02 December 2011

Indian Family-Run Businesses Have Short-Term Vision

Family-owned businesses in India have shorter life span against their global equivalents, says John L Ward, Clinical Professor of Family Enterprises, Kellogg School of Management. In an interview to Economic Times, John spoke about on why Indian Family-owned Business falls apart and what future stores for them. John has studied this issue very carefully and to make his research relevant enough, he has worked closely with Family-owned enterprises globally as well as in India.
Indian Family-Run Businesses Have Short-Term Vision


India has several small family-owned enterprises which are under the supervision of promoters. Businesses in India have several descendent to head on business. Usually business enterprises are split, divided and led by one inheritor. But, in the West, the family-owned businesses have a hold on how to govern an enterprise with multiple owners without making the company split into different parts. People sometimes don't work as an active member in the company though they have the ownership.

According to John, Indian business deals with several issues. They are wrestling with issues like whether companies should be held back as one and share ownership among group of inheritors, or the business should be split into different sections among the next generation descendants.

In context to Indian business, the standards of governance and transparency stand out as the major issues. Going by the fact that governance standards in Asia are very poor, India stands at a far better place when compared to its counterparts. But when competing with the West, India lags behind, though it has capabilities to improve. John feels that with improvement in capital market in India, the governance standards will also show marked improvement. Family-owned businesses are more into stock market than in other part of the world.

It has been witnessed that family-owned business in India has shorter vision against its counterparts that are more long term oriented. Today, India is turning into a fast achiever in terms of wealth in a shorter time span. Promoters in the country are in quest of immediate wealth and success. People running a family business are more thoughtful and careful regarding the money than people dealing with public money raised from market. As everyone is doing their best to beat each other in this rat race, Indian promoters are ready to take up any bet without being bothered about the fact that it can turn out to be risky in future.

Family owned businesses are working hard in India to attract professional talent and are working hard to build up their company. Training, recruitment and management systems are few factors that are focused by business houses in India.