The Economic Times daily newspaper is available online now.

    Family-run businesses rush to streamline operations

    Synopsis

    According to a study on family businesses by Stellar Search, over the next five years, 72% of family-run businesses plan to bring in non-family professionals to help run operations.

    generic-it-bccl
    A family business goes through various stages of evolution, depending on the vision of the founders.
    (This story originally appeared in on Dec 24, 2019)
    MUMBAI: Family-owned businesses are professionalising at a fast pace. The move is an effort to tackle new realities like increased competition, democratisation of information and other aspects that are disrupting business models.

    According to a study on family businesses by Stellar Search, over the next five years, 72% of family-run businesses plan to bring in non-family professionals to help run operations (see graphic). The study covered over 50 family businesses across industries, having a turnover in the range of Rs 500-25,000 crore. In addition, Stellar surveyed 150-200 professionals, including people currently working in a family business or are making the transition, or have worked in a family set-up in the past. What’s interesting is that the issues faced are the same across these companies.

    Empower Your Corporate Journey with Strategic Skill Courses

    Offering CollegeCourseWebsite
    Indian School of BusinessISB Chief Technology OfficerVisit
    IIM LucknowIIML Chief Operations Officer ProgrammeVisit
    University of Western AustraliaUWA Global MBAVisit
    Five


    Stellar Search founder Shailja Dutt said, “Most large companies are professionally run, but they are now bringing in the next generation of leadership professionals. They are investing heavily in succession planning, developing the leadership minus-one levels within their organisations.” Dutt said the next-generation promoters are incubating businesses which interest them. “Varun Thapar (of KCT Group) has successfully incubated a real estate business. Parth Jindal’s vision and interests have led to the JSW Group’s foray into sports, paints, cement and many other businesses outside steel,” she added.

    At Kanoria Chemicals and Industries, a leading manufacturer of chemical intermediates, the third generation of Kanorias is keen on inducting and developing domain experts in the company across functions. Although decisionmaking at the 60-year-old company has largely been top-driven, the Kanorias have realised the importance of bringing in diversity of thought. “We want to professionalise so that we have better systems in place, more market intelligence and more strategic and data-driven thinking within the organisation,” said a company official.

    When Aakash Educational Services (AESL) ventured into a new business Aakash Digital, AESL CEO Aakash Chaudhry nursed it to take it to a level where it then required a full-time professional CEO. Core functions at AESL — in which Blackstone recently invested around Rs 1,350 crore — have already been professionalised. “When Aakash Digital reached Rs 25-crore annual revenue, I wanted somebody to run the business, like putting in 100% of their time and energy,” said Chaudhry, 40, the younger son of AESL founder and chairman J C Chaudhry. A family business hires professionals if there’s nobody from the family to take charge, when family members lack the skillsets to remain competitive, or when the business is in an expansion mode. “Since I am the second generation, I joined the business to help my father who started this business. It was a progressive need-based decision,” said Chaudhry, who is the CEO of AESL.

    On the other hand, Aakash’s elder brother Aashish Chaudhry, who is a doctor by profession, chose to set up Aakash Healthcare, a multi-specialty hospital, which became a new venture for the group. “That’s how family businesses evolve. When the core business generates cash, it can be deployed into new and strategically aligned ventures. Our investment in digital was a strategic step. Health was a family priority,” said Chaudhry.

    A family business goes through various stages of evolution, depending on the vision of the founders. “If they only want to have a local presence and hold, they can run it like a retail store. If they want to grow the business, they will require a leadership team, the right resources and tools to grow it. For any future venture that we get into, we may have to look at professionals to run it, depending on the stage of development & growth need of founder,” said Chaudhry.

    According to Stellar’s analysis based on a Credit Suisse report, family-owned businesses account for 90% of India’s industry output and nearly 80% of its GDP.



    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News, Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the ET ePaper online.

    ...more

    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News, Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the ET ePaper online.

    ...more
    The Economic Times

    Stories you might be interested in