Family businesses account for almost 80% of the national Gross Domestic Product (GDP) in India. With over 111 publicly-traded family-operated organisations, India is the home to the third-largest number of family businesses worldwide.
We discussed various aspects of family-owned businesses with Rajiv Bhargava, the owner of HBD Packaging Pvt Ltd. The business was started by his uncle and him in 1985 after he graduated from IIT Rourkee in 1979.
Third generation into printing, his grandfather started the printing business. The packaging business was an offshoot and it is essentially a B2B business catering to FMCGs, pharma, food and beverages, personal care, mobiles and electronic devices. Some of its clients include: Dabur, Boroline, DS Group, Lava and Campus Shoes.
Pros and cons of family-owned businesses:
According to Rajiv Bhargava, family-owned business is a boon if it continues for 5 to 6 generations. It’s within the family, with a lot of flexibility and the decision-making is easy and fast. In terms of cons, there are new problems and every day is a new challenge, he said, when the family members are not on the same page, the thought process can be different and that can slowdown the decision making.
Finances is also a big issue. We have to depend on banks for the loans and collaterals take much longer to process in case of family- owned businesses, he said.
Succession Planning:
The elderly in the business are emotionally attached to the business and it’s not that easy for them to let go of the active decision making. In nuclear families, problems have also started coming with children going to study abroad. They either do not want to come back to their home country or very often don’t want to work in the family business. He said, it’s always better to have younger people in the business, but the elder one thinks he knows about it more. Slowly, it’s also important to start professionalising the business as a part of the succession plan.
Training of family members:
Family members usually get on job training. He said, I would expect the son to get shop floor level training. But it is difficult to get it in the organisation of which one is an owner. So he should probably work in some other organisation for a year or two before joining his own company.
Also he said that sending your family members to do short courses in the industry is a good idea to keep abreast with developments in the industry.
Conflict resolution mechanism:
The physical, financial, and emotional issues among family members are primarily responsible for affecting the regular operation of a family business. Moreover, conflicts between family members are another reason that destroys a family business at its core. According to Rajiv, the only way to resolve the conflict is to discuss, discuss and discuss. Talk about the targets, pitfalls and different directions in which members are thinking.
If conflict resolutions does not happen and spills into personal life, it is better to have someone elder or outsider resolve it, and if in a family there are more people, it is better to diversify into other verticals to expand the business and help the relationships at the same time
