Family Managed Business Vs. Professionally Managed Business By K. Gaanyesh

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Family Managed Business Vs. Professionally Managed Business By K. Gaanyesh

  1. 1. Family Managed Business Vs. Professionally Managed Business - Meaning & Definition - Brief History - Characteristics - Challenges faced - Pros & Cons - Conclusion Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  2. 2. Fami l y Managed Busi ness (FMB)  Const i t ut es worl d’s ol dest and most domi nant f ormof busi ness organi zat i on.  Rangi ng f romMSMEs t o Congl omerat es  May or may not operat e i n mul t i pl e i ndust ri es and count ri es. Prof essi onal l y Managed Busi ness (PMB)  Rel at i vel y cont emporary f orm, whi ch account s f or onl y 10-15% i n t he i ndust ri es.  PMBs, usual l y, are l arge ent erpri ses t o congl omerat es  General l y operat e i n mul t i pl e i ndust ri es and count ri es. Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  3. 3. A Fami l y Busi ness ref ers t o a company where (at l east 20%) vot i ng ri ght s are i n t he hands of t he cont rol l i ng f ami l y t han t he sharehol ders; i ncl udi ng t he f ounder(s).  FMB i s PERSON DRI VEN A Prof essi onal l y Managed Busi ness ref ers t o a company where t he vot i ng maj ori t y i s i n t he hands of i t s sharehol ders. PMB i s SYSTEMS DRI VEN Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  4. 4. There is a famous cliché: The first generation builds, The second generation consolidates, and The third generation destroys the family business! Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  5. 5. • Though, 85 per cent compani es i n I ndi a are f ami l y-run • Empl oyi ng about 57 per cent of t he I ndi an workf orce • Just 13 per cent survi ve t i l l t he t hi rd generat i on. • A t hi rd generat i on of busi ness f ami l i es di si nt egrat e because of generat i onal conf l i ct . Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  6. 6. Bri ef Hi st ory of FMB  Fami l y Managed Busi nesses exi st al l over t he worl d  Worl ds ol dest FMBs are e.g. - Kongo Gumi of Japan was f ounded i n AD 578 and i s current l y managed by t he 30t h generat i on.  Some of t he l argest weal t h creat ors and busi nesses are FMBs e.g.- Wal Mart (USA), Samsung (Korea), HTC (Korea), TATA (I ndi a), Bi rl a (I ndi a), et al .  I n I ndi a t oo, t he hi ghest generat or and creat or of weal t h are FMBs. Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  7. 7.  FMB’s came i nt o bei ng i n I ndi a bet ween 1860’s and 1870’s.  Bombay and Ahmedabad- Text i l e compani es.  Cal cut t a- Jut e and Text i l e compani es.  Chennai - Money Lendi ng i nst i t ut i ons. Bri ef Hi st ory of FMB Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  8. 8. Bri ef Hi st ory of FMB • These FMBs, i n I ndi a, were al so known as “Lal a companies” • They were doi ng busi ness i n a t radi t i onal way • Most of t hemwere t he money l enders i n ol den days, t hen became busi nessmen Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  9. 9. Bri ef Hi st ory of FMB  Gupt as & Aggarwal s i n Nort hern I ndi a.  Chet t i ars i n Sout hern I ndi a  The Parsees, Guj arat i Jai ns and Bani as, Musl i mKhoj as and Memons i n t he West  Marwari s al l over I ndi a. Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  10. 10. Bri ef Hi st ory of FMB  TATA – 1868, Jamshet j i Nusserwanj i Tat a (TI SCO, TELCO, TCS, I ndi an Hot el s, Tel ecom, Ral l i s, Vol t as et c.)  Wadi a – 1879, Nowrosj ee Nusserwanj i Wadi a (Bombay Dyei ng, BD-DMT, Br i t anni a, Go Ai r )  Ki rl oskar - 1888, Laxmanrao Ki rl oskar, Far m Equi pment (K. El ect r i c., Pr eci si on Tool i ng Syst ems, K. Pneumat i c, K. Fer r ous I ndust r i es et c.)  