‘Family-run biz better placed to brave downturn’
The Financial Express, Corporates & Markets, March 3, 2009, Page I
fe Bureau, New Delhi
Family-run businesses are better geared to withstand the current phase of economic downturn, according to a Barclays Wealth-Economist Intelligence Unit report released on Monday.
Around 90% of the 2,229 respondents from family-run businesses, based within India and overseas in the survey said that they had no plans to either sell or exit their businesses in future, while 67% of the respondents considered ensuring financial security for dependents as an important motivation to create business.
These business families have never thought of selling their business in the past as well. The family business members in Asia Pacific (4%) were least likely to consider selling as compared to 13% in Europe. The intense emotional attachment resulting in focus on long-term survival (contrary to the goal of amassing wealth in short period) and sustenance would keep these families afloat through the present rough patch. “These findings reflect strong family values amongst Asians, specially Indians who perceive their business as an asset to be passed down to the next generation rather than just a source of personal wealth,” said Satya Bansal, chief executive, Barclays India.
Only around 30% of Indian respondents cited enjoyment of money as one of the primary motivation for creating and sustaining businesses as 43% of respondents in Europe and 48% in the USA, added Bansal. While the report estimated that family-owned companies account for 70% to 90% of the global GDP, Bansal said, India is no exception to this general rule. “What we can safely infer is that over 50% of the domestic GDP can be accounted for by family-run businesses,” he estimated although the report didn’t make India specific estimates for the same. The survey studied what family business members deemed the most important advantages of the family business model. A strong support network from family members (48%) was seen as the most important plus point followed by shared values and ethos (39%), ability to think long-term (38%) and the ability to make decisions quickly (37%). Shared values make a particularly high impact on the direction and efficacy of a family business, which in turn influence shared objectives. According to the survey, clear and shared objectives are essential for the family business, and were identified as a key factor that attributed to the success of the family business model by 44% of respondents.
Among the most daunting challenges that such business face, the report counts the lack of planning succession before the need arises. “Business families shy away from planning on succession issues for a variety of psychological, social and other factors. More often than not, succession in business families is not by design but is thrust upon. This trend is more accentuated in Indian case studies, where the families running business demonstrate tremendous hesitation in broaching the topic and determining successors before the need arises,” said Bansal. Out of 2,229 respondents surveyed globally, 850 are from Asia-Pacific, out of which 197 are Indians and out of which 155 are Indian based out in India. The projection of success of family-run business through the downturn has been made despite the report factoring in family feuds, nepotism that usually afflict family-run business and slowing down efficiency of such business model.
The Financial Express, Corporates & Markets, March 3, 2009, Page I
fe Bureau, New Delhi
Family-run businesses are better geared to withstand the current phase of economic downturn, according to a Barclays Wealth-Economist Intelligence Unit report released on Monday.
Around 90% of the 2,229 respondents from family-run businesses, based within India and overseas in the survey said that they had no plans to either sell or exit their businesses in future, while 67% of the respondents considered ensuring financial security for dependents as an important motivation to create business.
These business families have never thought of selling their business in the past as well. The family business members in Asia Pacific (4%) were least likely to consider selling as compared to 13% in Europe. The intense emotional attachment resulting in focus on long-term survival (contrary to the goal of amassing wealth in short period) and sustenance would keep these families afloat through the present rough patch. “These findings reflect strong family values amongst Asians, specially Indians who perceive their business as an asset to be passed down to the next generation rather than just a source of personal wealth,” said Satya Bansal, chief executive, Barclays India.
Only around 30% of Indian respondents cited enjoyment of money as one of the primary motivation for creating and sustaining businesses as 43% of respondents in Europe and 48% in the USA, added Bansal. While the report estimated that family-owned companies account for 70% to 90% of the global GDP, Bansal said, India is no exception to this general rule. “What we can safely infer is that over 50% of the domestic GDP can be accounted for by family-run businesses,” he estimated although the report didn’t make India specific estimates for the same. The survey studied what family business members deemed the most important advantages of the family business model. A strong support network from family members (48%) was seen as the most important plus point followed by shared values and ethos (39%), ability to think long-term (38%) and the ability to make decisions quickly (37%). Shared values make a particularly high impact on the direction and efficacy of a family business, which in turn influence shared objectives. According to the survey, clear and shared objectives are essential for the family business, and were identified as a key factor that attributed to the success of the family business model by 44% of respondents.
Among the most daunting challenges that such business face, the report counts the lack of planning succession before the need arises. “Business families shy away from planning on succession issues for a variety of psychological, social and other factors. More often than not, succession in business families is not by design but is thrust upon. This trend is more accentuated in Indian case studies, where the families running business demonstrate tremendous hesitation in broaching the topic and determining successors before the need arises,” said Bansal. Out of 2,229 respondents surveyed globally, 850 are from Asia-Pacific, out of which 197 are Indians and out of which 155 are Indian based out in India. The projection of success of family-run business through the downturn has been made despite the report factoring in family feuds, nepotism that usually afflict family-run business and slowing down efficiency of such business model.
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