative of Center for Family Managed Business (FMB).
- CII’s FBN India Chapter – association of family-owned companies in India. The association was founded in 2005 and is the Indian chapter of the Family Business Network International (FBN International). FBN is a global network of family-owned companies headquartered in Switzerland, with local chapters in over 40 countries.
- Parampara Family Business institute, a GAAR social initiative that’s committed make a difference to family owned business community especially the small and medium business enterprises.
- Certificate programs & courses for family run businesses – BFF (Business Family Foundation), FFI Global Network (Famliy Business Advicing), EDI (Entrepreneurship Development and Training in India & the globe).
- The Welingkar Institute of Management in Mumbai runs an 18 month course for those who own companies.
Future of family businesses in India
According to McKinsey, family firms in emerging countries with annual revenues exceeding $1 billion will rise to 37% in 2025 from what was 16% in 2010.
There are excellent job opportunities in the field as well:
- Certified Family Business Associates – there’s a big gap in demand and supply
- Professional assistance for family governance
Tools for startup small & medium family businesses
Here are some tools to get family businesses going in the digital world:
- Take your business online, in partnership with Google
- Tie up with internet.org for greater reach. Check out these case studies:
- Learn how customers connect with businesses
Some more references
Here’s some more digging for you:
- Book: Role of Family Business in Indian Economy by Kshama V. Kaushik
- Book: The Dhandho Investor: The Low-Risk Value Method to High Returns by Mohnish Pabrai. A line from the book that resonates “Heads, I win! Tails, I don’t lose that much!”
- Article on BusinessIntelligence Middle East: What makes family businesses unique, and what can we learn from them?
- Article on FMBLinks (SPJIMR): Family Managed Businesses In India – The Opportunities And The Challenges
Enjoy the journey! Till the next post!
Monica is a digital marketer, blogger and technical writer. She’s helped small businesses with content strategy and development since 6+ years and is now extending the value with online marketing. Her goal is to introduce more businesses to this exciting and profitable marketing medium. She is a regular blogger for WMA. Connect with her on Linkedin or Twitter for digital marketing assistance or to say hello!