Why Indian family businesses are so successful

90 percent of the world’s companies are family-owned. A recent survey suggests that family businesses in India have been more successful than their counterparts. We dove into the crux of this to understand how the long term financial performance and growth of India family businesses is so interesting.

From the Ambanis and the Tatas in the Indian business horizon to the glamourous lives of Kapoors in bollywood, we Indians have grown up seeing various Indian families leading a particular business niche in the country. This is however true for biz families throughout the world.  On digging deeper into the business landscape, one discovers that most successful businesses or business groups are managed by sturdy family enterprises. Recent research indicates that family enterprises are more successful than their competitors and boast of long-term financial performance and robust revenue growth.

In the Indian context too, such businesses are largely supporting the Indian ecosystem by creating huge amounts of jobs as well as revenue streams in the country thus providing huge potential for the growth of the company. A few names we mentioned above are the best examples of the growth drivers in the country. Family businesses are also known for their long-running vision. It is often said that family-run enterprises think in quarter centuries rather than in quarter years like their competitors. This protracted horizon gives them a unique combative advantage.

That said, despite being widely acknowledged for fortitude and dexterity, the family-run businesses face another kind of issues when they expand. Most family-owned businesses start out with a handful of family members and a loose operating structure. Hence, managing this intricate subtleties of this closely-knit composition poses a risk of its own. Without strict guidelines to govern decision making, families often struggle to agree on leadership choices and succession issues. A strong governance framework is crucial to accelerate growth and avoid conflict. Also, the transition of a business from one generation to the next is a tricky process, thus making succession planning a major concern. The study also shows that 43 percent of family businesses don’t have a proper succession plan in place and only 12 percent make it to the third generation. A well-thought-out succession plan can possible ensure an unblemished transfer of power and management for business continuity.

But in the end the cornerstones of family-owned enterprises such as trust, values, purpose, culture, and legacy can never be overlooked. However, to thrive in the current everchanging business environment, family-owned businesses need to gear up to deal with disruptions and unforseen challenges. In the post COVID era, many family businesses have been seen make strategic investments towards digitization and prioritize environmental, sustainability, and governance (ESG) issues. While developing their people and leadership team, they also need to foster a corporate culture of inclusivity to drive growth and build communities.