Skills more critical than blood in family firms

Family owned business can no longer afford to secure the top management positions for family members without considering the educational qualifications, managerial and entrepreneurial skills, Ranjan Das, professor of Strategic Management at Indian Institute of Management, Calcutta (IIMC), warned here today.

Speaking at an interactive session on 'Family Business In Transition' organised by the Bharat Chamber of Commerce, Das explained that Indian family run businesses were passing through a transition period marked by changing market structure, increasing expectation of managers and most importantly, their own family structure.

"With the opening of the economy, family owned companies should more concentrate on timely restructuring of company with appropriate diversification and induction of professionalism in the way it operates to survive," said Das.

Separation of ownership issue from management was the key in the changing business scenario in India, he noted.

"Customers are not bothered about the structure of the family that delivers the goods. It is the goods and service delivered that matters. A professionally managed company first wins its competitor's customer, then human resource and lastly, asset of the company," he added.

Restructuring was another important issue that all family-run businesses had to accept.

"Capital market, foreign investors and customers find it easy to evaluate a diversification that is linked, that was the case few years back. Diversifying in linked business areas are very important in not only the growth of the business but in satisfying the increasing aspiration of the members of the growing family," he added.

For sustenance a company needs to have a proper selection system for its successors.

A company needs to look ahead of time to realise the company requirement in future and choose successors in the position of leader accordingly, added Das.

"This is the time when a company should think beyond its members as the sole successor. Efficiency should be most important selection criterion. Issues should be handled with efficiency as professional managers are coming up fast who have the capacity to lead an organisation." he said.

Only 30 per cent of first generation family owned businesses in the country reach the second generation and as few as 10 per cent of businesses lasted till the third generation, he warned.