Why should the next generation join the family business?

Growing the SME economy

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family
Amit Tara of Tara Art Printers engaged in technical discussion at Hunkeler Innovationdays 2015. After earning his Master’s in Business Administration from the University of Sydney, Tara joined the family business as managing director. Photo IPP

Family businesses constitute more than two-thirds of the economy and are its backbone. However, as Adi Godrej said in the recent Indian School of Business convocation in Hyderabad, these businesses continue to be unsung heroes. While on the one hand, the generational characteristic of family business ensures continuity of wealth creation, on the other, it has been widely observed in recent years that youngsters or the gen next does not always take pride in the family’s business and, often, looks out for other opportunities. 

Professor Parimal Merchant, director of the Gobal Family Managed Business Program at the SP Jain School of Global Management in Mumbai, says that more than 80% of the youngsters from family businesses shy away from joining the family business. Instead, they are lured by the glamour of the outside world and end up wasting the precious years of their lives before finally settling back in the family business.

The non-profit Asian Institute of Family Business believes that this is a matter of grave concern from the point of view of society and the economy, and needs to be examined. For this reason, we decided to speak to stakeholders about this dilemma in order to develop a holistic perspective. It was interesting to hear from some youngsters whose families own businesses and to try and understand their point of view.  

Creating our own lives 

Youngsters today want a complete hold over their life’s choices. They also don’t want to work under anyone. In a family business, they feel the compulsion of being answerable to the father or parent or mentor. They would also come under scrutiny from other relatives and employees, which infuses in them a sense of fear of losing their personal space. 

Education

In a way, since generation next is generally better educated and has increased access to opportunities, it may want to take up paths other than those offered by the family business. As an example, the son of a clothing wholesaler in Surat does not want to join the family business because he has earned a degree in MBA and he feels he can do better in life than dealing with small buyers.

Family business as backup 

Usually parents also say family business to hai hi . . . Kuch karna chahta hai to try kar le. (The family business is there in any case … so if you want to try something, go ahead.) This encourages many inheritors to treat their family’s business as a back-up. They also feel that they can join and manage the family business any time. College professors who often counsel students on career choices also provide similar inputs. Professor Yogesh Kamath of Mithibai College in Mumbai says that the trend of disinterest in building the family business is definitely visible. According to him, the most important reasons are exposure to business outside and considering the family business as a fall-back option.

Perception

Significantly, there is a misconception in the minds of gen next that if they join the family business at an earlier stage, the world would come to the conclusion that he or she lacks the capability to do something on his or her own. Here the perception of peers and the wider family also plays a key role. Hence, there may be a need to tell better stories of inheritors who have helped nurture the family business, aided in the growth of the business and earned respect for their own contributions.

Not attractive 

Inheritors are not always attracted to the family business as they gather from the family conversations and perhaps their personal experience that the business is neither easy nor glamorous. The idea of quick success lures them and they feel they can attain it immediately. Karan Kikavat, a family business scion, describes the current fad by saying, “Everybody wants to become an instant millionaire.” 

Generation gap 

There is a mismatch of ideas between generations, as the senior generation wants to go for the traditional method whereas the young guns like to implement new ideas. This also opens up the issue of younger members of the family being valued or not. Yashvee Dodhiwala, the next generation of an established family business, says, “The fathers don’t appreciate the new generation’s work or new ideas, their potential is not exploited to the full, they don’t get credit for their hard work or ideas. The generation gap is the primary, or at least an important, issue as this is the creative era—something which the older generation does not understand.”

Dr Minu Mehta of the IES Management College in Mumbai suggests, “Perhaps parents want to avoid intergenerational conflict. Maybe they don’t want to give up control and are too possessive of their business. Perhaps the business is too small to accommodate the children. Or, maybe the children are just not interested.”

Professor Sumant Bhushan of Daly College in Indore says, “There is a mixed bag of students. Some youngsters prefer not to join the family business at an early age. They want to make their mark in life, acquire theoretical wisdom such as MBA or MS degrees and practical wisdom or experience such as internship or work with an MNC and thus achieve a high level of satisfaction and actualization before they join the family business.”

Scalability

Business consultants and entrepreneurs are aware of the practical issues that can act as a deterrent. Sushil Chander, a human resource consultant for SMEs, says that the problem will be greater in small companies where the profit is less compared to the number of stakeholders. The problem is less prevalent in businesses that are doing well. Ankit Agarwall, scion of a wellknown family business in Mysore, echoes this view when he says that the scalability of the business can be an issue. Ajay Kapoor says children may not want to join a family business if there are too many labor-oriented issues. There can also be complicated partnership-related issues that may inhibit them.

Former IIM faculty Dr Asish Bhattacharya sums up the above by saying, “Every family business is not entrepreneurial or innovative. Many family businesses are engaged in traditional spheres. The current generation may not have the aspiration to scale up the business. In many cases, scaling up is not possible. Those businesses cannot attract the new generation. Moreover, today, the young generation has many choices in pursuing their career.” 

Globally, senior academicians and researchers have a somewhat different take. Professor John Davis, a celebrated authority on family business, has the following opinion, “An entrepreneurial experience in the younger generation may be precisely what is needed to either revitalize family enterprises that are maturing, or build additional sources of wealth for the family. Of course, this presupposes that the family can harness this entrepreneurial talent for broader family gain.”

Professor Lyoid E. Shefsky, founder and co-director of the Center for Family Enterprises at the Kellogg School of Management says, “The decisions as to whether or not to join the family business is very much a personal decision based on numerous factors such as family dynamics, desires, flexibility and pressures, real or perceived, personal career preferences, education and alternative opportunities.”

Conclusion

Professor Merchant mentions an important statistic—60% of youngsters ultimately come back to the family business where they cause unpleasantness and waste more time before setting down. Based on his decades of experience with generations of family businesses, Professor Merchant strongly advocates joining the family business as early as possible. He counsels the young generation to get exposure, develop vocabulary and be excited about doing business. “They should not get carried away by false notions and pursue comfort for comfort’s sake.”

Dr Bhattacharya echoes this sentiment, “The challenge can be addressed, to an extent, by grooming the young generation from childhood. It is important to inculcate a sense of pride in the business. It is also important to allow the young generation to experiment with new ideas and to run the business differently to create excitement in the members of the new generation.” As Professor Merchant says in conclusion, “The challenge of doing business is what life is all about.”

“Perhaps parents want to avoid intergenerational conflict. Maybe they don’t want to give up control and are too possessive of their business. Perhaps the business is too small to accommodate the children. Or, maybe the children are just not interested,” Dr Minu Mehta

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