Isn't it quite common to hear in Indian families or culture that my son or grandson will carry forward my destiny however this is the case in the Business as well. Do you ever know that leadership from great family businesses ratio is declining. On average 30% businesses last into the second generation, 12% businesses last till third generation and only 3% businesses last to the fourth generation which is occurring due to a lot of reasons.
The first important reason that is found out by the professors is that these businesses don't last long because of the changing CEO. However, it affects the business because everyone has a different perspective for doing business which brought that Italian auto group have gone through five CEO and three chairmen in the last two before bringing the outsider to lead it. This shutdown of family businesses is that after one generation the market value of shares of the business start declining by the average of 60% which is drawn by a Professor of Hong Kong where he took the data for 214 businesses for Taiwan, Hong Kong and Singapore.
It has been seen that family businesses have a great effect on the overall global economy where a study explained that on average if a family business hires 60% employees and on a global level this employment increases to 78%.
The problem faced by the people is that before entering into family business many things need to be taken into consideration for instance uncertainty about levels of autonomy, hidden agendas, lack of dynamism, and the potential for nepotism and irrational decisions.
Good governance is an obvious first hurdle for family businesses that want to hire and keep the best people and compete successfully over the long term. Committing to sound decision-making and management practices is thus essential, whether a company is publicly traded, partly owned by professional investors (such as private equity firms), or completely under family ownership.
But the family business has its own benefits and disadvantages as well. For instance, there are Flexibility in working hours, commitment, stability and decreased cost benefits as well but it lacks Nepotism, conflicts in the family and many more. However, there are key considerations that should be kept in mind.
While making succession planning for the family no conflict of the family should be mind because it's the biggest hurdle that disturbs a lot of business. While making planning it should be noted which business will grow or not ( means will it last up to three generations or not ) and one should prepare the strategy for different period of time.
- By Pooja
(WIB Member)
This is helpful and instructive✊
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