There are many definitions of a family business. Such entities can range from very small enterprises run out of the family home to large public entities. Family businesses have been defined as ‘businesses that are owned and managed by one or more family members’.
From the local dry cleaner to the largest breweries, family business makes up 90 percent of the thirty million businesses in the United States. Yet only one-third make it to the second generation and 10 percent to the third as owners.
Family business is an essential element of American society- a wellspring of innovation, and a source of ongoing joy, accomplishment, and values not only for family members, but for the employees, customers, and the communities they serve. In India, too, we have a rich tradition of family businesses-the Tata’s, the Birla’s, the Dalmia’s, the Godrej’s, the Ambanis and the Adanis to name only some of the biggies.
But the issues and problems are essentially the same in every country of the world.
Just as they make a meteoric rise, the fall, too, is steep. Take any big business family worth the name; it has disintegrated after one or two generations. So, sustaining the family business is as important as managing it across generations. A common joke told about family business- whether it is America or India- is that the first generation builds the business, the second generation lives off the business, and the third generation kills the business.
American business families have a peculiar understanding of business: to live well without having to go to work everyday persuades many family business owners to sell their businesses. For many Americans the goal of starting any business is to sell it, eventually, for a lot of money.
Many people also think that a life of luxury and ease is the most desirable human estate, and that the person who has the most money at the end of their life ‘somehow’ wins. This is in great contrast to Indian way of business thinking where sons and daughters automatically become heirs of family business.
Why do family businesses collapse? The reasons vary: lack of understanding in elements that create a culture of business in the family; inability to bring up children into the business in a positive way; unable to handle conflict between family members; not creating opportunities for non- family members, not renewing the business to build a solid customer base and, finally, not preparing heirs to take the reins. So, family business can be successfully passed on to generations if their current owners had a better grasp of these factors.
Marshall B. Paisner, ex-Chairman of the Board of the Massachusetts-based ScrubaDub Auto Wash Centers Inc, one of the world’s leading car –wash chains, and an active proponent of the family business, in his book Sustaining The Family Business : An Insider’s Guide to Managing Across Generations is of the view that ‘sustaining the family business is a celebration of the unique dynamics that occur when family and commerce meet.’ When family businesses go bust it is a loss to the family, the community, the local economy and the society as a whole.
(The author Bhaskar Parichha is a Bhubaneswar based senior journalist and columnist. Views are personal)
Tags: #FamilyBusiness #BusinessCrises #SaveFamilyBusiness #FamilyEntrepreneurship #HomeGrown #LocalBusiness #TATA #BIRLA #Ambanis