Many family businesses in India have a tradition of business established for problem-solving and community service rather than just profit. These businesses, grounded in tradition and family, have thrived, endured and grown over generations. But this legacy has not sustained a lot of family-owned businesses in recent years. Now, Venture-capital funded Startups and multinationals (MNCs) have become new challengers for family businesses. These newcomers have shaken up conventional industries and lured talent from family owned business with modern organization and practices.
If family businesses do not change their modes of operating, they will lose market share to MNCs and startups. Working on your family business helping to gain competitive advantage and survivability is the million dollar question today.
Family businesses are recognized for their cohesive, distinctive culture that is largely influenced by the founder’s objectives, approach and philosophy. The result of this culture is harmony between personnel workers, creating stability and dedication to the organization. However, in a turbulent business environment characterized by constant change, family businesses need to ask whether the cultural underpinning behind the family firm is still geared towards productivity.
While in an everchanging business environment where transformations and business model disruptions are a fact of life, every family-owned business must ask itself whether its culture is fit for purpose. The silver lining is that what most affects a company’s culture, health and potential can be measured, so executives can seize new opportunities. As business leaders, we help identify the gaps, and our OrgEfficience tool helps analyse those gaps to arrive at better solutions.
Based on GatewaysGlobal’s experience supporting family businesses, we have regularly observed that successful family businesses particularly flourish because they embody a cohesive, unique culture, which is strongly shaped by the founder’s purpose, approach and philosophy and embraced by the employees. Such cultures unite employees around a shared mission, creating dedicated and stable workforces.
Purpose and Philosophy
In the early stages of a family business, leaders usually verbally express their purpose to employees. This purpose as guided by the founder philosophy, is a strategic business driving force. This mirrors the underlying core values and decision-making mechanisms that guide daily operations. This strategy may work for smaller businesses, but the need to formalize these elements increases with organizational growth.
Such philosophy should be established, documented, and communicated in writing to ensure that the organization’s philosophy that composes vision, mission, and core values are enforced causing people to change how they behave and think. By having a decisive vision and mission, with significant values, the focus of the organization can be directed towards a specific effort leading to an engaged labor force.
People Management Systems
Family businesses are often resistant to putting in people in strategic roles, such as finance or human resources, who come from outside the family amongst anyone else. Such outdated practice can obstruct building up strong people management systems. Becoming an “employee friendly” organisation is made possible by formal people management systems. Get people management system right, and it can help you hire the right talent, allow meritocracy, make compensation attractive and help in fair system of managing people.
Translating to a modern people management system can help family businesses attract and retain talent, which has always been a challenge. A well-structured people management system not only helps the business assemble a talented team, but also gives the existing family leaders a system to identify and prepare the next generation, ensuring a seamless transition while developing the next generation for leadership roles.
Succession Planning
One of the biggest challenges encountered by family business is succession planning. Many family businesses are eventually passed down, handed down to the next generation. However, while some transitions go smoothly, in the majority of cases, the transition can be fraught with problems if we do not manage the transition process properly. At GatewaysGlobal, we have heard many stories about how succession planning has led to disappointment among senior leaders, who often feel overlooked and pushed to the side.
Succession planning is much more than simply filling leadership roles with family members. What it really needs is a holistic plan designed to accommodate the unique needs of a specific family business advisory and to help ensure a seamless succession, as well as to ready the next generation to take over the reins. Family businesses need a succession plan, striking the right balance between the interests of the present-day leaders and those of the next generation.
Conclusion
Today’s dynamic business environment leaves family businesses management of their own. But if they devote themselves to developing a strong vision, mission and values, building robust people management systems and designing clear succession plans, these businesses can happily navigate modern market landscapes and ensure their continued success.
Using a simple but powerful framework, GatewaysGlobal helps family businesses articulate their current culture, identify elements they may want to change and track progress toward a new vision, mission and values.
