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…….

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 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

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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 Stake FY 95 Stake FY 05

TATA Trust 78.0% 65.9%

TATA Group
Affiliates Less than 1% 12.8%
P.S. Mistry 17.5% 18,4%
TATA Family 3.5% 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

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How they control their Empire!

 CROSS HOLDING

 PYRAMIDICAL STRUCTURE

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Restructured Tata
Major Group Tata Sons Stake in Group Company
Companies
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
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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!

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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  Capital Needs

Development Plan (Family and business)

 Guidelines for Family  Leadership team

Involvement succession

 Ownership and Transfer  Succession Governance

Policy

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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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