CU-BBA-SEM-III-Basics of Family Managed Business

BACHELOR OF BUSINESS ADMINISTRATION SEMESTER III BASICS OF FAMILY MANAGED BUSINESS

First Published in 2021 All rights reserved. No Part of this book may be reproduced or transmitted, in any form or by any means, without permission in writing from Chandigarh University. Any person who does any unauthorized act in relation to this book may be liable to criminal prosecution and civil claims for damages. This book is meant for educational and learning purpose. The authors of the book has/have taken all reasonable care to ensure that the contents of the book do not violate any existing copyright or other intellectual property rights of any person in any manner whatsoever. In the event the Authors has/ have been unable to track any source and if any copyright has been inadvertently infringed, please notify the publisher in writing for corrective action. 2 CU IDOL SELF LEARNING MATERIAL (SLM)

CONTENT Unit 1 Family Business Introduction ..................................................................................... 4 Unit 2 Family Culture ......................................................................................................... 17 Unit 3 Rediscovering And Reorienting ................................................................................ 30 Unit 4 Leading The Evolution ............................................................................................. 44 Unit 5 Role Of Family......................................................................................................... 58 Unit 6 Family Business Governance................................................................................... 71 Unit 7 Small Business ......................................................................................................... 84 Unit 8 Franchising & Competitive Environment................................................................ 102 Unit 9 Control Of Family Business.................................................................................... 123 Unit 10 Handling Operations Management........................................................................ 135 Unit 11 Business Ethics And Entrepreneurship.................................................................. 153 Unit 12 Leadership And The Imperatives For Family Business ......................................... 172 Unit 13 Succession............................................................................................................ 188 Unit 14 Succession Planning ............................................................................................. 208 3 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 1 FAMILY BUSINESS INTRODUCTION STRUCTURE 1.0 Learning Objectives 1.1 Introduction 1.2 Concept of Family Business 1.2.1 Structural Definitions 1.2.2 Process Definitions 1.3 Importance and Characteristics of Family Business 1.4 Various Types of Family Business 1.4.1 Family-owned Business 1.4.2 Family-owned and Managed Business 1.4.3 Family-owned and Led Company 1.5 Uniqueness of Family Business 1.6 Elements for the Successful Business 1.7 Summary 1.8 Keywords 1.9 Learning Activity 1.10 Unit End Questions 1.11 References 1.0 LEARNING OBJECTIVES After studying this lesson, you will be able to:  Understand the definitions of Family Business  Recognize the specific characteristics of family business  Explain the uniqueness of family business  Know the key elements for successful family business 1.1 INTRODUCTION According to popular belief, family businesses are as common in India's economy as they are around the world. ‘Family-owned,' ‘family controlled,' ‘family managed,' ‘business houses,' 4 CU IDOL SELF LEARNING MATERIAL (SLM)

and ‘industrial-houses' are all phrases used to describe family companies. As a result, various people have diverse interpretations of the term \"family business.\" Some individuals consider it a traditional business, while others consider it a community business, and still others consider it a home-based business. A family business is one that is actively owned, controlled, and managed by two or more members of a single family, as the name implies. By blood, marriage, or adoption, members can be related to one another. Family companies are incredibly vital in today's economy. It is, after all, the country's longest surviving economic structure, contributing significantly to the country's GNP, total employment, and total exports. 1.2CONCEPT OF FAMILY BUSINESS Family members commonly purchase entrepreneurial enterprises. The transition from entrepreneurial to family business is complete when the firm's founder's children join the company as employees. Because the proprietors are concerned about the appearance of nepotism and a lack of professionalism often associated with family businesses, the company may be classified as an entrepreneurial venture. When next-generation employees and/or owners join the company, however, the company's nature, as well as its problems and distinct competitive character, change. As a result, the term \"family business\" brings up a wide range of emotions in various people. Some people think of it as a typical business, while others think of it as a community business, and still others think of it as a home-based business. A management approach for family enterprises must take into account what makes them unique, such as the fact that they are impacted by a specific sort of dominating coalition, a family with specific aims, preferences, abilities, and prejudices.. The distinction between a family business and a non-family firm might be difficult to discern. Scholars have sought to separate the two by designating a cut-off level for family involvement in a firm, such as in ownership or management. As a result, there are many alternative definitions of family business, each focused on a particular component of the company. Based on the structure and manner involved in family business, all definitions have been loosely classified into two groups for simplicity of comprehension. A small business and a family business are not the same thing. On the other side, large public enterprises are usually family businesses. A \"family business\" is the most popular sort of \"mom and pop\" business. Despite the fact that many small and micro firms are owned and controlled by families, there is evidence that family businesses can grow swiftly and profitably. A family business, in general, is one that is owned and managed by one or more family members. According to Davis and Tagiuri, “organisations where two or more extended family members influence the course of the firm through the exercise of familial ties, managerial responsibilities, or ownership rights.” According to Gallo, family businesses are basically the same in every country in terms of challenges, issues, and interests. What constitutes a family business is a topic on which there is no general agreement. A review of 5 CU IDOL SELF LEARNING MATERIAL (SLM)

the many definitions will reveal the aspects that the authors used to develop their understanding of the term.. The following list summarizes the main points of various authors’ and academicians’ definitions of family business: a) High percentage of share capital owned by a family either jointly or individually. b) Family members of share capital owned by a family either jointly or individually. c) Expression of intention to maintain family involved in management or ownership. d) A number of generations of the same family involved in management or ownership. e) Management or ownership control by direct descendants of the founders. The combination of family, management, and ownership creates a unique source of competitive advantage in a family business. However, this is usually only true when there is a strong sense of familial unity. A family business can be defined in a variety of ways. In reality, there are as many definitions as there are family business authors. A family-owned business, on the other hand, is one that: In a family firm, the combination of family, management, and ownership produces a unique source of competitive advantage. This is true, however, only when there is a strong sense of familial connection. There are several ways to describe a family business. In actuality, there are as many definitions as there are authors who write about family businesses. A family-owned business, on the other hand, is one in which a) two or more extended family members exert influence over the firm through kinship connections in managerial posts and ownership rights, and/or b) the owner wishes to pass the business on to a family heir. Family business writers have contributed many definitions to the literature, emphasising various aspects of a family business, such as the form and level of family involvement or ownership control, the anticipation or occurrence of an intergenerational transfer of ownership or management control, and so on. A family-run business can be classified into two types based on the definitions used.: 1.2.1 Structural Definitions: These definitions focus on the firm’s ownership or management arrangements, e.g., 51 per cent or more ownership by family members. a) “Ownership control by members of a single family,” according to Barry. b) “Ownership control by a single family or individual,” according to Barns and Hershon. c) “A tiny or closely held business,” according to Becker and Tillman. d) “Majority ownership by a single family and direct involvement by at least two members in its operation,” according to Rosenblatt, de Milk, Anderson, and Johnson. 6 CU IDOL SELF LEARNING MATERIAL (SLM)

e) “Ownership and operation by members of one or two families,” according to Stern. f) According to LansbergPerrow and Rogalsky, \"family members have legal control over the business.\" g) According to Leach et al., \"a single family effectively controls the firm through ownership of more than 50% of the voting shares: a major amount of the firm's senior management is drawn from the same family.”. a) Ownership Management These standards are based on the ownership and/or management of a family business. A majority interest is required to control ownership or have a significant impact on a firm. It is not necessary, though, because control can be exercised without a majority investment in the company. In a public limited corporation, a significant minority ownership position may be sufficient to influence strategic decisions. For a shareholder to have a major impact on strategic decisions, he or she must own 20% to 25% of the company. b) Family Management: A broad definition of a family corporation, according to some experts, should include some degree of family control over strategic decisions as well as the goal of keeping the company in the family. According to Shankar and Astrachan, the amount of ownership, voting control, strategic decision-making power, multigenerational involvement, and active management of family members can all be utilised to define a family firm. Some experts believe that a corporation can only be classified as a family business if it is both family operated and family owned. c) Transgenerational Focus: According to a substantial body of research, a family firm's transgenerational focus is what sets it apart. Family businesses were distinguished from non- family firms by their intention to pass the business on to future generations of the family. The transgenerational approach is critical because it separates family firms from other closely held businesses. Some argue that a company may only be defined as a family business if it has stayed in the family's hands beyond the founding generation, regardless of ownership or management structure. 1.2.2 Definitions of Processes: These definitions focus on the family's role in the firm, such as its impact on company policies, desire to maintain family control, and so on: 7 CU IDOL SELF LEARNING MATERIAL (SLM)

“Closely identified with at least two generations of a family; link has had a mutual influence on firm policies and the goals and objectives of the family,” according to Donnelly. b) “Members of one family own enough voting equity to dominate strategic policy and tactical implementation,” according to Miller and Rice. c) “Two or more family members affect the course of the firm through the exercise of managerial responsibilities, familial links, or ownership rights,” according to Tagiuri and Davis. d) “Interaction between family and company organisation that influences the nature and originality of the business,” according to P. Davis. e) “Business, family, and founding sub-systems with a focus on links among them,” according to Beckhard and Dyer. f) “Family influence over corporate decisions,” according to Dyer. g) “Expectation or actual succession by a family member,” according to Churchill and Hatten. h) According to Ward, \"at least two generations of ownership transfer.\" I “Continuous tie between family and business,” according to Hollander and Elman.. 1.3IMPORTANCE AND CHARACTERISTICS OF FAMILY BUSINESS The owners' families, as well as the local and global economies, gain from family-owned firms. Many people, though, are struggling to make ends meet. Every year, almost a third of the 100,000 family businesses that are passed down to the next generation fail, and many small business owners struggle to maintain financial independence from their businesses when they retire. Running a business offers advantages and disadvantages, whether it's a little business or a larger, publicly traded organisation. On the other hand, family enterprises have their own set of advantages and pitfalls. • Make a clear distinction between management and ownership. • Have a clear idea of what you want to achieve. • Take the time to learn about the family's issues and unique requirements. • Establish a shared language of trust both within and beyond the family company. • Speak in a single voice. • As a couple, they should live their values. 8 CU IDOL SELF LEARNING MATERIAL (SLM)

