Indian family businesses are increasingly integrating family management and professional governance to ensure successful business continuity over the long term, according to a survey.
Barclays Wealth announced the results of a study titled ‘Ensuring Business Continuity: New Thinking in Building a Sustained Leadership in Indian Family Business’. Researched by Dun & Bradstreet (D&B) in conjunction with Barclays Wealth, the study seeks insights on the way promoters of Indian businesses are thinking to sustain and build their business over the long term.
The survey covered over 200 HNIs operating as owners, co-owners of their respective establishments across five cities: Mumbai, New Delhi, Bengaluru, Kolkata and Chennai.
Contrary to popular perception, the adage ‘like father like son’ seems to be having less relevance for HNIs and owners. The study shows that leaders are increasingly looking beyond their families and first generation entrepreneurs for grooming the next rung of leaders. While promoters retain financial ownership to themselves, nearly 70% of respondents prefer hiring independent professional managers to undertake all or most of the management work
Mumbai and Bengaluru seem to give almost equal preference for professionals within the organisation as well as from the industry. Delhi, Chennai and Kolkata seem to be a little more inclined towards professionals from within the organisation. Preference within family for leadership positions has taken a backseat across cities with respondents from Kolkata being the least inclined (12%).
The study revealed that respondents rated decision making abilities as the top most trait associated with quality leadership. Planning and execution come close to second. Respondents from Mumbai and Kolkata chose decision making and planning as the two top most qualities. Respondents from Chennai favored decision making and execution while those from Delhi rated planning and ethics as two key aspects of leadership. In Bengaluru, values and ethics found equal importance with decision making as critical traits.
Gauging perceptions of family businesses towards leadership, the study revealed differences in perception in various cities. Respondents from Delhi, Bengaluru and Chennai felt strongly that leadership qualities are inherent and cannot be inculcated. This is in contrast to respondents from Mumbai who were of the belief that leadership qualities can be developed by training and mentoring.
Most family businesses consider decision making as the most important trait for quality leadership. It also emerged as the most important parameter for choosing a leader for building a sustainable business environment. Ability to enhance business turned out to be the second most significant ability to be considered while choosing a potential leader. Family businesses in India have ranked ‘values and ethics’ higher than ‘enhancing business proposition’, reflecting the Indian tradition of valuing virtues over business gains.
Efficient and diligent systems and processes along with strong leadership emerge as critical components for building a long term sustainable business environment. Over 90% of the respondents were of the view that corporate governance is an important canon for long term business sustainability. Majority of the respondents also consider corporate governance as a critical element in preserving brand image, maintaining goodwill and operational stability.
Corporate governance was also viewed to be important in building corporate reputation and channelling strategic investments. Over 80% respondents linked the same as crucial to building reputation and capital raising abilities of the firm. This thought is especially significant among respondents who had plans to raise capital through the IPO route. Out of these, 63% viewed governance to be paramount in the success of an IPO.
“The study reflects a paradigm shift in the thought process of family business owners on how they wish to deal with business succession. One of the significant findings is that Indian family businesses have started differentiating between business and family succession and are willing to hire capable professionals to focus on continuity of their businesses. This provides them with the dual benefit of professionalizing their business for long term growth and also creating strategic diversification opportunities within their group. This new thinking also throws light on how family businesses may be looking at succession in a more open and conscious manner,” Satya Bansal, Chief Executive, Barclays Wealth India, said.