While family run businesses are backbones of many econimies, their longevity is often dependent upon the founder. In this paper, we describe some novel approaches family businesses pursue to sustain multi-generational enterprises

1. Browne and Mohan
Board & CEO Advisors, Management Consultants
Sustaining Multi-generational family
business

2. Browne and Mohan
Board & CEO Advisors, Management Consultants
Family run businesses are a significant segment Most successful families created space for the
of any nation’s industrial structure. 5% of US elder siblings to graciously side-step and allow
GDP is contributed by family businesses and younger, more focused leadership to emerge.
35% of Fortune 500 is family owned. They Family elders played a significant role in
generate close to 50% of employment and 59% establishing the business parameters,
of all new job creations (Institute of Family discussed and communicated the same across
owned business, 2011). multiple interest groups to buy the succession
plan well in advance.
In India 95% of business are family run, and 30%
of BSE listed companies are family owned (CII, Case in point is a Bangalore based trading and
2010). Multi-generational family run business real-estate business family, which realised
are commonly involved in trading, textiles,
despite being a Charted Accountant, the elder
hospitality, healthcare, accounting, agro-based sibling of the family of six, did not have the
industries. According to Small Business zeal or intensity to carry the business to next
Administration Office of Advocacy, only in one level. The third sibling with background in
in three businesses succeed in making from one engineering, good admin skills and ability to
generation to other. There are no official figures network with power be was identified as the
for closure/exit rates in India, but informed next family leader. The elder sibling continues
estimates are one in five businesses survive to be invested with all the ritualistic values in
beyond second generation. Many family run a traditional Marwari family, and the business
businesses life span is highly correlated with growth has multiplied many folds.
their founder.
Our experience indicates successful family run 3. Plan and go geographically
businesses have few things in common.
Going regional and international is very
1. Diligent accounting and thrust on profitability important for family business. One they offer
spread of existing business, but more
Most successful multi-generational family
importantly hold the interest of next
businesses believe in managing with numbers.
generation to continue and expand the base.
Often the family dinner times are quick and dirty
The promise of new land and new country
review on day-to-day basis and a formal business
helps in continual investment in the family
review monthly. Major expenses are reviewed
business, but also can add reverse flows to the
and risks are discussed. In a novel method, one
parent overtime. A leather company in Agra
of the Sindhi family made this a ritual to be
over two generations has pursued a simple
discussed in their prayer room and all major
strategy of moving its eligible next generation
financial discussions were done under oath.
family member into key cities in India first.
2. Succession based on capabilities and passion, Over time, it moved couple of newly wed
NOT on tradition or gender families to Russia, UK and USA. Over time,
each of these nodes not only do substantial
In cultures where first-born enjoys higher share imports from Indian parent, but also have
and is considered a natural leader, many families diversified into exports to India and other
build their succession on the tradition. markets.

3. Browne and Mohan
Board & CEO Advisors, Management Consultants
4. Empower and Mentor early Brand recall, upselling and economies of
scope across generation are the benefits
Once a future leader is identified, successful gained the family gained.
family businesses start mentoring the person
through on-the job exposure and empower him 6. Create a corpus for growth and
to learn and implement changes. An IT company challenging times
into 3rd generation ownership has an interesting
triad of mentoring process. Two CEO’s who had Like families saving for the rainy days, most
grown the business doing an informal mentoring successful family business believed in
and an external professional guiding the investing for a corpus to fund expansion and
designated leader on formal process and decision growth. The funds were administered by a
making. professional investment group and the inter-
generational leaders had mandates to plough
5. Preserve roots and diversify in x% YoY as the corpus. They set explicit
rules for dipping into these reserves and
Many successful multi-generational businesses what process to follow.
diversify and build around the personalities and
interests of each generation. The idea is similar
to a Bricolage, allowing each generation to add 7. Create rituals and process for
and extend the enterprises and cash-in the intergenerational bonding
relational assets built across generations. Some
of them devised simple mechanisms for The adage family that eats its meals together
breakouts or cashing out by next generations and stays together is apt for success of family
designed appropriate methods to preserve business too. Successful business families
multigenerational legacy and continuity. used festivals and rituals to bond, create
relationships and preserve the club. Families
A third-generation jewellery family in Chennai, also used these occasions to mollycoddle
had a peculiar problem. It was located in elder siblings who have been replaced on
traditional area of Chennai, most of its current business front, and reinforce their positions
clients were in the age group of above 50’s. They and value in family tree. One Gujarati family
had three traditional gold jewellery shops that into timber business for last 3 generations
had crafted pendent, chains, etc. against an had an interesting Hundi concept. All
order and with newer make-to-stock Kerala branches of the family contributed 2% of
based jewellers entering the market they were their revenues which was used for three
unable to attract newer customers. Their current purposes: education, pilgrimage, and
generation wanted to look beyond traditional investment. Only 15% of the contributions
business and the family invested in two could be used for education and pilgrimage.
businesses, traditional attires and other The allocations were chaired by the senior
traditional art. The clients for all the three most siblings of multiple generations to
businesses were common, 73% of them being ensure all family members get their turn to
multi-generational clients for the parent. tour and rest. However any investment

4. Browne and Mohan
Board & CEO Advisors, Management Consultants
required formal family votes by all the family Browne & Mohan insight are general in nature and
does not represent any specific individuals or entities.
members.
While all efforts are made to ensure the information
and status of entities in the insights is accurate, there
8. Plan and infuse professionals can be no guarantee for freshness of information.
Browne & Mohan insights are for information and
knowledge update purpose only. Information contained
Successful family business realise the value in the report has been obtained from sources deemed
reliable and no representation is made as to the
of bringing in professionals. They can bring
accuracy thereof. Neither Browne & Mohan nor its
transparency, drive and divergence to the affiliates, officers, directors, employees, owners,
business and can propel new directions. representatives nor any of its data or content providers
shall be liable for any errors or for any actions taken in
Many business families also bring external reliance thereon.
professionals to mentor their wards to give
them the advantage of 3rd party neutral
insights. Successful family business brought © Browne & Mohan, 2012. All rights reserved
in professionals after a thorough vetting my Printed in India
multiple generations and actively
encouraged dual reporting (to two different
generational leaders) for the outside
professional to ward any leanings and
quicker induction.