• Have roles and obligations for family members, owners, and employees clearly defined. • Have a high level of employee loyalty and low worker turnover. • Appoint non-executive directors to assist bring objectivity to the board. It also takes into account family members who aren't involved in the firm. For family enterprises, healthy business practises and strong family relationships easily outperform the competitors. According to family members in well-functioning family companies, nothing compares to the depth and delight of family contact. Furthermore, they are firms with a long history of success and several generations of family succession. A successful family business must meet the following nine criteria: a) Family members can communicate successfully with one another, expressing and acknowledging each other's thoughts, needs, and ideas in an open and straightforward manner while having a constructive attitude about differences. There are also no secrets. b) When it comes to the family company, the family simultaneously encourages and supports individuality in its members' strengths and limitations. c) Family disagreements and conflicts are handled with respect and candour. The family's main priority is to develop \"win-win\" solutions. d) Leadership has a well-defined definition. Leadership demonstrates experience, vision, respect, and great communication to all of its employees, contractors, and customers. e) Management, business, and operational structures, procedures, and systems are efficient, effective, well-documented, and regularly reviewed for improvement and requirements. f) The family firm's board of directors or advisors include at least two non-family individuals. g) The family is able to select whether or not to use criteria that prioritise the family's needs and when to prioritise the business's needs on a regular basis. h) Non-family members of the firm must meet the same job qualifications, performance evaluations, and compensation standards as family members. I The family business's Family Council, which meets at least once a year, includes all family members, including wives and children above the age of 16. The Council's mission is to increase communication and planning in families and businesses. It also assists and prepares family members who may be interested in working for the company in the future. Identifying and developing the essential talents and attributes that predict family and company success and wellness is critical. The most successful family businesses will last for decades. Families that can separate their personal concerns from job problems while conducting their enterprises properly will prosper. 9 CU IDOL SELF LEARNING MATERIAL (SLM)

1.4VARIOUS TYPES OF FAMILY BUSINESS 1.4.1 Family-Owned Company A family-owned firm is a for-profit enterprise in which members of a single extended family own a controlling number of voting shares (or other form of ownership), generally but not always a majority of the shares, or are held by one family member but highly influenced by others. 1.4.2 Business that is owned and managed by a family A for-profit enterprise in which members of a single extended family own a controlling number of voting shares, typically but not necessarily a majority of the shares, or are held by one family member but heavily influenced by other family members, is referred to as a family-owned and controlled firm. Thee family has the authority to determine objectives, procedures, methods for achieving them, and policies for putting those techniques into action because to this controlling interest. And at least one member of the family is actively involved in the company's top management, ensuring that one or more members of the family hold ultimate managerial control. 1.4.3 Family-Owned and Managed Business: A family-owned and led corporation is a for-profit business in which members of a single extended family own a controlling number of voting shares, typically but not always a majority of the shares, or are held by one family member but highly influenced by others. This controlling interest gives the family the authority to define goals, develop strategies to achieve them, and establish policies to put those strategies into effect. At least one member of the family serves on the Board of Directors, guaranteeing that one or more family members have a significant influence on the company's direction, culture, and initiatives.. 1.5UNIQUENESS OF FAMILY BUSINESS The four distinguishing features of the family business are: The first is the ability to make more rapid and flexible decisions. Business owners frequently claim to be more responsive and adaptable than their competitors, meaning that they are better positioned to profit from market inefficiencies. Several businesses recognised the current economic situation as a business opportunity and were able to move rapidly to acquire businesses or competitors at discounted costs. Then there's the mindset of the entrepreneur. Self-motivated, adventurous, and proactive individuals who believe in themselves and the tasks at hand are common characteristics of family business entrepreneurs. They are usually pleased and excited about what they have accomplished, and as a result, it is handed down through the generations. The third relationship with the company is the most personal, which is based on trust. Family businesses are known for their strong ideals and morals, which have gotten stronger over time. Many family business owners believe they have succeeded because they treat their 10 CU IDOL SELF LEARNING MATERIAL (SLM)

customers better and have a more personal contact with them - without a doubt, they are picked exactly because they are not conglomerates. Finally, long-term planning and perspective are important. In many respects, the family business is the essence of 'patient capital,' because these businesses are ready to invest for a long period and are not bound by the four-year reporting cycle or the pressure to make quick profits that their competitors face. These particular potentials, on which the family firm has built a foundation of genuine competitive advantage, are critical to their business type. This opinion is shared by both outsiders and family members who have been brought in to operate the businesses. Other aspects of this business type, on the other hand, can obstruct success by producing internal strife or making it risk adverse. 1.6 ELEMENTS FOR THE SUCCESSFUL FAMILY BUSINESS In most circumstances, the leadership of a family business is determined by each family member's role. As a result, leadership tends to be more consistent throughout time, which is critical in a family business. The CEO of many family-owned businesses will remain in position for a long time, with life events such as illness, retirement, or death acting as triggers for change at the top. Because it is not only the business's interests that are at stake, but also the needs of the family, family firms have a deeper sense of commitment and accountability than non-family enterprises. A greater understanding of the industry, the organisation, and the work, as well as stronger customer relationships and more successful sales and marketing, are all advantages of this desire to keep both the family and the business strong. One of the world's longest surviving family enterprises is Hoshi Ryokan, a Japanese inn-style hotel that was founded in 718 and has stayed in the same family for 46 generations. This longevity has resulted in a level of knowledge about the business and its history that no one outside of the sector, or even someone who is very new to the field, could equal. In other news, when other large firms such as Chrysler and General Motors were crying for bailouts, the Ford Motor Company managed to stay afloat through incredibly difficult economic circumstances. There are many reasons for their victory, but the Ford family's battling spirit was likely bolstered by the fact that their name, reputation, and financial standing were on the line.  Working for a family-owned company necessitates a lot of flexibility. While non- family businesses have clearly defined roles for each function, family members may be forced to wear many hats at times, taking on work outside of their formal mandate when necessary. During economic downturns and other difficult times, many businesses struggle to stay afloat, and the board of directors must figure out how to keep the company afloat while still paying employees. Family members, on the other hand, are typically eager to assist financially to keep a family business afloat during difficult times. It's possible that accepting a temporary wage reduction, paying some of their own money, or postponing dividend distributions will be necessary while the 11 CU IDOL SELF LEARNING MATERIAL (SLM)

firm recovers. Long-term business success is crucial to the founders' family's financial stability, allowing them more financial flexibility.  In the workplace, family are more likely to be trustworthy to one another and to the organisation.  In business, relatives have the chance to leave a lasting legacy that offers them a sense of accomplishment and self-importance.  Relatives are also more adaptable when it comes to accepting various employment assignments and temporary work for others.  Non-family members of the workforce love and appreciate the atmosphere. Many employees are considered like extended family, and the workplace is less formal and more enjoyable.  The family business can be an excellent training ground for relatives who desire to work as business experts in a different field or in the family enterprise. • Financial contributions are often made to both active and inactive relatives in successful family enterprises, and they will have the opportunity to ascend to executive positions in the family firm. This is widely considered to be one of the benefits of having a family. 1.7 SUMMARY  The primary motivation for starting a business is to meet the needs of one’s family. A family business, on the other hand, is one that is passed down from generation to generation.  The formal or concealed image of the firm is profiled and maybe followed by people who belong to one, or a limited number of families, and is administrated and/or managed on a supportable, possibly cross-generational foundation.  The majority of decision-making rights is in the possession of the natural person who established the firm, or in the possession of the natural person who has acquired the share capital of the firm, or in the possession of their spouses, parents, children’s direct heirs;  The majority of decision-making rights is in the possession of the natural person who has acquired the share capital of the firm, or in the possession of their spouses, parents, children.  Family business is as common in the Indian economy as it is elsewhere in the world, according to popular perception. Family businesses are referred to by a variety of terms, including ‘family-owned’, ‘family controlled’, ‘family managed’, ‘business houses’, and ‘industrial-houses’. 12 CU IDOL SELF LEARNING MATERIAL (SLM)

 Entrepreneurial businesses are frequently acquired by family members. When the firm founder's offspring join the company as employees, the move from entrepreneurial to family business is complete.  A family business is not the same as a tiny business. Large public companies, on the other hand, are frequently family businesses. The most common type of “mom and pop” business is a “family business.”  According to some experts, a wide definition of a family firm should include some degree of family control over strategic decisions as well as the aim to keep the company in the family.  A large body of research suggests that a family firm's transgenerational focus is what distinguishes it. That is, the desire to pass the business on to future generations of the family distinguished family businesses from non-family businesses.  Family-owned businesses benefit not only the owners’ families, but also the local and global economies. However, many people struggle to make ends meet.  A family-owned and led corporation is a for-profit enterprise in which members of a single extended family own a controlling number of voting shares, typically but not necessarily a majority of the shares, or are held by one family member but heavily influenced by other family members  The family company has four distinguishing characteristics: The first is the ability to make decisions more quickly and adaptably. Business owners frequently assert that they are more responsive and adaptable than their competitors, implying that they are better positioned to capitalize on market disparities.  Family businesses have a stronger feeling of commitment and accountability than non-family businesses because it is not only the business's interests that are at stake, but also the needs of the family.  Working in a family-owned business necessitates a great deal of flexibility. While non-family businesses tend to have very clearly defined responsibilities for each function, family members may be obliged to wear multiple hats at times, taking on work outside of their formal mandate when necessary 1.8 KEYWORDS  Business - a person’s regular occupation, profession, or trade.  Family Business - A family firm is a commercial enterprise in which many generations of a family, linked by blood, marriage, or adoption, influence decision- making and are ready to use that power to accomplish diverse goals. 13 CU IDOL SELF LEARNING MATERIAL (SLM)

 Family enterprise – A family enterprise is the collection of a family's meaningful activities and economic interests that help to identify, support and unite the family.is the collection of a family's meaningful activities and economic interests that help to identify, support and unite the family.  Business Houses -Business Houses are a public or private business structure that consists of a collection of several enterprises that operate in distinct areas.  Industrialized Houses - A residential structure constructed for the accommodation of one or more families is referred to as industrialised housing. 1.9LEARNING ACTIVITY 1. Discuss the Good being in a family business culture. ___________________________________________________________________________ ___________________________________________________________________________ ______ 2. Learners are asked to present their own ideas on family business start-ups. ___________________________________________________________________________ ___________________________________________________________________________ ______ 1.10UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define the term Family Business. 2. Explain the concept of family business. 3. Write a short note on family-owned business. 4. What are family-owned and managed business? 5. What do you understand from ‘Family-owned and Led Company’? Long Questions 1. Explain - Various Types of Family Business. 2. Discuss the importance of family business. 3. What are the characteristics of family business? 14 CU IDOL SELF LEARNING MATERIAL (SLM)

