Areport titled ‘State of family businesses in India’, released by SP Jain Institute of Management Research, said that once technology was adopted, business growth would accelerate. In the last year, service sector enterprises outperformed manufacturing sector enterprises in such business parameters as sales, market share, profitability, number of people employed, and profit margin on sales.
The survey studied 350 familybusinesses from 50 Indian cities. Almost 40% of the enterprises surveyed belonged to the manufacturing sector, while 60% were from the service sector. Interestingly, a large proportion of the enterprises surveyed expect to induct professionals into top management in the year ahead. Sadly though, only a minuscule proportion of family businesses reported inducting women in the last year.
The top ranked family priorities next year included ‘to increase the involvement of the next generation in the management of the family business’ (39. 4%), followed by ‘to create a family council or other forms of family governance’ (25%). Tapping newer domestic markets was next on the list.
However, succession planning, training women and other non-active family members in different aspects of the businessdid not feature high among short-term family priorities. Nor did getting a written will and sharing it with all family members figure among matters of significance. Cutting costs, investing in research & development, providing greater employment or even tapping international markets were not the top ranked short-term business priorities.
Of those surveyed, 47% expected cost of raw materials to increase next year, and 64% of family businesses surveyed forecasted their cost of labour to rise too. Going forward, the centre and its head, professor Tulsi Jayakumar, executive director of centre for family business observed that ‘familiness’ and its constraints on business success are often overlooked.
“It is clear that family businesses face headwinds more from family issues than from the business side. Thus, despite an uncertain business environment, it clearly emerges from the survey that small and medium family enterprises face greater challenges due to lack of corporate governance and succession. The MSME family enterprises will require not just domain-specific training programmes, but more of leadership and human resource development programmes.”