INDIVIDUAL ASSIGNMENT

ARTICE ANALYSIS

THEME: Professionalizing Family Businesses

SUBMITTED BY:
NAME: Megha Shah
ROLL NO.: 191333
SUBJECT: Case Study of Entrepreneurs

SUBMITTED TO:
Dr. Shahir Bhatt
Faculty, Strategy and Entrepreneurship Area
Institute of Management, Nirma University

Date of submission: 2nd December, 2020

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 INDEX

S. No. Topic Page No.

Article 1 – A Founder’s Guide to Professionalizing a Family

1 3
Business

2 Article 2 – Towards Professionalizing Family Business 4

Article 3 – How India’s Family-Run Businesses Are

3 5
Transitioning to External Leadership

4 Conclusion – Professionalizing a Family Business 6-8

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ARTICLE 1

TITLE: A Founder’s Guide to Professionalizing a Family Business

AUTHORS: Vikram Bhalla and Christian Orglmeister
PUBLICATION: Boston Consulting Group
LINK: https://www.bcg.com/en-in/publications/2017/family-business-people-organization-
founders-guide-professionalizing-family-business

SUMMARY:
In this particular article, Bhalla and Orglmeister talk about the various pitfalls and Challenges
that a founder of a family business is faced with once the business starts catching pace and
requires more hands on deck. When a Family Business starts to scale, the founders often find
themselves in a dilemma – they may start hiring more but are unable to manage the
workforce, take quick decisions or even in some cases retain the essence of the business.
Thus, they need to start professionalizing their business in a way that it is able to retain its
uniqueness where it is required, but is also able to scale when it is needed. For this, they need
to be able to overcome certain pitfalls such as not being able to delegate tasks effectively, not
creating proper verticals and not having all family members in roles that suit them. In such a
situation, the founder needs to understand that the professionalization process will not take
place overnight, but will take place in 3 phases – initially it will require to have the same
managerial setup but a dedicated workforce for each vertical; then the founder will need to
integrate new and existing members and ensure they’re all aligned towards the same goals;
and lastly, the seamless flow of information to and from all the levels of the hierarchy thus
formed will lead to a high-performing, professionalized family business.

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ARTICLE 2

TITLE: Towards Professionalizing Family Business

AUTHOR: Hitesh Shukla
PUBLICATION: Business World
LINK: http://www.businessworld.in/article/Towards-Professionalizing-Family-Business/08-
11-2019-178674

SUMMARY:
In this particular article, Shukla lays out the right way to professionalize a family business.
Contrary to popular opinion, this ‘professionalization’ does not mean changing the
management from family controlled to professional controlled. This professionalizing,
Shukla says, refers to the creation of organizational structures, hierarchies, verticals and
teams. One of the core tasks of the founder, while such transformation, is to deepen and
strengthen the discipline and commitment of family members in the business. It also involves
breaking free from the societal norms that a family usually abides by and to encourage
members to take up those tasks that they are actually good at and can manage. If any family
member establishes dominance of any kind in such a structure, it could have disastrous or
even fat outcomes for the business. Thus, it is very important for the founder to ensure that
the family members are committed to and respectful of the hierarchy that is being created and
are welcoming towards new members being added to the business. Another very important
pillar to the success of such professionalization is the integration of both family members and
outsiders into one unified team, and their alignment towards business objectives. Shukla
notes that founders must ensure that the culture, values and morals are passed through
generations in order to keep frowning sustainably. Thus, family business can be
professionalized by well-defined objectives, well-laid policies and processes, appropriate
organizational culture and to top it all, ethics and faithfulness.

