It has been pointed out, however, that between 1970 and 1990, Indian firms were below par, considering global standards. After the liberalization of the Indian economy in 1991, reduced government control, lower duties and a dramatic drop in restrictions on Foreign Direct Investment (FDI), existing firms suddenly faced fierce competition. Those family enterprises which were proactive and nimble were the only ones to survive and flourish, while the others faded away.
India is not unfamiliar with family businesses. The country has a rich history of family-run companies. Originally restricted to communities in northern and western India, especially Rajasthan and Gujarat, family businesses contribute to roughly 85 per cent of the national Gross Domestic Product (GDP) every year. Some of the best-known family businesses in India are Tata, founded in 1868 by Jamsedji Tata; Aditya Birla, founded in 1857 by Shiv Narayan Birla; TVS, founded in 1911 by T V Sundaram Iyengar; and Reliance, founded in 1966 by Dhirubhai Ambani. These companies have also made their presence felt global.
In spite of their success, Indian family-run enterprises face a number of problems. The key among them is succession planning. It is the lack of succession planning that prevents many companies from lasting more than two or three generations. To avoid its business from disintegrating over time, a family must ensure good governance.
Family relationships play an all-too-important- almost arbitrary- role in deciding the position a person occupies in the hierarchy of the company. This is aggravated by the fact that a few castes predominate most businesses- to the point that caste controls the presiding culture in these families. Additionally, higher positions are more likely to be held by the men in the family rather than women.
Among the most notorious fallouts in the Indian industry was the struggle of succession between Dhirubai’s sons Mukesh and Anil. Interestingly, it is this feud that galvanized the extremely diversified GMR group to chalk out an intricate succession plan, code of conduct and entry and exit rules for a family member into and out of an enterprise. Importantly, this led to a push for visionary leadership and strong management.
I have pondered on the problem of succession faced by Indian family businesses. It is my considered opinion that the difference between the family businesses in Germany, where they are highly successful, and the ones in India is in the extent of involvement of professionals. Where there is greater professionalism, there is success:
To integrate my children, Nilabh and Saumya early into my business, I insist that they interact with my customers, whom I often invite to my residence for dinner. My villa doubles as an office from 9am to 6pm every day.
Currently, my brothers are also involved in his business, however I let the professionals in my company do what they know best without interfering.
I have earlier mentioned that a considerable number of family firms fizzle out due to succession problems. It is also true that some of the biggest names in the Indian industry are also family-owned companies, some dating back to the nineteenth century. Learning from them could greatly improve the current scenario in India.
