Highlighting one of the four imperative components of any family business to evolve, CEO, Parampara Family Business Institute, N Krishnan said that transition of a family business to generations was crucial and also indicates the successful management of the business.
Speaking at a session on ‘Awareness on Family Business’ jointly organised by the Confederation of Indian Industry (CII) in association with Parampara Family Business Institute (PFBI), a GMR social initiative, at a private resort here on Thursday, Krishnan pointed that family businesses contributed over 60 percent to the Indian GDP and had generated employment of 67 percent.
However, Krishnan said it was not easy to ensure sustainability of family business owing to several challenges such as capability and competency, governance, wealth and trust management issues.
“There will be differences in any business, especially if more than one generation is involved. With longevity of life increasing, working three generations together is a strong probability leading to the possible generational gap and ideas. Any conflict of the ideas or other issues need to addressed at initial stage so as to keep the business going,” he said.
Commenting on the encouragement aspect, Krishnan said that the founder of the business should encourage the coming generation to shoulder the business.
“Family businesses in India have a higher premature mortality rate with 80 percent of the family businesses dying before they reach the third generation. While Seven percent are sold before they reach to the second generation, only three percent businesses grow while 10 percent maintain their size,” Krishnan pointed.
Later, senior consultant, PFBI, S V M Murthy spoke on how to make a family business successful and said that it was important to institutionalise a family business as the family which goes into the fourth generation could have many employees and could be system-driven with time.
“It is necessary that you make the business very interesting to the next generation and start the process in the very beginning itself, as it can never be a one man show. Hence, it is necessary that your family members are enrolled and educated about your plans and trade and you stayed clear as to where you want to see yourself in the next five years to come,” he said.
Chairman, N Ranga Rao & Sons, R Guru also shared the secret behind the success of his family in the business for years now.
He said, “Our family has been into the business from many generations as we take conscious decisions for our betterment. We consciously see to it that that even children attend business visits with their parents, just to help them see what respect their father commands in the world of business, If not for which they will be lost midway and won’t get opportunities to know or understand as to what’s in store for them next,” he said.
Over 60 members from various business families from in and around Mysore participated in the event.