FAMILY BUSINESS SPECIAL...Five Lessons from Family Businesses

Five Lessons from Family Businesses

Cultural continuity, long-term vision and a more meaningful involvement with all stakeholders set family-owned businesses apart from non-family entities

New-age companies have learnt a lot from the way families have run businesses for generations. That’s why the focus on culture is so pronounced in these companies. The ubiquitous family businesses hold many lessons for non-family entities. Here are a few:
Lasting Culture
A new culture takes root every time a new CEO takes charge in a nonfamily business. Old practices go and new ones come in. What ensues is confusion. There’s no such drawback in a family concern. Here, employees know what to expect from the promoters. This is true for even seemingly minor practices, such as distributing sweets during festivals. Everyone from the peon to the managing director expects this. That’s the culture of the place. In a family business, culture evolves and becomes sustainable over time. It doesn’t change with the boss, as in a non-family business.
Long-Term Vision
For a non-family business, quarteron-quarter growth is so important that the obsession remains even during extreme situations such as downturns. As a result, they can’t take bold decisions that may help in the long run. A family business, on the other hand, is rarely under such compulsions. It can invest even during a downturn. After all, the capital belongs to the family. There’s merit in it because a downturn is the best time to invest in capital goods, since that’s when their prices are weak. What is needed is a bit of patience, giving time for the market to recover and the investment to bear fruit. They can similarly be bold in exiting businesses whose prospects are bleak. The late management guru CK Prahalad used to describe such situations with the analogy of a frog in water that manages to adapt to a gradual heating of the liquid. It eventually gets killed because of this. The lesson? Jump out at the right time.
Stakeholder Comfort
Non-family businesses should realise that there are more stakeholders than just the management and shareholders. One can’t just keep pleasing them. Family businesses are far more meaningfully involved with all stakeholders. The relationships forged by those running a family business with suppliers, customers and employees are family relationships, not transactional ones. It isn’t uncommon for a family to be doing business with suppliers for generations together. Trust is easily built in such relationships. The ties are so deep that a dealer in Ludhiana or Kanyakumari expects to be invited to a wedding in the business family.
The Art of Giving
There is a misconception that Indian family businesses don’t give back to society. That’s not true. It is just that they haven’t sought publicity. There have even been cases of smaller business families taking up the responsibility of a clean-up when something has gone wrong in their neighbourhood. My grandfather used to say, ‘If you lose your reputation, you can’t get it back, but if you lose one quarter, you can make it up in the next quarter.’ In the Chettiar community that I come from, businessmen invariably keep aside a portion of the money they make every year for charity (mostly education and healthcare). Family businesses have always believed they are an intrinsic part of the society they operate in. Business is seen as a social institution, not a disposable asset. It is only in recent years that corporate social responsibility has caught the fancy of the corporate world.
Stewards v/s Leaders
Finally, members of a business family are trained to become stewards, not charismatic leaders. This ensures continuity of culture. There can be different personalities in a family, but that can be provided for so that the business isn’t affected. This is an aspect where non-family businesses struggle.
As told to Sriram Srinivasan and Sanjay Vijayakumar 

EXPERT VIEW
MV Subbiah
FORMER CHAIRMAN MURUGAPPA GROU

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