Godrej - 1897, Ardeshi r Burj orj i Godrej Locks.(Godr ej & Boyce, Godr ej Soaps, Godr ej Foods, Godr ej Oi l et c.) Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  11. 11.  Maf at l al - 1905, Maf at l al Gagal bhai Text i l e.(Maf at l al i nd., NOCI L)  Bi rl a - 1912, G.D. Bi rl a Jut e and Text i l e.(Fami l y Spl i t - B.K., K.K., L.N., M.P. Bi r l a Gr oups)  Baj aj - 1924, Jamnal al Baj aj Tr adi ng company. (Baj aj Aut o, Baj aj El ect r i cal , Mukund Engi neer i ng, Mukund St eel , Baj aj Sevashr am, Baj aj Hi ndust an et c.)  Thapar - 1928, K.C. Thapar Coal Tr adi ng.( BI LT, Cr ompt on Gr eaves, CG gl ass, Raj ast han Pol ymer s et c.) Gaanyesh Kulkarni @envertis Mgmt Consultants Bri ef Hi st ory of FMB 10-Oct-13
  12. 12. Gaanyesh Kulkarni @envertis Mgmt Consultants Bri ef Hi st ory of FMB 10-Oct-13
  13. 13. Emergence of PMB Hi gher Dreams, Hi gher Aspi rat i ons, Di re wi sh t o become a Prof essi onal Company, Wi l l i ngness t o bri ng t he Tal ent Pool t o own organi zat i on are some of t he Key Fact ors responsi bl e f or Transf ormat i on of t he FMB t o PMB Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  14. 14. Charact eri st i cs of FMB Loyal t y t owards f ami l y Fami l y rel at i onshi ps Mal e Domi nat ed cul t ure, Ownershi p & Commi t ment Act i ve and non-act i ve members Tradi t i onal met hods of busi ness Successi on Pl anni ng of Next of Ki n Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  15. 15. Charact eri st i cs of PMB PEC (Pl anni ng, Execut i on & Cont rol ) Def i ned Mi ssi on, Vi si on, Goal s & Obj ect i ves Def i ned Rol es, Rul es & Regul at i ons Perf ormance Dri ven Modern met hods of busi ness Successi on Pl anni ng of a Prof essi onal Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  16. 16. Chal l enges f aced by FMBs Gener at i on Gap At t r act i ng & Ret ai ni ng non-f ami l y empl oyees Women i n t he f ami l y j oi ni ng t he busi ness Moder n t echnol ogy & cont empor ar y busi ness pr act i ces Fi nanci al l i mi t at i ons I nabi l i t y t o sust ai n compet i t i on agai nst MNCs Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  17. 17. Chal l enges f aced by PMBs Or gani zat i ona l conf l i ct Adher ence t o Syst ems Ret ent i on of Tal ent Successi on Pl anni ng Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  18. 18. Bandwagon of I ndi an FMBs Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  19. 19. Bandwagon of PMBs Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  20. 20. St rengt hs & Weaknesses of FMB St rengt hs  Hi gh commi t ment /dedi cat i on f r om f ami l y as busi ness owner s.  Fami l y member s wi l l i ngness t o wor k har der and r ei nvest pr of i t s i nt o t he busi ness f or l ong t er m gr owt h.  Wi l l i ngness t o pass on knowl edge and exper i ence  Fami l y name and pr i de associ at ed wi t h t he busi ness. Weaknesses:  Poor Management , i nsuf f i ci ent cash t o f und gr owt h.  Non-al i gnment of i ncent i ves among f ami l y member s.  Lack of ar t i cul at ed pr act i ces and pr ocedur es. Lack of di sci pl i ne. Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  21. 21. St rengt hs & Weaknesses of PMB St rengt hs  Hi gh commi t ment /dedi cat i on of Top Mgmt .  Loaded wi t h cont empor ar y Management t echni ques and busi ness t ool s  Ef f ect i ve del egat i on of aut hor i t y  Fi nanci al st r engt h  Ti mel y Successi on Pl anni ng  Sust ai nabi l i t y i n hi ghl y compet i t i ve mar ket s  Per f or mance based cul t ur e Weaknesses:  Less f ocus on human devel opment .  