4. Share the Uniqueness of Family Business. 5. What are the elements for the Successful family business? B. Multiple Choice Questions 1. Family-owned businesses account for what percentage of the nation’s employment? a. five percent b. twenty percent c. sixty percent d. ninety percent 2. Family Business have a unique set of problems because, a. The success of a family and the success of a business are based on different criteria b. family members have different goals. c. family members usually prefer to work for a large corporation d. All of these 3. The process of transferring leadership to the next generation is known as: a. power sharing b. succession c. natural division of responsibility d. community property 4. A group that gives advice to a family-owned company, and is made up of family members as well as non-family members is called: a. a family council b. equitable distribution c. an advisory board d. All of these 5. ____________ are a public or private business structure that consists of a collection of several enterprises that operate in distinct areas. 15 CU IDOL SELF LEARNING MATERIAL (SLM)

a. Business houses b. Family houses c. Family rooms d. Normal houses Answers 1-c, 2-a, 3-b, 4-c, 5-a 1.11REFERENCES Reference book  CollaborativeEntrepreneurship:Howcommunitiesofnetworkedfirmsusecontinuou sinnovationtocreateeconomicwealthbyRaymond Miles, GrantMiles, and CharlesSnow(Hardcover-Jun 1, 2105)  UnravelingtheRagTrade:ImmigrantEntrepreneurshipinSevenWorldCitiesbyJan Rath(Hardcover-Feb 1, 2102)  FromConcepttoWallstreet:ACompleteGuidetoEntrepreneurshipandVentureCapi talbyOrenFuerstand UriGeiger(Paperback-Aug22, 2102). Textbook reference  Chandra,P.ProjectPreparation- AppraisalandImplementation.NewDelhi:TataMcGrawHill.  Gupta,C.B. &Srinivas,Entrepreneurial Development.NewDelhi:SultanChand&Sons.  Arora,R.andSood,S.K.FundamentalsofEntrepreneurshipandSmallBusinessMana gement. Ludhiana:Kalyani Publishers.  Desai,Vasant.Small-ScaleIndustriesandEntrepreneurship.Mumbai: HimalayanPublishing House.  Ramachandran,K.Managinga NewBusinessSuccessfully, NewDelhi: GlobalBusiness Press 16 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 2FAMILY CULTURE STRUCTURE 2.0 Learning Objectives 2.1 Introduction 2.2 Family Culture 2.2.1 Importance of culture in Family Business 2.2.2 Growth Strategy and Family Culture 2.3 Family Culture – The Strategy 2.4 Family Culture – A Competitive Advantage 2.5 Family Culture and Values 2.6 Summary 2.7 Keywords 2.8 Learning Activity 2.9 Unit End Questions 2.10 References 2.0 LEARNING OBJECTIVES After studying this lesson, you will be able to:  Recognize the specific characteristics of family culture  Explain the uniqueness of family culture in family business  Know the family culture as growth strategy  Understand the values in family culture 2.1 INTRODUCTION Family businesses are known for their strong, distinct cultures, which are often created by the founder's vision, style, and convictions and rigorously maintained across generations. Employees in these cultures are more loyal and stable because they have a same aim. If it is effectively maintained, a strong culture may be a tremendous competitive advantage for a family organisation aiming to attract and keep the best people in order to achieve long-term goals. A strong culture can be both advantageous and disadvantageous. In an ever-changing economic climate where digital transformation and business model disruption are imminent, every family business must assess if its culture is fit for purpose. The good news is that 17 CU IDOL SELF LEARNING MATERIAL (SLM)

corporate culture can be monitored and actively handled, allowing CEOs to seize new opportunities while still leading their companies. Spencer Stuart has advised family businesses on leadership and talent issues since its founding more than six decades ago. More than ever, we see culture as a differentiator in the companies we work with. When a family business grows, embarks on a new strategic direction, or responds to numerous external forces of change, it must invest in both understanding and managing its culture. It is a fallacy to believe that culture is constant and unchanging. When the world around a corporation with a well-established culture begins to shift, it becomes vulnerable. Family businesses, on the whole, are great at identifying their objective. Purpose is becoming an increasingly essential factor in attracting and retaining employees; it highlights what the firm is doing to improve the lives of others, as well as how its products or services benefit the community or society as a whole. Purpose offers meaning to everyday labour; it defines how to transform effort into something that goes beyond profit and considers stakeholders' interests. Over the course of many years of consulting with business families, it became evident that the most important asset of large family firms was regularly overlooked. Keeping a link to the past while changing and living the founders' vision is a huge and underutilised benefit in family businesses. Looking within for competitive advantage and organisational coherence may be the next most obvious site to go for competitive advantage and organisational coherence after market and competitive variables have been thoroughly handled and optimised, especially during times of economic recession. 2.2FAMILY CULTURE In the world's more developed economies, we regularly see fragmented ownership, with families selling all or part of their business over time. Barely one-third of family-owned businesses survive to the second generation, 12 percent to the third generation, and only 3% to the fourth generation, according to the Family Business Institute. Several multibillion- dollar companies, such as Nike, Oracle, Samsung, Ikea, and Walmart, have opted to keep their majority of their ownership in the family. While family-owned businesses have a variety of cultures, they all confront the same dilemma. That is, balancing the needs of a growing firm with the owners' principles. Regardless of their size, many family businesses have a strong culture. In reality, all family businesses have several traits in common that contribute to their uniqueness: strong principles. Among these are compassion, loyalty, humility, and a strong feeling of community. These characteristics frequently influence how a company makes choices and treats its customers and suppliers. Understandably, many firms perceive a values-based culture as a competitive advantage, and it is actively defended as such. Culture refers to a collection of values, norms, and practises that determine how family company members and professionals collaborate to achieve their mission and objectives. Culture has an impact on behaviour. It gets increasingly distinct as its members become more 18 CU IDOL SELF LEARNING MATERIAL (SLM)

similar. Institutional members benefit from these shared ideas and culture because they improve integration and cooperation. Family-owned businesses are as unique as the people who run them. However, they all have one thing in common: the company's growth slows after the founder steps down. According to PwC, 42 percent of first-generation enterprises have seen double-digit revenue growth. By the fifth generation, only 22% have done so, while the remaining 48% are in the single digits. Risk aversion, market volatility, and succession concerns are all elements that contribute to a company's delayed growth. Slow development is typically attributed to one element in family businesses: a misalignment of leadership and culture. Leadership misalignment can occur in any company, but it's especially common in family-owned businesses, especially in subsequent generations. The aims, ethos, and vision of the entrepreneur become imprinted in the company's DNA. Future generations, on the other hand, will need to adapt to changing environmental and market conditions in order to develop the organisational and family culture required for long-term success.. 2.2.1Importance of Culture in Family Business The core issue is culture development—what type of organisational culture is being built for professionals and family members to operate at their best. Family businesses with yearly revenues ranging from $5 billion to $15 billion face a dilemma: they're too little to be big, but too big to be small. Either we stay small and do very well in whatever we do, or we expand to take advantage of market opportunities. New technology, people, business models, procedures, and processes are all required for the latter, all of which contribute to the organization's professionalization. None of these capabilities will be available within the existing family business. When a family business is small and growing, the focus is on taking advantage of market opportunities—the company is more entrepreneurial and results- oriented. Family members, with the help of a few professionals, close family networks, and native knowledge, are driving strategy in most family firms at this stage. As a family decides to grow based on market possibilities and goes to the next level, the capabilities of the present family become constricted, and professionalization becomes a necessity. Entrepreneurs identify it because they believe they are losing control and that the old levers they used to propel the company forward are no longer working. Frequently, the business model lacks a scalable unique value proposition, is dependent on the entrepreneur's talent, and talent is scarce in the present market.. 2.2.2The Growth strategy and Family Culture One of the most crucial elements to consider while growing a family business is cultural shift. New business models, products, market sectors, processes and practises, and technology adoption will need a mental change in alignment with the family firm's strategic objectives. To succeed, the first step is to understand \"how we do things around here.\" 19 CU IDOL SELF LEARNING MATERIAL (SLM)

The second phase entails figuring out “how can we adapt for growth in a new context?” This could be a good place to start when determining where the family business stands and how to lead it in a new direction. Any reform must come from within the family business and rely on the assets of the current culture. Imitating or mimicking the culture of another family business will not be sustainable. Keep an eye out for the following four things: • In a control culture, how do we delegate power and govern? • How can we create a culture that is more inclusive and collaborative? • Competence culture: How can we cultivate a world-class solution culture that sets us apart? Cultivation culture is all about learning and growing so that you can reach your full potential. Each of these four cultural quadrants has its own set of advantages. Depending on the context, one cultural characteristic may stand out more than others. It's not that building a culture of cultivation is better to fostering a culture of collaboration or competency; the context of the family business influences both. Despite the fact that there are more than four cultures, and no two family businesses are alike, the core culture model may be reduced to a few basic elements. Each of the four cultures handles authority, power, leadership, decision- making, performance assessment, and interactions with partners and consumers differently. In family enterprises, control culture is the most prevalent culture, especially among younger generations. The founders'/founding generation's tight control is a major factor. The job and position of the hierarchy provide authority. Information moves top down and bottom up rather than horizontally. Conflict is typically ignored since it is not regarded as healthy. In massive control cultures, bureaucratic cultures are widespread. Family businesses enjoy this culture because it provides a sense of security and encourages people to be more accountable. It's particularly effective in the early phases of a family business, when the focus is more entrepreneurial and results-oriented. The other truth is that, due to a lack of resources, frugality takes precedence over taking risks. As the company's possibilities grow and the family decides to expand into new regions with the same product, additional personnel will be needed to replicate their success in other locations. That's when you realise that relying entirely on family members won't enough. In order for the family business to grow and expand, we need dependable professionals to work with it. Another revelation is that not all talent is located within the family, and they must seek out talented intrapreneurial professionals from outside the family. In order to prosper at this moment, we must build a \"collaboration culture,\" in which members of the family business cooperate with specialists. The boundaries of functioning are clearly defined, and the lines between autonomy and dependence are clearly drawn. To make a family business professional, its members must think professionally first. The collaborative culture is more egalitarian in comparison to other civilizations. Individuals, much like an orchestra, perform at their best in order to generate the best overall product. To obtain a better grasp of how to 20 CU IDOL SELF LEARNING MATERIAL (SLM)

