FAMILY BUSINESS HOUSES IN INDIA
Introduction: Family held and run businesses are the oldest and most prevalent form of business
ownership anywhere in the world. Family businesses form the backbone of any country’s
prosperity and economy. In India, keeping business ownership within a family is a deeply-rooted
practice since ages. India enjoys a rich and glorious history of family-owned businesses. Initially,
family business in India started in the form of trading and money lending involving the hustle
and bustle of the bazaar. It was also confined to certain communities, notably the Gujarati and
Marwari’s especially in the western and northern India. Today, family business almost
contributes around 80 percent of national GDP annually. According to various estimates, more
than 80% of the companies in India are family owned.
In India, there are many highly successful family businesses which are operating for more than
100 years and not only in India but all over the world. The list includes:
1. Tata Group – Founded in 1868 by Jamsetji Tata
2. TVS Group – Founded in 1911 by T V Sundaram Iyengar
3. Aditya Birla Group – Founded in 1857 by Shiv Narayan Birla
4. Kiroloskar Group – Founded in 1911 by Laxmanrao Kirloskar
5. Godrej Group – Founded in 1897 by Ardeshir Godrej and Pirojsha Burjorji Godrej
6. Shapoorji Pallonji – Founded in 1865 by Pallonji Mistry
7. Reliance Group – Founded in 1966 by Dhirubhai Ambani
Advantages: Advantages of family run businesses Family businesses are still thriving in today’s
competitive economy. The following are some of the advantages of family run business:
Stability: Family businesses are ideal in nature as they are loyal to the principles of the founder
and top leadership, which results in overall stability within the organization. Leaders usually stay
in the position for many years, until a life event such as illness, retirement, or death results in
change.
Commitment: There is a greater sense of commitment and accountability by all family members
due to involvement of reputation stake of the entire family. This level of commitment is almost
impossible in non-family businesses. It is natural that all family members demonstrate and share
a level of commitment to the firm since the core of any family business is a shared business
vision and identity.
Leadership: In family run business, most of the time leadership is centered to the senior most
people in the family. So each family member shows faith and loyalty in the top leadership.
Trust: Since all family members know each other and related by blood relations, there is feeling
of trust in each other. Flexibility In family run business, all family members can take any role
which the business needs. You won’t hear, “Sorry, this is not my job” in a family business. They
can take several different tasks outside of their formal role in order to ensure the success of the
company.
Decreased Cost: All family members contributing land, labour, capital and entrepreneurship
means there will less cost of running and managing business. In hard times just like COVID-19,
family members even can take a pay cut or work without any pay.
Disadvantages: Disadvantages of family owned business Every coin has two sides. Same as
with family business. In spite of its several advantages, it has following disadvantages:
Family Conflict: As and when new generations come into the family business, conflict is bound
to happen due to generation gap. There are many cases of conflict in family business in India like
famous case of Reliance when two brothers Mukesh and Anil divided the India’s biggest
corporate group in 2005.
Unstructured Governance: There are no formal governance structure in many small family run
businesses because of the level of trust inherent at family firms. Unfortunately, this can be
gravely detrimental.
Nepotism: Some family businesses are reluctant to let outsiders come and seat in the top
management and as a result good talent may find it uncomfortable to work in lower levels. This,
obviously, has a far-reaching effect on the success of the company.
Succession Planning: If there is no proper succession planning for the family businesses, there
are chances of family disputes and sometimes it leads to collapse of entire business. The
succession planning and execution is one of the biggest challenges in family run and managed
firms. Most of the family businesses fail to remain family business after first one or two
generations because of lack of effective succession plans.
Succession Planning is a key to success for family owned business Succession planning is a
strategy for passing on an ownership and management of a company—to the next generation in
case of family business or to an employee or group of employees in case of non-family business.
The main object of succession planning is to ensure that businesses continue to run smoothly
after a company’s most important people move on to new opportunities, retire, or pass away.
Need of Succession Planning Succession
Planning is an ongoing process, which needs careful planning and preparation for smooth
transition of ownership, leadership and management of the family business and family assets to
the future successive generations.
A strong succession planning is required due to following reasons: to achieve the objects of
businesses:
to ensure the continuity of business in long run to create a wealth for future generations’
to avoid the conflicts in business
to give stability to the business
to hand over the business from one generation to another.
Every family business must have a solid succession planning for smooth transition of
management and ownership of family business so that the fruits of the business can be enjoyed
by the upcoming generations of the family.
Around the world, family-owned businesses form the backbone of a country’s economy, driving
growth and contributing to development. Family businesses in India have a rich history with multi-
generational such businesses surviving through the ages to become an indispensable part of India’s
economic landscape.
Since independence, entrepreneurial zeal and ambition led to the emergence of many new-
generation family businesses driven by the values of the promoters and owners. The turn of the
century saw a meteoric rise in startups, but family businesses have continued to flourish, accounting
for 79% of the national GDP annually. This is in line with global trends with over two-thirds of all
worldwide businesses owned and maintained by families.
Advantage – family business
Family businesses have proven to be resilient and even in periods of economic uncertainty, they
have not only managed to survive but thrive. A study last year showed 86% of family businesses
around the world optimistic about growth in 2022 even as they recover from the impact of the
pandemic. A recent global study shows Indian family businesses to be more resilient than their
global counterparts.
Family businesses – which can refer to large conglomerates, mom-and-pop stores, and everything in
between – are rooted in values and tradition. Values such as trust, risk-taking ability, centralized
decision making and cost consciousness differentiate them from other businesses. Intuition and
relationships play an essential role in the growth and expansion of family businesses.
What differentiates family businesses in India from those in the rest of the world is the place
‘family’ as an institution holds in Indian culture with family being the fundamental cornerstone of
Indian society. Family businesses prioritize long-term stability over short-term gains and focus on
building an organisation that will last for future generations, thus building and maintaining trust and
goodwill amongst consumers.
The spirit of Make in India
The conversation around ‘Make in India’ may have begun gaining momentum a few years ago with
the launch of the government initiative in September 2014 to increase investments, promote
innovation, and transform India into a global design and manufacturing hub. However, family
businesses have embodied the spirit of Make in India long before the initiative was launched.
The history of Indian family businesses goes back to pre-Independence India. After independence,
they grew despite the challenges of a controlled economy till the 1990s brought the era of
liberalization. They have played a critical part in import substitution with a significant contribution
to the economy. Today, with foreign direct investment (FDI), private equity and venture capital, the
family businesses are holding their own and evolving dynamically in line with the rapidly growing
Indian economy.
Leading the way
Today, about 85% of all incorporated businesses in India are family businesses. They continue to
have a massive impact on India’s economic growth – including contributing to the national GDP,
creating jobs, and assisting in the nation-building process. Some of the largest and most profitable
companies to come out of India are family-run enterprises. Some of these which have existed for
over a hundred years have evolved into global business conglomerates and they have put Indian
business on the world map.
Staying relevant
As resilient as they may be, family businesses are not immune to setbacks. In this age of rapid
digitalization and an evolving global business scenario, family businesses must transition by
reinventing themselves from promoter-driven to being professionally managed. While staying true
to the core values and honouring the legacy, family businesses must adapt and evolve, staying agile
and adaptable to take family businesses into the new age of Industry 4.0.
It is only then that family businesses will continue to lead the way in supporting the Make in India
movement!