Poor commi t ment l evel s of mi ddl e and j uni or mgmt .  Hi gh at t r i t i on l evel s  Chances f or shut -downi ng wi t hout t he appr oval of al l peopl e i n t he or gani sat i on  Wor ker s may f eel uneasi ness Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  22. 22. Bandwagon of I ndi an PMBs FMBs sl i ght l y l ag duri ng economy boom, but t hey sust ai n recessi ons f ar bet t er. Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  23. 23. St ages of Fami l y Busi ness and Common I ssues Ownershi p St age Domi nant Sharehol der i ssues St age 1: The Founder(s) - Leadershi p t ransi t i on - Successi on - Est at e pl anni ng St age 2: The Si bl i ng Part nershi p -Mai nt ai ni ng t eamwork and harmony -Sust ai ni ng f ami l y ownershi p -Successi on St age 3: The Cousi n Conf ederat i on - Al l ocat i on of corporat e capi t al : di vi dends, debt , and prof i t l evel s - Sharehol der l i qui di t y - Fami l y conf l i ct resol ut i on - Fami l y part i ci pat i on and rol e - Fami l y vi si on and mi ssi on - Fami l y l i nkage wi t h t he busi ness Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  24. 24. Put t i ng ‘Busi ness Fi rst ’ Sampl e I ssues Fami l y Fi rst Cos. Fami l y Empl oyment Open-Door Pol i cy f or al l f ami l y member s, r egar dl ess of qual i f i cat i ons Compensat i on Equal pay f or al l , r egar dl ess of t hei r exper i ence or per f or mance Leadershi p Leader shi p based on Seni or i t y i n Fami l y, r egar dl ess of mer i t or qual i f i cat i ons Resource Al l ocat i on Busi ness Resour ces used f or per sonal needs (e.g., l oans, gr ant s) Deci si on-Maki ng Uni l at er al & Concent r at ed wi t h Seni or Fami l y Member (e.g., Chai r man/CEO) Busi ness Fi rst Cos. Qual i f i cat i on-Based Empl oyment , as f or any ot her new hi r e Meri t -Based pay, based on exper i ence, per f or mance Leadershi p grant ed t o t he ri ght person (f ami l y or non-f ami l y), based on mer i t and qual i f i cat i ons Busi ness resources onl y used f or busi ness purposes – separ at e f ami l y r eser ve f und ut i l i zed f or f ami l y needs. Mul i t -l at eral , based on Def i ned Governance St ruct ure (e.g., Execut i ve Commi t t ee) Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  25. 25. Concl usi on To ensur e success, FMBs need t o:  Devi se a wel l def i ned st r at egi c pl an.  Ensur e cost ef f ect i veness and good oper at i onal management .  Focus on cor e compet enci es.  Become Fl exi bl e and gear up f or change management .  Ensur e hi gh cust omer sat i sf act i on.  Ensur e hi gher r et ur ns t o shar ehol der s.  Cl ear successi on pl anni ng.  Opt f or pr of essi onal management . Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  26. 26. Concl usi on To ensur e success, PMBs need t o:  Pl anni ng – st r at egi c and annual busi ness pl ans  Goal s and obj ect i ves f or t he company, di vi si ons, depar t ment s, and peopl e  Responsi bi l i t y – Ri ght del egat i on of aut hor i t y  Rol e def i ni t i on – Peopl e have cl ear l y def i ned r ol es & Job pr of i l es  Under t ake empl oyee engagement pr ogr ammes  Ensur e Cor por at e Cul t ur e i s wr i t t en and wel l under st ood by t he empl oyees  Mi ssi on St at ement – The compani es pur pose and mi ssi on i s under st ood by t he empl oyees. Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  27. 27. The Essence Busi ness shoul d become SYSTEMS DRI VEN and not PERSON DRI VEN Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13
  28. 28. Thank You! Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13

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