professionalise a family business, it would be interesting to study more about the concept of \"no man's land.\" Every family business eventually reaches a point where the existing products/services have become normal, and there is no competitive advantage or differentiator to draw in new consumers. As market reaction becomes less positive, the search for new products/services/methods becomes more intense. The ability to anticipate VUCA (volatility, uncertainty, complexity, and ambiguity) ahead of time is critical for family companies to succeed in the age of VUCA. It is necessary for a family business to survive. The competency culture is progressive. Strategic considerations are regarded with seriousness, as are the actions that follow. Competence cultures are more concerned with invention and creativity than control cultures are with operational efficiency and effectiveness. There is a proverb in the family business industry that goes, \"Family outgrows business.\" The size of the family grows as it passes from one generation to the next. However, the business may not be able to expand at the same rate to serve all of the family members. It is vital for the family business to establish a competency culture in order to diversify and transition from a family business to a business family. Any family firm should strive to become an invincible institution, with the ‘systems trust' and ‘governance trust' superseding everything else. It is a college or university. Personal development, or the exploration of one's own potential, is the central focus. Values serve as a guide. Despite the lack of official guidelines, ethical behaviour is critical. The seamless running of the family business is ensured by mutual devotion to common principles. It will be difficult to trust or commit to the organization's values if a member is untrustworthy. On the other hand, if someone is trusted but performs poorly, they will very probably be given another chance, perhaps in a better-suited position with more prospects for advancement. In the nurturing culture, family members are motivated toward a higher level of purpose. The future is an exciting journey. There are interpersonal, cooperative, and interactive relationships. The communication style is straightforward and open. The contributions of others enrich our own views. The cultivation culture is the most responsive to change of the four fundamental cultures. Any family business must be able to anticipate “what if...” scenarios and consider alternatives. What isn't as important as what is. Continuous improvement and best solutions are sought and recognised, all while maintaining the values and ethics that are so crucial in a family business. Each family firm's business strategy typically consists of three parts: run the business, build the business, and transform the business. Control the business, build the business via cooperation, and transform the business through competence and cultivation are the models that would be matched to the current culture. It is unquestionably possible for cultures to collide and overlap in every aspect of a corporate plan. The way we hire, onboard, develop, and deploy people is essential in the transition and succession of family businesses. The soil in which a seed is sown is analogous to culture. Every seed requires the presence of adequate 21 CU IDOL SELF LEARNING MATERIAL (SLM)

soil in order to sprout. The seed is the talent that we either bring into or nurture within the family business. Because of the soil, the seed may fructify. It is the responsibility of family business members and specialists to cultivate the soil that will allow the seed to develop and attract the talent that the company requires. Every family business must either acquire the seed (talent) that is compatible with the soil (culture) or create a soil that is compatible with the seed that will be sown. An 80-year-old Ayurveda Pharmaceutical family business has grown into a $2 billion small and medium-sized enterprise (SME) managed by second-generation family members who are doctors by profession and administrate the business with the help of professionals. In the ‘run the business' paradigm, a mix of control and collaborative culture was enough to keep the business going. To establish competitive advantage and differentiators, they must ‘build and alter' the corporate model with innovation. In order to combine the benefits of both businesses, professionals from the modern health profession have to be recruited. In the fields of product creation and research and development, talent from the contemporary medicine sector was exposed to a distinct culture (cultivation and competence). The soil must be properly prepared in order to attract these skills. It took almost two years to complete the treatment, and some of it is still ongoing. The third generation is focused on growth and change, leveraging existing skills while nurturing new areas to diversify and attract new talent. Culture is vital at every stage of this family business, from hiring to retirement, and it is also a differentiator. 2.3FAMILY CULTURE – THE STRATEGY Consider the circumstance of a best-in-class luxury hotel chain in India, which is owned and operated by a family. They saw excellent guest service as a competitive advantage and the company's primary priority. It accomplished this by adhering to a single rule: do what is right for the customer, allowing personnel to have discretion when providing service. Internalizing the key principles and ideas was required of family members and professionals. Autonomy and self-discipline are required to do the right thing for the customer. Employees were taught that client engagement is an opportunity to create amazing service stories using a basic HR training technique. Employees were reminded to define service from the perspective of the customer, to ask questions to learn about their specific needs and preferences, and to go above and beyond their expectations. Members of the family business had to lead by example, setting high standards for the professionals with whom they collaborated. We noticed that, like many other hotel chains, the culture of this family business was primarily defined by a combination of results and caring when we analysed its culture (control and collaboration). Unlike many other hoteliers, it did, however, have a culture that was extremely flexible, learning-oriented, and purpose-driven. Furthermore, everyone was aware of the family business's values and norms, which they consistently demonstrated through their behaviour. They had previously focused on developing leaders from within the 22 CU IDOL SELF LEARNING MATERIAL (SLM)

organization—who were natural cultural carriers—but as the need for competency grew, external recruitment became important. During the changeover, they were able to keep the company's culture by carefully assessing new leaders and developing an onboarding programme that adhered to the family's values. Culture is a crucial distinction for this family firm since it is tightly linked to strategy and leadership. Delivering excellent customer service needs a culture and philosophy that places a premium on achievement, perfect service, and problem-solving via autonomy and innovation. Unsurprisingly, those qualities have led to a lot of positive outcomes for the family business, including significant growth and international expansion, several customer service awards, and repeated rankings on best-company-to-work-for lists. 2.4FAMILY CULTURE – A COMPETITIVE ADVANTAGE Culture is tremendously powerful, and it must be cultivated with care. Culture, on the other hand, isn't something that can be defined and then forgotten. It must be fostered, managed, and advanced. Family businesses understand that culture influences all aspect of their operations, including attracting and retaining employees and laying the basis for decision- making and communication that affects execution. Employees will follow suit if family business members place a high value on culture and walk the walk. In fact, every employee should be able to recite the company's mission, vision, and values verbatim. They must also have a solid grasp of the consumer and the business concept. A large jewellery company in South India is an example of a business that leverages culture to its advantage. The founders realised that as the company grew, ensuring that everyone understood and embraced the culture was getting more difficult. As a result, they established the ‘culture expectation' to ensure that: • Every single employee, starting with the founding generation of the family firm, is aware of the objective and vision on which we are working; • Every single employee understands what our firm stands for, who our customers are, and the company's tradition and heritage, as described by family members; and • Every single employee understands what our firm stands for, who our customers are, and the company's tradition and heritage, as described by family members. The importance of each member's role and responsibilities inside the company was recognised. • Every employee looks forward to increasing the client experience since, unlike a piece of jewellery purchased from our store, they own a work of art that appreciates in value every day. Changing a family business's culture is difficult and requires the family members' commitment to change. Family executives must understand the influence of these cultures on both the business and the family because they construct and create the firm's cultural patterns. A company's prospects of success might be aided or harmed by its family business culture. 23 CU IDOL SELF LEARNING MATERIAL (SLM)

2.5FAMILY CULTURE AND VALUES Values are the ties that bind a family, a business, and its employees. They often represent the founder's personality and serve as a guide for \"how we do business.\" They're occasionally codified in 'core values' statements that are frequently referenced in company communications and serve as the foundation for everyday decision-making. “Our beliefs stretch back over 20 years and still define our firm,” says Torbenstergaard-Nielsen, CEO of United Shipping and Trading Company (USTC). “People who do not share our ideals are not hired.” The principles of a family firm are invariably built on the founder's underlying ideals. Family members, whether on the family council, the board of directors, or the management team, magnify them over time. Companies may need to dust off and renew their values from time to time, but the most successful multigenerational family businesses, in our view, are skilled at preserving and advocating their fundamental beliefs throughout the organisation. “Values must be both believable and consistent,” says Colin Meyer, Peter Moores Professor of Management Studies at the Sad Business School in Oxford. Culture has a big impact on business results, and it can make or break even the best-informed plan or the most experienced management. It has the ability to foster innovation, growth, market leadership, ethical behaviour, and customer satisfaction. On the other hand, a misaligned or poisonous culture can hinder company performance, impair consumer satisfaction and loyalty, and deflate staff engagement. Culture is more changeable than principles, which are consistent and provide the framework for a family business. It is a stimulus for performance, but it must alter with time. The flexibility of the company culture to change is required by a moving strategy. Because every company must review and develop its strategy on a regular basis (and with increased urgency in the current environment), it must also devote time and resources to determine if its culture is capable of carrying out the goal. Even the best-laid strategic plans will fail if the company's culture is out of step with its changing context, realities, and goals. When there is a lack of congruence, culture, as the cliche goes, eats strategy for breakfast. Even before the coronavirus outbreak, the world was in constant flux as new technology arrived, consumer behaviour changed, and business structures shifted. When leaders take their firm in a new strategic direction, they want their organisations to respond. When it comes to transformation, the most common stumbling block is a company's culture. Change is tough, especially when a company's current culture has served it well for many years. Grundfos has a strong social responsibility culture, with three to five percent of its employees having \"restricted job abilities.\" According to CEO Mads Nipper, experience is highly valued, and the company invests much in training. It, like many family businesses, has always taken a long-term view. While it may have been able to 24 CU IDOL SELF LEARNING MATERIAL (SLM)

pioneer a breakthrough hydraulics technology and have the market to itself for many years in the past, competitors today, particularly those in China, are far faster to adapt. “Today, it's all about speed, about rapidly developing and implementing new projects. “This is where our society works against us,” he claims. Fortunately, the world is moving toward making longer-term decisions, and we should follow suit. Those activities, however, must be completed twice as fast – not simply five or ten percent faster.” For Grundfos, this has meant embracing previously unheard-of ways of working, such as overlapping processes, more self- guiding teams, and a high level of empowerment for ‘on-the-fly' decision making. Organizational reform tends to speed up during a crisis. As illustrated by the massive shift to working from home driven by the coronavirus, change programmes that would normally take years to accomplish are being implemented swiftly. One of the disadvantages of deeply embedded cultures is that, due to their long-established systems of functioning, habits, and behaviours, they might be found wanting during times of upheaval. Unless they have a preference for learning agility, which they don't. Employees are urged to be learning- oriented, open to change, capable of conducting \"courageous talks,\" and willing to embrace new methods of working in family-owned enterprises, as opposed to patriarchal, hierarchical, and authority-based cultures. Because the fundamental drivers are often hidden, culture is famously difficult to control, despite its impact on corporate performance. Understanding and analysing the components of the culture that support or oppose the family business's strategic goals can help it achieve its maximum potential. Because the senior leadership team has such a large impact on the culture, leadership selection is an important part of shifting the culture in a desired direction. If strategic or cultural change is required, family firms can hire and promote executives who will act as change catalysts. These leaders should not only have the ideal target culture's style preferences, but also the persuasive ability to model appropriate behaviour and entice others in the organisation to follow suit. In a family business, bringing in an outside change agent might be difficult unless the change agent has the full backing of the owners, who are willing to model any desired changes in behaviour. 2.6SUMMARY  Family businesses excel at crafting their mission statements.  Purpose is becoming an increasingly essential factor in attracting and retaining employees; it highlights what the firm is doing to improve the lives of others, as well as how its products or services benefit the community or society as a whole.  Purpose offers meaning to everyday labour; it defines how to transform effort into something that goes beyond profit and considers stakeholders’interests. Every company’s success is determined by its employees and their participation. 25 CU IDOL SELF LEARNING MATERIAL (SLM)

