Sunday, April 30, 2017

Managing change in family run businesses ..

As per data from reliable sources listed below, public professionally run companies in US have an average life of only 15 years (50% wind up in 15 years) while we find 30% of all family run businesses transitioning successfully into the second generation, 10-15% into the third generation, 3-5 % into the fourth generation, creating value for the customer and wealth for the country in the long run. Family run businesses are therefore a vital component of any country's economy as the example of Walmart, Toyota, Volkswagen, BMW and Berkshire Hathway and many others remind us.  (Refer : Baron, Josh, "Why 20th century will belong to family businesses, Harvard Business Review, March, 2016)

One of the best definitions of family business I have ever come across is this -
A family business is a commercial organization in which decision-making is influenced by multiple generations of a family—related by blood or marriage. They are closely identified with the firm through leadership or ownership - wikipedia
Here is Forbes link to the top 25 family businesses of the world, led by Walmart, Volkswagen and Berkshire Hathway ..

The biggest family business on planet earth, Walmart ..
As per a report from rediff.com, of the top 20 businesses in India, 15 are family run businesses and contribute 26 lakh crores to the Indian economy. The exceptions are HDFC Bank, ICICI Bank, Infosys, L&T and Axis Bank.

Family run businesses have been there from time immemorial when men settled and lived in societies from 6000 BC. Though in the present days, government run and professionally run organisations are models to the rest of the world, family run businesses are here to stay ..

Great Indian business families have come and gone ..
This brief writeup is case study of a very successful family run business from the state of Kerala processing one of the oldest and and valuable items India has been famous for thousands of years and which has attracted travellers and traders from wide and far in search of this precious asset - spices. The Spice Route and Silk Route which connected India and China respectively to the rest of the world for the past four millennia and which made them prosperous and rich for thousands of years speak lots about the thriving spices and silk trade in the eastern hemisphere. This writeup is an attempt to link up with one of the oldest and prosperous trade which India has been known for thousands of years, spices.

Synthite Industries, a family run business from Kadayiruppu, Kolenchery, Kerala is the world leader in oleoresins and spice oils, controlling 30% of the global business in oleoresins.

Aju Jacob
Aju Jacob, Director, Synthite in (click here for the video of the ISB talk) where he speaks clearly speaks of the challenges of managing family run businesses. He is the son of CV Jacob, Chairman of Synthite, from Kolencherry. George Paul is the Vice Chairman of Synthite. Their family runs the INR 1800 crores Synthite Industries which controls 30% of global market in spice oils and oleoresins..

Aju, an executive alum of ISB, Hyderabad has hughlighted the challenges faced by family run businesses in this talk he gave at ISB recently. Aju's elder brother Viju, also from Rajagiri, is the Managing Director of Synthite. His articulation of problems, particularly from the viewpoint of a prosperous, educated, spiritual and emotionally well balanced family background has been perfect !! Sparks of humility, understanding and great leadership was visible in that speech.
Dr, Viju Jacob, Mg.Dir., Synthite.

From being an organisation working well for the past 47 years, there is great learning for the third generation in his family and for elders and youngsters of other business families planning transition of leadership and authority to the next generation..  The added lesson from this case study is how to work with the active and often militant  trade union leaders of Kerala. This case in plain high impact words provide simple thoughts very neatly put across to understand the pressures of managing family businesses, both during good and bad times. 

This earlier writeup of mine some time back throws light on Synthite Industries, what they do and how. This Kerala based co. controlling 30% of global market in spice oils and oleoresins supplies to global food processing industry majors across the world !!

References :

1. Baron, Josh, Why 20th century will belong to family run businesses, Harvard Business Review, March 2016.
2. Forbes, Top 25 largest family owned companies in the world, 2017.

George ..

PS : Aju is my classmate from Rajagiri HS Ernakulam during late 70s and a family friend too.

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