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ARTICLE 3

TITLE: How India’s Family-Run Businesses Are Transitioning to External Leadership

AUTHORS: Jaideep Bajaj and Rohit S. Kale
PUBLICATION: Spencer Stuart
LINK: https://www.spencerstuart.com/research-and-insight/india-family-business

SUMMARY:
More rooted to the Indian family business landscape, this article discusses why family
businesses have in the recent years chosen to make the transition to having professionals in
key management roles, analyzes the catalysts for such transition, identified common
challenges and provided solutions for them. To get deeper insights, the authors interviewed
four top managers of popular family businesses in the country – Apollo Health and Lifestyle,
Hero Motocorp, Becton, Dickinson & Co. and Godrej Group. Through their research and
analysis, Bajaj and Kale determine that there are three main reasons why so many family
businesses are undertaking this transition – increasing complexities of business, stepping
down of promoters, and ever-increasing competition. The authors have thus said that a
successful transition has various factors – the first and most important one being the decision
of the family to undertake such transition and embrace it. The decision to bring aboard an
external professional is not easy for family-run businesses. There can be a high degree of
distrust, as some members of the family worry about losing control of something that has
been internally controlled for years. The culture fit can be hard to mesh, at least initially. And
there can be unreasonable expectations heaped upon the new executive. Moreover, if the new
employees embrace the culture and values that family follows, even they can thrive within
even the most entrenched family-run business.

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 CONCLUSION – PROFESSIONALIZING A FAMILY BUSINESS

Family business is the most substantial and dynamic form of business around the world. It
can range from small mom and pop retail outlets to Fortune 500 companies, or from being
run by the first generation of entrepreneurs to the 40th generation. Family businesses are
really important to an economy as well, since they create massive additions to the GDP, job
opportunities and viable value chains in the economy.
In India too, family businesses are a very common occurrence. Most family businesses in
India, though, are faced with the same problems that corporate conglomerates face:
 Increasing competition from local and global firms
 Increasing complexities and compliances
 Limited expertise of promoters of the business.
These problems have led to family businesses embarking upon a journey of
professionalization. People often think that professionalization means hiring professionals
into the company. However, professionalizing much more than that, and is often a very
difficult endeavor, and businesses need to ensure they do it just right.
There is a process to professionalizing a business that must be followed in order to make sure
the business continues to sustain and keep growing. This process is outlined as follows:

Defining Roles

Appoint a Board

Hiring the Hirers

Building the Corporate Center

Knowledge Transfer

STEPS TO PROFESSIONALIZING A BUSINESS

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Step 1: Defining roles
Right at the onset, it is very very important to define the roles that all family members will
have. It may sometimes be difficult for family members to give up the autonomy and
succumb to the discipline and structure that comes with Professionalizing. Therefore, identify
the strengths of each family member and assign them a role in the soon to be set corporate
hierarchy. It is always advisable for younger members to join from entry level positions and
then go through the hierarchy to be able to handle the business better in the future.

Step 2: Appoint a Board

Once a business is professionalized, owners will have to take certain decisions that they may
not be comfortable with or that may cause arguments among the family members. Therefore,
it is important to appoint a Board of Directors comprising industry veterans, thought leaders,
a few close connections of the family and a few senior family members as well.

Step 3: Hiring the Hirers

This is the first ‘real’ step towards professionalization – building an HR team. They will be
the ones who build the rest of the teams by hiring the right people. However, it is beyond
important here to make sure that the HR Team is made aware of the roles that need to be
filled and the roles that are exclusively for family members. There should not be any ego
clashes in the organizational hierarchy.

Step 4: Building the corporate center

This step entails hiring professionals and building the teams that will be working in the
various divisions. Essentially, it means building and filling the corporate hierarchy. It entails
creating the right verticals, the right subteams and hiring the right people.

Step 5: Knowledge Transfer

After the hires have been made, comes the most important step – giving the knowledge
transfer. A family business only succeeds because all of the members are aligned on the same
vision, and it is this vision that keeps the business alive and growing. Therefore, the new
hires should know about the vision and the mission. This knowledge transfer must make sure
that all the employees are all feeling welcomed, part of the family and are have the same
vision for the business.
Following these steps will help family businesses professionalize in a manner that ensures
that the ideas and values of the business remain the same, but the methods and the workflow
are professionalized for the best results. Another important part of professionalization is to
build a long lasting and inspiring culture that makes every employee feel as part of the family
as the business.

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Family businesses have a lot to gain from professionalizing their company. Medium and
emerging companies all the more so. The right mindset and rigorous commitment with
dollops of patience will see this journey through. The goal must be to retain the uniqueness of
the business where it counts, but also be able to scale when needed.