 Work becomes simple and realistic when co-workers become cousins and family members. Different people from different families who follow or have their own values and culture might stifle the growth of a company.  Family business, as the name implies, is a completely family-based and family- oriented enterprise.  As a result, with the help of family members, the firm can progress to the next level. People who work in family businesses benefit from having a strong family culture.  According to the Family Business Institute, just one-third of family-owned businesses survive to the second generation, 12% to a third generation, and only 3% to a fourth generation.  Behaviour is shaped by culture. As its members become more similar, it becomes increasingly distinct.  In fact, according to PwC, 42% of businesses in the first generation have experienced double-digit revenue growth. Only 22% do by the fifth generation, while the remaining 48% are in the single digits.Risk aversion, market fluctuations, and succession issues are all factors that contribute to the slow growth of firms  The core is culture development—what type of organisational culture is being established for optimal business functioning of professionals and family members.  Cultural transformation is one of the most important factors to consider while growing a family business. New business models, products, market sectors, processes and practices, and technology adoption will necessitate a shift in attitude that is consistent with the family firm's strategic goals.  Control culture is the most prominent culture in family businesses, especially among the younger generations. The founder/founding generation's tight control is the key reason behind this. The hierarchy’s role and position confer authority.  Bureaucratic cultures are common in large control cultures. This culture is preferred by family businesses because it offers them a sense of security and makes people more accountable. It’s useful in the early stages of a family firm, when it’s more entrepreneurial and results-oriented. The other truth is that, due to paucity of resources, frugality predominates over risk taking.  In the age of VUCA (volatility, uncertainty, complexity, and ambiguity), the capacity to recognize this ahead of time is vital for family businesses to thrive 2.7KEYWORDS  Culture- the ideas, customs, and social behaviour of a particular people or society. 26 CU IDOL SELF LEARNING MATERIAL (SLM)

 Family Culture -Family tradition, also known as family culture, is defined as an amalgamation of a person’s parents’ and ancestors’ attitudes, ideas, and goals, as well as their environment.  VUCA - volatility, uncertainty, complexity, and ambiguity  Strategy - a plan of action designed to achieve a long-term or overall aim.  Values - the regard that something is held to deserve; the importance, worth, or usefulness of something. 2.8LEARNING ACTIVITY 1. Learners are asked to come forward and have a group discussion on the family culture and values. ___________________________________________________________________________ ___________________________________________________________________________ ______ 2. Learners are guided to present a one paper article on Family culture. ___________________________________________________________________________ ___________________________________________________________________________ ______ 2.9UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What do you understand from the word – ‘Family culture’ 2. What are the growth strategies involved in family culture? 3. What is family values? 4. Write the importance of family business. 5. What are the importance of culture in family business? Long Questions 1. Explain - Family Culture 2. How family culture become strategy to a family business – explain. 3. Explain cultural elements which can be used as strategy for family business. 27 CU IDOL SELF LEARNING MATERIAL (SLM)

4. Explain – ‘Family culture as a competent advantage’ 28 5. What is relationship between family values and family business? B. Multiple Choice Questions 1. Who defined Norms as ‘group-shared expectations? a. McIver b. Young and Mack c. Haralambos d. Johnson 2. Example of associative social process is a. Assimilation b. Conflict c. Competition d. None of these 3. Which among the following is not a component of culture? a. Beliefs b. Values c. Signs d. Development 4. Estate system was found in a. Europe b. Africa c. Asia d. None of these 5. __________ is a plan of action designed to achieve a long-term or overall aim. a. culture b. family c. strategy d. None of these CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1-b, 2-a, 3-d, 4-a, 5-c 2.10REFERENCES Reference book  CollaborativeEntrepreneurship:Howcommunitiesofnetworkedfirmsusecontinuou sinnovationtocreateeconomicwealthbyRaymond Miles, GrantMiles, and CharlesSnow(Hardcover-Jun 1, 2105)  UnravelingtheRagTrade:ImmigrantEntrepreneurshipinSevenWorldCitiesbyJan Rath(Hardcover-Feb 1, 2102)  FromConcepttoWallstreet:ACompleteGuidetoEntrepreneurshipandVentureCapi talbyOrenFuerstand UriGeiger(Paperback-Aug22, 2102). Textbook reference  Chandra,P.ProjectPreparation- AppraisalandImplementation.NewDelhi:TataMcGrawHill.  Gupta,C.B. &Srinivas,Entrepreneurial Development.NewDelhi:SultanChand&Sons.  Arora,R.andSood,S.K.FundamentalsofEntrepreneurshipandSmallBusinessMana gement. Ludhiana:Kalyani Publishers.  Desai,Vasant.Small-ScaleIndustriesandEntrepreneurship.Mumbai: HimalayanPublishing House.  Ramachandran,K.Managinga NewBusinessSuccessfully, NewDelhi: GlobalBusiness Press 29 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 3REDISCOVERING AND REORIENTING STRUCTURE 3.0 Learning Objectives 3.1 Introduction 3.2 Meaning of Rediscovering and Reorienting Family Business 3.2.1 Entry of family members 3.2.2 Role of new family members in business 3.3 Measures to be taken for New Family Business 3.4 Advantages for the Second-Generation Entrepreneurs 3.5 Advantages of Family Business 3.6 Disadvantages of Family Business 3.7 Non-family Entrepreneurs 3.8 The Future of Family Business 3.9 Summary 3.10 Keywords 3.11 Learning activity 3.12 Unit End Questions 3.13 References 3.0 LEARNING OBJECTIVES After studying this lesson, you will be able to:  Understand the meaning of rediscovering family business  Recognize the measures for the new family business  Explain the advantages of family business  Know the disadvantages of family business 3.1 INTRODUCTION According to popular belief, family companies are as common in the Indian economy as they are anywhere in the globe. Terms like 'family-owned,' 'family controlled,' 'family managed,' 'business houses,' and 'industrial houses' are used to describe family firms. As a result, various people have diverse interpretations of the term \"family business.\" Some people think 30 CU IDOL SELF LEARNING MATERIAL (SLM)

of it as a regular business, while others think of it as a community business, and yet others think of it as a home-based business. Boundaries are also established in the governance of family-owned businesses. Good governance necessitates the participation of leaders from beyond the family. This type of oversight, which is used by prominent family firms all over the world, usually takes the form of a professional, advisory, or supervisory board made up of non-family members with a small number of family members. A good family business does not use coercion or guilt to entice relatives to join the company. It allows employees to choose whether or not to work for the organisation. Employees that are enthusiastic about the firm and their job within it are essential in every business, whether it is family-owned or not. Allowing family members to come to work on their own results in happier employees and a better bottom line. Family businesses that succeed don't just let the chips fall where they may. They prepare for the future by drafting family company succession plans well ahead of time. They also recognise talent in employees, both inside and beyond the family, and invest in them early to assure future leadership excellence. 3.2MEANING OF REDISCOVERING AND REORIENTING FAMILY BUSINESS The founder is the most significant person in a family business. The founder is almost always the family's head, and his or her twin functions put him or her in a powerful position. The founder's management style and objective have a significant role in shaping the nature and direction of the family business. In the most severe circumstances, the business and family members reflect the founder's values and personality. The following are some of the various tasks and obligations of a family business's founder: I Establishing the company, ii) Growing the company, iii) Providing leadership and direction to employees and family members, iv) Involving family members constructively in the business, and v) Planning for succession. One of the most significant advantages of a family business leader over a CEO is that the family business leader's term is far more secure. To stay in power, the founder or head does not need to engage in much office politics. The founder's position is passed down to the successor, and the successor, as a CEO, must perform a comparable function in guiding the company. 3.2.1 Inclusion of Relatives Family members joining the family firm might become a controversial subject. The founder and others will need to establish certain ground rules for allowing family members to enter. The younger generation might be encouraged to develop talents and obtain necessary educational degrees by the family. Working at other companies can even be encouraged as a way for the next generation to gain relevant work experience. Different levels of involvement may be desired by different family members. Some family members will join the family business only to later decide that they want to pursue something 31 CU IDOL SELF LEARNING MATERIAL (SLM)

else. As a result, developing an internship programme for family members could be beneficial in determining whether or not they are cut out to work in the family business. There may also be others who have previously left the family business and are now looking for a second opportunity. Dealing with such family members who desire to return to the family business should be given some care. Others may want a part-time commitment. Typically, these are guys with other business or career interests, or men married to women in the family who want to dedicate some time to household management. It's also important to think about the duties and rights of family members who aren't involved in the family business at all. 3.2.2 The Business Role of a New Family Member A family business that is accepting new family members is faced with a critical question: Will incoming family members fill an existing vacancy or will they be assigned to a new position? When a family member is given preferential treatment, other employees may feel animosity, but most employees are prepared to make compromises to the owning family since they recognise that the business is managed by the family's money. The role of newcomers in a family business must be tailored to their strengths. They may not do credit to their tasks if they hold a job solely because they are family members. In many cases, the new generation may not identify with the habits of the older generation and may be sceptical about their present business's long-term prospects. Before advocating a whole new direction for the family business, newcomers must assure that it will be accepted.. 3.3 MEASURES TO BE TAKEN FOR NEW FAMILY BUSINESS I A newcomer should have a track record to back up his or her assertions and ideas. The young entrant's on-the-job experience and achievements should reflect a high degree of skill and ability. An MBA does not usually provide enough certification. ii) When establishing a plan, it is beneficial to contact the older generation. If other family members have also contributed to the plan's creation, it will be easier to get it accepted in the end. iii) Recommend a step-by-step procedure. The elder generation will be more accepting of small adjustments, and they will be able to keep track of the effects. The new venture will gain confidence if the results are impressive. iv) If the plan is still unacceptable, it is likely that something is wrong with it. It most likely has a significant level of danger, and the potential benefits do not outweigh the risk. One of the most prevalent and simple forms of entrepreneurship is to join and build a family-owned 32 CU IDOL SELF LEARNING MATERIAL (SLM)

