Janina Schröder | University Witten/Herdecke

First published in M+V’s India Insight in May 2014

In an interview I recently conducted with the owner and CEO of a large family business, he told me: “Family is an idea. Like the whole of India is an idea.”

My natural follow-up question was how he meant that. How could a society, so lively, be only an idea? And he elaborated further: “A country, so diverse, so many different languages, religions, and communities all living together, cannot be one country just like that, it can only exist through the feeling of an identity, which all share.”

The family was the same in his point of view – only working through its members having a feeling of togetherness and striving towards a common goal.

The family businesses in India, and therefore the business families, have had this common goal and shared identity in the past, when it was absolutely certain that sons would enter the business to keep the family business going – the first born becoming the CEO when the patriarch felt it was the right time to move over and become chairman; the other sons receiving similar positions in sub-companies of the business group, all being treated equal when it came to ownership status or salary. During the difficult years of the “License Raj*”, social rules manifested the success of many of the large business groups: gathering every license one could put one‘s hands on, and employing talented and educated family members to govern the various businesses resulting from this rule.

Nowadays the market is more open and society is increasingly influenced from the outside, so the situation has changed to a great extent. Not only are daughters entering the field, equally educated and interested in pursuing a professional career in the parental business, but also the sons are no longer willing to accept whatever destiny the father had decided for them.

The dynamic in families has changed. From clear roles, structures and hierarchies to open communication, the family dynamics have changed influenced by the media and the desire of youth to be heard, accepted and respected for their vision of a good life. These visions may or may not be possible in the family business nor be what the parents had in mind. Conflicts of vision and interest, which were formerly not discussed, are testing the foundations of more and more business families with quite a few well-known business families being even brought to court. This situation has become very demanding where patriarchs see their children being socialized not only by their family but also by a constantly evolving individualistic culture.

How can business families cope with these changes?

The rules, which have worked for generations, are changing for families all over India and leading to new frictions in the families. This is the moment when certain mechanics of corporate governance can support business families all over the country. The necessity and significance of institutions, like formal agreements over succession and other critical topics, are rising and becoming more and more accepted. The idea of a family charter, established with the help of experienced professionals, is no longer alien or regarded as a failure.

At the same time, the mode of communication within families has already seen an evolution for many family business owners. Nowadays, communication is no longer seen as a one-way street with one sender and one receiver, from the elder generation to the youngsters, but as a method to develop common goals and strategies in the business and in the families. Nevertheless the younger generation has still respect for its predecessors and they take pride in being part of a business family.

Therefore, business families are developing new ways of cooperating by transferring ideals from the past and combining them with new communication models, to keep the family together. They become institutions on their own, preserving work and other important traditions, while at the same time successfully embracing future changes and challenges.

To quote another owner: “In a family business, there is no right or wrong, it is not right to stay together, or wrong to split, one cannot think in black or white, as long as it works, it works.” While this is true, it has been shown by many successful business families that they are able to make the idea of the Indian family work for their business.

*“Licence Raj” is a term used to describe the regulation of the private sector in India between 1947 and the early 1990s. In India at that time, one needed the approval of numerous agencies in order to set up a business legally. Manufacturing in particular was heavily regulated. The Licence Raj was the result of a mixed economy that used a government planning commission established after India‘s independence.