In about 30 years post-liberalization of the 1990s, thousands of family businesses reached the size of about Rs. 5,000 million - Rs. 50,000 million from virtually zero. Their business growth till now is truly praiseworthy.
While very few break free to become large business houses, many of them are unable to scale up at the same pace beyond this point.
You may find some or all of the following 6 dysfunctional behaviour among those that have stagnated:
1. Because of very good growth in the past, business family leaders have become somewhat arrogant and/or complacent – “We are not stagnating. We don’t need to learn better business practices. We don’t need to connect with various sources of information or innovation. We are happy with the money we are earning from the business. Why take the trouble to change?” How would you revive your entrepreneurial spirit?
2. Many HR policies either are poorly drafted or don’t exist at all. HR practices are not rule-based. Employment conditions are arbitrary or extractive except for a handful of trusted persons. No succession planning or leadership development program exists. Office and factory facilities are unpleasant. It is not a surprise that they fail to attract good-quality talent. How would you improve your Employer Brand and Employer Value Proposition?
3. Strategic planning is almost non-existent and goals for next year are set through back-of-the-envelope calculation. Business reviews are handicapped by insufficient data and are ineffective. The linkage of the annual plan to business goals to business reviews to results is weak or broken. Business innovation is not a priority. How would you make your ‘Plan to Performance’ more effective?
4. The owners are secretive about financial numbers. Finance & Accounts department is run in an archaic manner. Some have only a few CAs or none in their rolls. Despite their cash-positive, profitable business for decades, their balance sheet is weak with astonishingly small reserves & surplus and burdened by considerable debt. Getting a loan is difficult and the interest rate is high. Availing growth equity is a far cry. How would you upgrade your Finance & Accounts practices?
5. The owner's family has little understanding of the distinction between ownership, family, and business. They have low-level skills in managing differences. Succession planning is absent. They live in the past and think ‘We shall follow what our father did or didn’t do”. How would you improve your family governance?
6. The Board exists mostly on paper. Internal audit is almost a formality. Statutory and regulatory compliances are considered unnecessary trouble. Corporate relations are handled crudely. They may be doing philanthropy at the family level, but corporate social responsibility is not understood nor practiced well. Weak family governance pulls down the standards of corporate governance. How would you improve your corporate governance?
First, your business family must have a strong desire to break free.
Next, you must engage a firm with consulting + coaching capabilities to guide you with breakthrough initiatives and help you institutionalize new business practices. Contact us: https://eumatterconsulting.com/contact-us/