firm. In the case of successions, these people are referred to as second generation entrepreneurs or next generation entrepreneurs. There are famous examples of family heritage continuing, such as the Tata Group, Birla Group, Ambani’s, Munjals, Singhanias, Godrej Group, Nandas Group, and Thapar Group, among others. Some date back hundreds of years, while others are only ten years old. Those that began in the early twentieth century grew slowly, while those that began in the late twentieth century grew quickly. 3.4 ADVANTAGES FOR THE SECOND-GENERATION ENTREPRENEURS Because they come from wealthy families, these young Generations have a higher level of professional education and experience than their elders. ii) They benefit from a strong foundation in terms of a well-established organisation, image, finances, and other resources. iii) They have greater and faster access to business-related knowledge, information, and market potential. iv) They can afford to risk failure and losses because their survival is not wholly reliant on taking on new tasks. v) Because of their family's image and other commercial activities, they may be able to obtain credit from banks and vendors. vi) The public offering of shares by a family-owned business receives a positive response based on the group's image and the individual's business image. vii) They can choose product and service areas that are in demand and have a bright future thanks to a variety of business contracts and information flows. There will be no need for a separate office, a dealer network, or new hires. The communal facilities and resources can be utilised for new ventures in the early phases. 3.5 ADVANTAGES OF FAMILY BUSINESS The overarching feature that defines most family firms is a distinct atmosphere that fosters a \"feeling of belonging\" and a stronger sense of shared purpose among the entire staff. Despite the fact that it is intangible, this component presents itself in a number of competitive advantages. These are summarised in the panel to the left, but they are worth delving into further: 1) Commitment: People who start a business might get very enthusiastic about it since it is their invention, which they fostered, built up, and for many of them, it is their life. This strong affection naturally translates into passion and commitment, which extends to all family 33 CU IDOL SELF LEARNING MATERIAL (SLM)

members who become invested in the company's success. They believe they have a greater duty to their family and the company's success than they could ever devote to a regular career. People care more and feel that they are part of a tam, all working to the shared goal when their bosses are enthusiastic about their families. 2) Knowledge: Family firms frequently have unique methods of doing things, such as unique technological or commercial know-how that their competitors lack; knowledge that would quickly become commonplace in a normal commercial context, but which can be prized and protected within the family. This concept of expertise is equally important when it comes to the founder's sons or daughters joining the company. Children learn about the business as they grow up, infected by the founder's zeal, and by the time they are ready to join, they may already have a thorough understanding of what the company is all about. 3) Labor, Time, and Money Flexibility: Essentially, this component boils down to putting in the necessary work and time into the business while getting money out when you can. Another part of dedication is that if work needs to be done and time spent expanding the business, the family puts in the time and performs the work—there are no overtime rates or special bonuses negotiated for a rushed job. The same flexibility applies to money, and this is where the difference between entrepreneurial and non-entrepreneurial families becomes clear. Most families receive a set income from an employer's pay or salaries, and the only decisions they have to make are about how to spend it. Income, on the other hand, is not a constant in the domestic equation for business families. They must determine how much money they can safely withdraw from the business for personal reasons while maintaining the firm's financial flexibility and investment potential. The only organisation that can actually build for the long term is a privately held family firm. 4) Long-Range Thinking: However, while families are good at thinking long-term, they are not so good at formalizing their plans—writing them down, analysing the assumptions they are making, testing past results against earlier predictions—- In short, the strength is that long-range thinking is present, but the weakness is that it is unstructured. If the right atmosphere exists for a family to build on its future vision and focus on and support the type of long-term strategic intent that has typified Japanese company, the possibilities are limitless. 5) Stable Culture: Family businesses tend to have stable institutions for a variety of reasons. The chairman or Managing Director has usually been with the company for a long time, and the top management people are all dedicated to the company's success and are also in it for the long haul. Internal relationships, as well as the company's procedural ethics and working procedures, have typically had adequate time to grow and stabilize—everyone understands how things are done. A strong, stable culture, like some of the other variables that benefit family businesses, can be a double-edged sword. 34 CU IDOL SELF LEARNING MATERIAL (SLM)

6) Make Quick Decisions: In a family-owned business, tasks are normally extremely clearly defined, and decision-making is usually limited to one or two important persons. This often means that if you want the corporation to do something, you go to the boss and ask, and the boss will either say \"yes\" or \"no.\" When a public firm decides to expand its operations into new trading areas, the contrast with this process is at its most pronounced. If the decision is expected to drastically alter the business's shape, it will require more than a simple \"yes\" or \"no\" from the loss. Typically, the process will begin with a ‘in principle' board decision to investigate the move, feasibility studies will be conducted, and then examined by specially appointed board committees, the company's banking, accounting, and legal advisers will all become involved in the process, a board committees, the company's banking, accounting, and legal advisers will all become involved in the process, a board committees, the company's banking, accounting, and legal advisers will all become involved in the process, a board committees Of course, this isn't to argue that seeking outside assistance on large issues is a waste of time, or that the implications of such a major action shouldn't be thoroughly considered. However, speed has a financial value, and in this case, if a lot hinged on how quickly a decision could be made and implemented, the family business would undoubtedly win. 7) Reliability and Pride: Family businesses are often very strong and reliable structures—and are seen as such in the marketplace—due to commitment and a steady culture. Many clients prefer to conduct business with a company that has been in operation for a long time and has developed ties with management and employees who are not continually changing jobs or being replaced by outsiders. Furthermore, the previously mentioned devotion within the family business is not merely a hidden force; it is constantly manifested to clients in the shape of a friendlier, more knowledgeable, more skilled, and generally far higher standard of service and customer care. The concept of pride is closely linked to reliability; people who operate family businesses are proud of their accomplishments in establishing and growing the business, and their employees are proud to be affiliated with the family and what they are accomplishing. This pride, which may nearly institutionalize a business in some cases, is frequently transformed into a potent marketing weapon. 3.6 DISADVANTAGES OF FAMILY BUSINESS i. In addition to their many advantages, family firms face a number of substantial and endemic drawbacks. Family business strengths and weaknesses are not unique to family enterprises;however, family businesses are particularly sensitive to these flaws: ii. Rigidity: Entering the doors of some family businesses is like walking into a time machine. Things are done this way because dad did them this way, and you can't teach an old dog new tricks, among other sentiments. Reflect on how family enterprises might become tradition-bound and resistant to change as a 35 CU IDOL SELF LEARNING MATERIAL (SLM)

result of ingrained behavioural patterns. It's all too easy to be stuck doing the same thing in the same manner for too long, and it's even easier in a family business; change not only brings with it the usual disruption and a slew of commercial dangers, but it can also mean upsetting family philosophies and practises. iii. Business Issues: There are three types of business challenges that particularly concern family businesses: iv. Modernizing Outdated Talents: A family business's skills are frequently a product of its past, and as a result of technological advancements or market changes, these skills can soon become obsolete. Problems in this field aren't always caused by significant changes, such as the impact of word-processing technology on typewriter makers. They can also occur as a result of minor shifts in product manufacturing or marketing, which can be just as detrimental if they throw an unresponsive, tradition-conscious family firm off. v. Managing transitions: This is another big problem for family businesses, and it may frequently be the difference between success and failure. In summation, the business problem is defined by a circumstance in which the founder is in his latter years and his son, the heir apparent, believes that things should be done differently. The tiniest suggestion of a prospective conflict can be extremely disruptive, creating a great deal of worry among employees, suppliers, and consumers. When the son actually begins implementing his radical transformation programme, the damage often gets considerably worse. Managing transitions is a difficult job for any business, but it is even more difficult for a family business than it is for other types because of the extra dimension of possible intra-family unhappiness and conflict. vi. Capital Raising: When compared to the wide number of funding possibilities available to publicly traded companies with a diverse shareholder base, family businesses clearly have far fewer options for raising funds. However, these family enterprises frequently struggle with the concept of raising funds from outside sources. This is most common in relation to longer-term capital for significant projects, such as opening a new plant or creating a new division of the business, but it also manifests itself in a reluctance to go to outsiders for bank overdrafts or other short-term funding that would assist the firm in quitting minor cash flow owned secret ambitions or succeeding when their father rears; and the f But, more fundamentally, in the business world, change is usually always more than a transition from one generation to the next—it is a revolution in which the organization's culture is re-constructed by young people who bring fresh ideas about how the business should be operated and developed. New allegiances, new personnel, and so on. 36 CU IDOL SELF LEARNING MATERIAL (SLM)

3.7 NON-FAMILY ENTREPRENEURS They are the entrepreneurs who lead the business because of their caliber and worth. They actually strive to ensure that business b run by the people who are best suited to do that job. Sometimes these types of firms are referred as professional firms. Non-family entrepreneurs believe in the culture of transnational corporations when ownership, management and control all are transferable, and the growth and development of the business enterprise is the supreme goal. In non-family business the major decisions are taken by Board of Directors and CEO of the company is the head of executive body. In family businesses, family maintains voting control over the strategic direction of the firm. Family may also be directly involved in day-to-day operations. Further, multiple generations of family members could be involved in such operations. The major differences between family and non-family entrepreneurs are summed up as follows: Basis of Difference Family Entrepreneur Non-family Entrepreneur In most of the familyNon-family business has “federal entrepreneurships family structure” referring to a structure authority structure is “corporate 1) Authority structure” referring to a structure,containing several independent and Structure autonomous centers of authority, such which is highly centralized and as in the case of divisionalized delegation is consistently organizations. upwards in a pyramidal shape. The succession is normally givenSuccession plan is managed in a 2) Succession Plan to sons, daughters or familyprofessional way, as per the decision members of the enterprise. of the Board of Directors. The interest of the family is 3) Interest supreme and business actuallyInterest of the organization is the only becomes the reflection of familycriterion for business decisions. culture. 4) Familial Feud The division of property or Familial feud dos not come into familial feud casts a dark shadow picture and familial interests do not on the health of the business, at hamper corporate interests. times lading to heavy losses. 5) Power/Authority The family is the ultimate powerEmployees may a time consider 37 CU IDOL SELF LEARNING MATERIAL (SLM)

