I've devised this PPT for the students of MBA. Hope, this will be useful to them.

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. 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. 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. 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. • 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. 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.  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. 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. 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. 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.  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. Gaanyesh Kulkarni @envertis Mgmt Consultants
Bri ef Hi st ory of FMB
10-Oct-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. 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. 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. 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. 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. Bandwagon of I ndi an FMBs
Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13

19. Bandwagon of PMBs
Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13

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. 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. 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. 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. 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. 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. 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. The Essence
Busi ness shoul d become
SYSTEMS DRI VEN
and not
PERSON DRI VEN
Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13

28. Thank You!
Gaanyesh Kulkarni @envertis Mgmt Consultants 10-Oct-13