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Managing Family Owned Businesses Professionally

Family Business Management – A new Attraction?

India has always had a huge number of family businesses running for generations. Many of them are in traditional industries that have grown big enough to compete with the professionally managed ones. About 73% of the top 500 companies listed on BSE are family-owned, while almost half the companies on Nifty are second or third-generation family businesses.

Traditionally, the progeny of family owned businesses were acquiring the skills for managing their business from outside India, as it was believed that India lacked specialized programs. But not so now. Many reputed B-Schools have started offering specialized courses catering to the needs of family businesses in their second and third generation.

If family business is not a new concept, then why do we are witnessing a sudden surge in courses related to managing family businesses? The answer is not a one line statement, but has various aspects.

Unique Set of Challenges:

Family businesses were traditionally run on practice wisdom and solely by family members. The funds and resources belonged to family itself. These businesses have seen transformation to more professionally-run organisations. Several family businesses in India like Future Group or the Burman family-owned Dabur India have got top professionals to run their businesses. In such cases scions have to familiarize themselves with emerging innovations and business strategies to hold their position intact

Family businesses in India have their unique set of challenges, succession planning being one of top ones, the other being human resources. The younger generation plays huge role in determining the future of the family business. There is a need to prepare the younger generation with a skill to balance professional competence and family governance principles so that they can work with both non family member professionals and family relationships.

What do B-Schools have to offer?

We have seen that there are lot of family owned businesses in India, but aren’t many business schools that specially cater to the needs of such families and their children. However many big names have entered the league with the objective of providing the right set of skills.

These programs are generally of 12-18 month duration, with a program structure focused on practical learning and international exposure. A generalized version of such program structure is presented hereby

There program usually has three parts. One part is general principles of management like in any other MBA course. The second part is the family involvement area. How the family dynamics are understood and displayed. At SP Jain, the program requires the participant to learn at the institute for one week per month and gain hands-on business experience for the remaining three weeks of the month. Some institutes require the presence of family head in many of the course activities.

The third part is the International exposure. India does not have many family businesses that are long-lasting, whereas in Europe or in the US, there are different industry experiences. By studying such cases from Europe, Latin America and other parts of Asia, the students can learn about succession planning and success of sustenance of family business. ISB students pursuing this course will have an opportunity to pursue a part of this course at Kellogg School of Management in Chicago.

Conclusion

Institutes are cashing in on the opportunity provided by changing trends. The demand has risen 30 to 40 per cent in the last two years. The students have variety of options to choose from depending upon their budget (The cost ranges between Rs. 9Lacs to a jaw dropping Rs. 33 Lacs), time duration and selection process (Many of the institutes have an aptitude test for admission). However a cautious decision should be taken as many of the programs so far focus on business management with little emphasis on family dynamics in Indian context.

The future might see many of the institutes in tier II cities coming up with such courses so as to cater to the need of small and medium family enterprises.

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