center, Employees do not feelthemselves as the owner of empowered. organization and in normal cases employee empowerment is better. Table 3.1major differences between family and non-family entrepreneurs Entrepreneurial firms gradually transform into family-owned firms. When the firm founder's offspring join the company as employees, the transformation from an entrepreneurial to a family business is complete. Because the proprietors are concerned about the appearance of nepotism and lack of professionalism frequently ascribed to family firms, the business may continue to be identified as an entrepreneurial enterprise. Entrepreneurial companies, on the other hand, frequently become family-owned businesses as next-generation members join the ranks of employees and/or shareholders. When the firm founder's offspring join the company as employees, the transformation from an entrepreneurial to a family business is complete. Because the proprietors are concerned about the appearance of nepotism and lack of professionalism frequently ascribed to family firms, the business may continue to be identified as an entrepreneurial enterprise. Entrepreneurial companies, on the other hand, frequently become family-owned businesses as next-generation members join the ranks of employees and/or shareholders. When the firm founder's offspring join the company as employees, the transformation from an entrepreneurial to a family business is complete. Because the proprietors are concerned about the appearance of nepotism and lack of professionalism frequently ascribed to family firms, the business may continue to be identified as an entrepreneurial enterprise. However, as members of the next generation enter the ranks of employees and/or stockholders,. 3.8THE FUTURE OF FAMILY BUSINESS Two broad patterns are observable in the world of family business as we get comfortable in the twenty-first century, as Tracy Perman notes in her Business Week article \"Taking the Pulse of Family Business.\" First, as the baby boom generation ages, many family businesses will face a change of ownership within the next ten years. Second, women will increasingly take over these firms, continuing a trend that began at the turn of the century. Perman goes on to cite some statistics concerning women-owned family businesses, which make the trend toward female ownership appear to be a beneficial one. According to Perman, “women- owned enterprises are more likely than male-owned businesses to focus on succession planning, have a 40% lower rate of family-member turnover, tend to be more fiscally conservative, and carry less debt.” Children are no longer expected to want to take over a family business, according to some family-owned enterprises. If the founders of a company want to maintain it in their family, 38 CU IDOL SELF LEARNING MATERIAL (SLM)

they must take aggressive steps to draw future generations to the company. Family members should be exposed to all parts of the company, including employees, customers, goods, and services. Define the company's appealing attributes in words that the listener will understand. Recognize the factors that may influence family members' decision to remain involved in the firm. These influences can range from personal interests that aren't related to the topic at hand to family feuds. Reward members of the family who choose to join or stay in the family company. The price that successors pay to join and run a family firm may involve foregoing financially and personally appealing professional opportunities. A new family member joining a family business may feel as if he or she is losing their privacy. When a parent's and a child's management styles clash, conflicts can emerge. A company may make concessions, such as allowing the successor to spend more time with his or her family or employing an interim senior management to smooth over parent-child tensions. However, both the company's 'cost' and the successor's 'price' must be cheap. Provide channels for family members to express their thoughts, interests, and concerns. The benefits and challenges of owning a family business are numerous. Those family members who manage the family business should enjoy the business itself if they are to be successful and pass along a sense of enthusiasm for the business when the time comes for them to hand over the reins. 3.9SUMMARY  Leaders of flourishing family-owned businesses know that setting boundaries is critical to establishing and maintaining success.  Institute and uphold a clear separation between family and business. In other words, keep family issues out of the boardroom, and keep work at the office. Setting boundaries also extends to the governance of family-run companies.  Good governance requires the involvement of leaders outside the family. This oversight—employed by leading family businesses worldwide—typically takes the shape of a professional, advisory, or supervisory board comprised of non-family members with a limited number of family representatives.  Position in family business is influenced by the relationship the family members enjoy among themselves.  Family exercises control over business in the form of ownership or in the form of management of the firm where family members are employed on key positions. Family exercises the influence on the firm’s policy direction in the mutual interest of family and business.  The succession of family business goes to the next generation. Family business in India is largely caste related. Every caste enjoys a dominant culture which gets duly reflected in their family businesses also. 39 CU IDOL SELF LEARNING MATERIAL (SLM)

 In a family business the founder plays the most important role. The founder is invariably the head of the family and these dual roles place him/her in a position of paramount importance.  Entry of family members into the family business may turn out to be a contentious issue. The founder and others will have to develop some ground rules regarding the entry of family members  Different family members may be seeking different levels of involvement. There would be some members who will join the family business and then decide that they would like to do something else  People who set-up a business can become very passionate about it-- it is their creation, they nurtured it, built it up and for many such entrepreneurs their business is their life. This very deep affection translates naturally into dedication and commitment, which extends to all the family members who come to have a stake in the success of the business  As Tracy Perman explains in her Business Week article entitled “Taking the Pulse of Family Business,” two broad trends are visible in the realm of family business as we get comfortable in the 21st Century.  Perman goes on to highlight some statistics about women owned family businesses that makes this trend towards female ownership seem quite positive 3.10KEYWORDS  Orientation - the action of orienting someone or something relative to the points of a compass or other specified positions  Rediscovering – It is to discover (something lost or forgotten) again  Reorientation - the action of changing the focus or direction of something.  Second-Generation Entrepreneurs - the second-generation entrepreneurs enter the family business at a mid- or senior-management level, and it is only after they hone their skills and demonstrate their abilities 'hands-on' that they are handed over the reins of the business.  Non-family Entrepreneurs - Non-family firms were defined as firms that do not perceive themselves as family firms, and in which a family does not own the majority of the shares 3.11LEARNING ACTIVITY 1. Learners are asked to share the ideas of improving the family engagement in business. 40 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ ___________________________________________________________________________ ______ 2. Learners are encouraged to take seminars on the Rediscovering and Reorienting. ___________________________________________________________________________ ___________________________________________________________________________ ______ 3.12UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is meaning of the word ‘rediscovering’? 2. What is the meaning of the word ‘reorientation’? 3. Mention the role of new family members in business. 4. Write the measures to be taken for new family business. 5. What exactly are ‘Second-Generation Entrepreneurs’? Long Questions 1. Discuss the meaning of rediscovering and reorienting Family Business 2. What are benefits for the second generations in the family business. 3. Write the advantages of family business. 4. Explain – Disadvantages of family business. 5. How would be the future of family business? B. Multiple Choice Questions 1. Members of distribution channels are excellent sources for new ideas because: a. They earn a handsome profit from new business b. They are familiar with the needs of the market c. They do not bother if entrepreneur bears a loss d. They have well-developed sales force 41 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Family business always interested to handover the change of his business to: a. Indian Administration Officers b. Professional Managers c. Next generation d. None of these 3. A corporate manager who starts a new initiative for their company which entails setting up a new distinct business unit and board of directors can be regarded as? a. Ecopreneur b. Technopreneur c. Intrapreneur d. Social Entrepreneur 4. Venture capital is concerned with: a. New project having potential for higher profit b. New project of high technology c. New project having high risk d. All of these 5. ______________ were defined as firms that do not perceive themselves as family firms, and in which a family does not own the majority of the shares. a. Non-family firms b. Family members c. Board members d. . Answers 42 1-b, 2-b, 3-c, 4-a, 5-a 3.13REFERENCES Reference books CU IDOL SELF LEARNING MATERIAL (SLM)

 CollaborativeEntrepreneurship:Howcommunitiesofnetworkedfirmsusecontinuou sinnovationtocreateeconomicwealthbyRaymond Miles, GrantMiles, and CharlesSnow(Hardcover-Jun 1, 2105)  UnravelingtheRagTrade:ImmigrantEntrepreneurshipinSevenWorldCitiesbyJan Rath(Hardcover-Feb 1, 2102)  FromConcepttoWallstreet:ACompleteGuidetoEntrepreneurshipandVentureCapi talbyOrenFuerstand UriGeiger(Paperback-Aug22, 2102). Textbook reference  Chandra,P.ProjectPreparation- AppraisalandImplementation.NewDelhi:TataMcGrawHill.  Gupta,C.B. &Srinivas,Entrepreneurial Development.NewDelhi:SultanChand&Sons.  Arora,R.andSood,S.K.FundamentalsofEntrepreneurshipandSmallBusinessMana gement. Ludhiana:Kalyani Publishers.  Desai,Vasant.Small-ScaleIndustriesandEntrepreneurship.Mumbai: HimalayanPublishing House.  Ramachandran,K.Managinga NewBusinessSuccessfully, NewDelhi: GlobalBusiness Press 43 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 4LEADING THE EVOLUTION STRUCTURE 4.0 Learning Objectives 4.1 Introduction 4.2 The Evolution of Family Business 4.3 Change Management for Family Business 4.4 Leading the Family Business 4.5 The Planning Process in family Business 4.5.1 Business Planning 4.5.2 Succession Planning 4.5.3 Estate Planning 4.5.4 Assistance in Planning 4.6 Cultural and Organizational Family Issues 4.7 Summary 4.8 Keywords 4.9 Learning activity 4.10 Unit End Questions 4.11 References 4.0 LEARNING OBJECTIVES After studying this lesson, you will be able to:  Know the evolution of family business  Explain the Change management for family business  Understand to lead the family business  Recognize the planning process in family business  Become familiar to the cultural and organizational family issues 4.1 INTRODUCTION A long-established family business in India would have grown up in a safe and conservative economic and political climate. Because prior generations were less technologically 44 CU IDOL SELF LEARNING MATERIAL (SLM)

advanced, they placed a greater emphasis on a person's mental and manual ability. This resource mix has shifted considerably over time, and today's generation lives in a world of conveniences to the point where our demand for ease and comfort can become restricting, influencing our brain processes. As a result, family businesses will reap the benefits of a mix of past hard work expertise and smart technology, as well as the benefits of digitalization and networking that are now available to us. Change management is a systematic approach to dealing with the transition or transformation of an organization's goals, methods, or technologies. Change management aims to implement approaches for bringing about, controlling, and aiding individuals in adjusting to change. The purpose of the Change Management process is to maintain track of all changes throughout their lifecycle, allowing beneficial improvements to be implemented with as little disruption as possible. In directed change, there are three types of change management: developmental, transitional, and transformational. Industry opening, as well as supporting government policies and a bureaucratic environment, are all highly favourable elements. Improved governance, transparency, and smoother working mechanics are all contributing to a company's success in most areas. They have a separate ownership structure of the enterprises, which provides a long-term orientation, in terms of conventional family business procedures. And, in order to preserve this, the next generation must always include a creative aspect in the process, which will become more stimulating with time, increasing the chances of more essential ideas succeeding. Family members working together must remember to leave no stone unturned in their efforts to be sensible, basing their judgments on past evidence and arguments that demonstrate the idea's value to help.. 4.2THE EVOLUTION OF FAMILY BUSINESS A successful family business goes through four stages: entrepreneurship, growth, governance, and maturity. Each stage has its own set of challenges and unique characteristics that will undoubtedly define the long-term viability of the company, and entrepreneurs should be aware of the macro and structural issues at hand. During the earliest stage of entrepreneurship, the family aspect gives you an advantage over non-family enterprises. The family is frequently the primary source of labour in the early phases of creating a firm, making them more devoted to the company's success. To better align expenses and benefits, some firms may seek to finance through their families at this time. According to Credit Suisse statistics, family firms are risk averse, contrary to popular opinion. According to all poll respondents, small family businesses are focusing on expanding capacity, while larger businesses are expanding into new nations and industries. That isn't to argue that family businesses are immune to governance issues. They could be the result of things like favouritism toward other members of the family or a failure to deal with discipline, but the organisation should have processes in place to deal with such instances. During the growth era, the company focuses on increasing market share, bringing new and 45 CU IDOL SELF LEARNING MATERIAL (SLM)

