10 May Keys to Successful Succession Planning in family-run businesses (Part 3 of 3)
“Without the right succession planning put to play in human resources, we build for the future without a future.” ~ Mmanti Umoh
As we move into the last part of this series, we uncover valuable insights and actionable strategies in key areas of succession planning, to help family-run businesses succeed and thrive. Read on…
Securing the legacy
The resilience and success of Indian family businesses during the previous fiscal year have been remarkable. An impressive 83%* of enterprises experienced substantial growth, while a mere 5%* experienced a reduction in sales. Protecting the business as the most important family asset, growing it, and passing on the legacy to the next generation are the key long-term personal goals for Indian family business owners. Moreover, Indian family businesses have set ambitious growth targets for themselves.
(*Figures quoted from PwC’s 11th India Family Business Survey)
In trusts, wills and family charters, we trust
Succession planning through trusts, wills and family charters has recently gained importance due to the varying degrees of critical advantages. These include giving the succeeding generation the benefits of family wealth without sacrificing control over key assets, catering to the specific demands of the family, such as providing for their recurring lifestyle and maintenance expenses, a better legal framework, and the charity/philanthropy desires of the families, etc.
Post-pandemic, HNIs have realised the importance of making a will to ensure hassle-free succession. A Family Charter document becomes an important basis for governing the family in terms of its actions and relations, dealing with situations, and day-to-day functioning.
Building trust with employees and customers
Building trust with stakeholder groups like family, customers, the public, and employees remains a cornerstone for thriving in the Indian family business landscape. Customers have simple expectations, viz., product or service excellence. Employees expect that their employers respect and care for them during their service. The public expects a defined corporate purpose, demonstration of results, and transparent and effective communication.
Ensuring digital readiness
Indian family businesses continue to grapple with adopting digital solutions, as evidenced by a modest 36% who express confidence in their digital capabilities – a figure below the global average of 42%. In this age of digital transformation, data assumes an even more pivotal role, serving as the cornerstone of a thriving digital economy.
Amidst an evolving digital landscape, Indian family businesses must actively strengthen their digital skills, nurturing their natural ability to stay financially strong.
How some Indian family-run businesses have done it
At Reliance Industries and Kotak Mahindra Bank, gen-next is poised to take the helm, signifying a shift toward generational transition. The Aditya Birla and Adani Groups have involved successive generations in family stewardship across diverse sectors, underscoring the enduring legacy and commitment to business excellence.
The leadership transition challenge looms as the heirs to Cipla and Ranbaxy Laboratories contemplate cash-out options and navigate the complexities of selling majority control. Bajaj Auto and RPG have strategically divided the businesses among the legal heirs, ensuring continuity and growth as younger generations step into leadership roles.
The legal arrangements made by stock market investor Rakesh Jhunjhunwala and former Essel Propack promoter Ashok Goel to establish private family trusts are increasingly adopted to preserve and pass on family wealth across generations.
Right before this piece could be posted, the 127-year-old Godrej Group agreed to split the conglomerate. One side of the family kept Godrej Industries, comprising five listed firms. The other side kept Godrej & Boyce and its affiliates as well as a land bank. What crowned the split was the official statement issued. “The realignment has been arrived at in a respectful and mindful way to maintain harmony and to better align ownership in acknowledgement of the differing visions of the Godrej family members,” it said.
“The realignment has been arrived at in a respectful and mindful way to maintain harmony and to better align ownership in acknowledgement of the differing visions of the Godrej family members.”
Concluding thoughts
Through this three-part series, we have attempted to illuminate the multifaceted journey of Indian family-run businesses, navigating the intricate balance between tradition and innovation, continuity and change. From agreeing on the rules to reconciling varying work practices, each challenge presents an opportunity for growth and evolution. The fear of losing control gives way to a newfound understanding of the interests of gen-next, fostering a culture of collaboration and empowerment.
As we explore contradictions between ‘the family’ and ‘the business,’ we uncover the ambitions framework, guiding us towards harmonious alignment and sustainable success. Sensitivity around succession emerges as a cornerstone, driving us to embrace preparation as the key to securing the legacy for future generations. Drawing inspiration from the resilience and ingenuity of Indian family-run businesses, we chart a course towards a future defined by prosperity, continuity, and enduring success.
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