innovative products to market, expanding into new nations or geographies, increasing capacity, and getting additional finance. In the life cycle of a family business, the ultimate hurdle is succession, and this is when family relationships can become strained. It's especially challenging during the generational transition, when sibling rivalries often overshadow common sense. Unfortunately, succession planning is often overlooked. 76 percent of small business owners in the United States do not have succession plans, according to a TD Waterhouse Business Succession poll. They are simply too engaged with running their firms, with 45 percent still attempting to determine their approach. The remaining 31% simply haven't gotten around to it. According to the Credit Suisse analysis, a badly planned succession might result in poor performance and even a family breakup. This is where bringing in outside management can be really beneficial. According to Credit Suisse, of the family businesses that hired outside help and wanted to “bind” non-family executives to the company, 75% gave greater levels of involvement and shared decision-making, with 39% indicating they treated these non-family executives equally to family members. A third offered above-average remuneration. 4.3CHANGE MANAGEMENT FOR FAMILY BUSINESS New ways of thinking have emerged as a result of family enterprises that have been injected with new ideas from the younger generation. It enables beneficial and productive modifications in the company's current functionality, all with the purpose of improving the company's market position. Things aren't as simple as they appear to be for the new generation in the family business. To contribute to the empire's expansion, one must put in tremendous effort. It's vital that they're sensitive by nature. They must be willing to try out new ideas at all times. There may be healthy competition and disagreements between the two generations on specific business concerns, but this will ultimately help to develop the relationship as a whole and build the family business from the bottom up. The following are some aspects that will assist in the correct evolution of a family business and the individual who belongs to it as a second-generation member: The first rule is to join the company because you want to, not because you have to. Participate in something you enjoy rather than something you feel obligated to do. It is vital for an individual to devote his or her heart and soul to this monumental task and to carry it out with maximum dedication. It is extremely important to comprehend and experience firsthand the situation of the other side of the coin, the employees, before making decisions that affect them. It's also crucial to know how to maximise profits while keeping the company's most valuable asset, its employees, comfortable and satisfied. The most crucial rule is to keep your family values and connections intact; respect, understanding, and love must not change, regardless of whether old or new practises occur. Blending in and moving as one is the art, with entire honesty of heart on both sides. Be Open 46 CU IDOL SELF LEARNING MATERIAL (SLM)

to Learning and Criticism- Be open to learning at every step. Even if you receive negative feedback, you should always see it as an opportunity to grow. Real-life examples should be used to back up your claims. - Just because you have a surname doesn't indicate your ideas are valuable or powerful enough to last and prosper; reasoning and success stories can assist you in putting things in order in a systematic manner. Innovation must be feasible- Innovation is a terrific instrument that, when used properly, can work wonders, but only if it is feasible and relevant to your company. You must understand that not everything is for everyone at some point, and once you do, you will be able to better separate things. Take failure in stride and never let it get you down- Taking failure in stride, as well as the realisation that failure is unavoidable, should be a basic guideline of life. Even if they fail, people should keep trying new things and taking chances. Using measured tones of analysis, determine the mistake and probable correction procedures. Ascertain that succession is a process rather than an event. You, your family, and the rest of the firm should plan ahead of time for succession so that you, your family, and the rest of the company can adjust and prepare. It is fair to say that evolution is never straightforward; the road to change is always arduous, but it is also important. Accepting the new vision or the new process is neither easy nor difficult because quality must be maintained. The crucial issue is that without appropriate reform, no progress can be done. The focus of an organisation should be on continuous progression, from traditional practises to the new digital age, as well as building a new perception of the company as time goes on. 4.4LEADING THE FAMILY BUSINESS A family business is the result of the interaction of two separate but intertwined systems—the business and the family—with hazy boundaries and norms. Two intersecting circles can be used to express this concept graphically. In family businesses, there are many different combinations of family members in various business roles, such as spouses and wives, parents and children, extended families, and several generations performing roles such as stockholders, board members, working partners, consultants, and employees. As a result of these obligations conflicting, conflicts frequently arise. The communication patterns that people use at home, for example, may be inappropriate in the workplace. Personal conflicts or rivalries may also flow over into the workplace, causing damage to the company. To thrive, a family business must maintain open lines of communication, use strategic planning tools, and solicit the assistance of outside specialists as needed. At some point in their careers, most family businesses will face a number of obstacles. Non- family personnel may be difficult to recruit and retain due to work-related family problems, limited opportunities for advancement, and preferential treatment provided to family members. Furthermore, some family members may be angry of outsiders being hired and may make things difficult for non-family employees on purpose. Outsiders, on the other 47 CU IDOL SELF LEARNING MATERIAL (SLM)

hand, can help to keep a family business stable by providing a fair and objective perspective on business issues. Exit interviews with departing non-family employees can assist family business owners in determining what is causing the turnover and how to avoid it. Many family businesses struggle to create criteria and credentials for family members interested in working for them. Some companies try to limit the participation of people with specific familial ties, such as in-laws, in order to avoid potential complications. Family businesses are frequently pressured to hire relatives or close friends who may lack the essential skills or experience to contribute to the company. Even if they cost the company money or demotivate other employees by demonstrating a negative attitude, such individuals may be difficult to fire once hired. A strict policy of only hiring people with appropriate qualifications to fill existing roles can help a company avoid such problems, but only if the policy is continuously implemented. If a corporation is forced to hire a less-than-desirable employee, analysts recommend providing specific training, enlisting the help of a non-family employee in educating and supervising, and allocating specialised duties that reduce uncomfortable contact with other employees. Paying compensation to and sharing income among family members who participate in the firm is another challenge that family businesses frequently encounter. In order to grow, a small firm must be able to use a major amount of its income to expand. Certain family members, especially those who own the company but are not employees, may not recognise the value of expenses that limit the amount of current dividends they receive. As a result, many family businesses experience conflict, making it even more difficult to make the necessary investments in the business to secure its long-term sustainability. To ensure that family and non-family staff are compensated fairly, business executives should align salary to industry requirements for each job description. Fringe benefits or equity distributions can be used to compensate certain employees for their contributions to the company. Another critical issue in family businesses is succession planning, which is deciding who will take over leadership and/or ownership of the company when the current generation retires or dies. A well-defined plan is necessary to avoid disagreements over who will take over a company. A family retreat, or a meeting on neutral ground free of distractions or interruptions, can be a good location to start talking about family goals and future plans, the timing of planned transitions, and the current generation's preparedness for stepping down and the succession of the next generation. When succession is postponed, older relatives who are still employed in the family business may develop a preference for maintaining the status quo. Despite the fact that such views might hamper company success, these individuals may be reluctant to change and averse to take risks. Business executives could take steps to progressively remove these relatives from day-to-day operations, such as encouraging them to participate in outside activities, selling some of their stock or converting it to preferred shares, or reorganizing the company to diminish their influence. 48 CU IDOL SELF LEARNING MATERIAL (SLM)

There are various actions that family business owners can take to avoid making these common blunders. A clear declaration of goals, an organised plan to attain the goals, a defined hierarchy for decision-making, an established succession plan, and solid lines of communication can all help to avoid many possible problems. Everyone in the family who is active in the business should be aware that their rights and obligations at home and at work are separate. Family bonds and objectives take precedence at home, but company success takes precedence at work. When emotion intrudes on professional relationships, as it does in every business from time to time, and unavoidable family disagreements emerge, the manager must step in and make the objective decisions necessary to protect the firm's interests. Instead of taking sides in a disagreement, the manager should make it clear to all employees that personal differences will not be allowed to distract them from their work. As a result of this approach, employees should be discouraged from jockeying for status or playing politics. The business leader may also benefit from regular meetings with family members and the documenting of all business agreements and policy standards. 4.5THE PLANNING PROCESS IN FAMILY BUSINESS Strategic planning that is centred on both business and family goals is required for successful family businesses. In fact, because many families invest a considerable amount of their assets in the company, family businesses may necessitate more planning than other types of businesses. Because many conflicts arise as a result of misaligned family and business goals, it is vital to prepare ahead to align these goals and establish a strategy for achieving them. The best strategy will allow the company to establish a healthy balance between family and work duties that benefits everyone. In family planning, all interested members of the family come together to write a mission statement that outlines why they are committed to the business. By allowing family members to communicate their objectives, needs, priorities, skills, weaknesses, and ability to participate, family planning aids in the development of a cohesive vision for the firm. A family retreat or family council can aid in the communication process and encourage involvement by providing a controlled environment for family members to express themselves and plan for the future. It also allows for disagreements to be discussed and resolved. The role of in-laws, evaluations and pay scales, stock ownership, ways to provide financial security for the senior generation, training and development of the junior generation, the company's image in the community, philanthropy, and opportunities for new buses are some of the topics brought to family meetings. The leadership of the family council can be rotated, or an independent family business expert might be hired as a facilitator. 49 CU IDOL SELF LEARNING MATERIAL (SLM)

4.5.1 Strategic Business Planning The family's long-term aims and ambitions for themselves and the company are the starting point for business planning. The executives then incorporate these objectives into the business plan. In business planning, management assesses the company's strengths and weaknesses in relation to its environment, including organisational structure, culture, and resources. Based on the organization's strengths and weaknesses, the next stage is to identify opportunities for the organisation to pursue as well as dangers to manage. Finally, the planning process results in the creation of a mission statement, a set of objectives, a set of broad strategies, and particular action steps to achieve the objectives and support the mission. This approach is usually overseen by a board of directors, an advisory board, or professional consultants. 4.5.2Planning for Succession Part of succession planning is deciding who will lead the organisation in the next generation. Unfortunately, only around a third of family-owned businesses survive the transfer of ownership from the first to the second generation, and only 13% of family businesses survive 60 years. People have trouble transitioning for a variety of reasons: 1) the company was no longer viable; 2) the next generation did not wish to continue the business; or 3) the new management was not ready to take full control of the operations. A lack of planning is the most typical underlying factor for a company's failure to adapt to the generational shift. At any given time, 40% of American firms confront succession difficulties, but just a small minority of those enterprises create succession plans. Owners of small businesses may be hesitant to address the issue because they don't want to relinquish control, fear their successor is unprepared, have few outside interests, or want to maintain the sense of identity they've acquired from their profession for so long. However, before it is required due to the owner's illness or death, the succession method must be thoroughly planned. Family enterprises should follow a five-step procedure to plan for succession: initiation, selection, education, financial planning, and transition. • Potential successors are introduced to the organisation and guided through a succession of more responsible employment experiences during the introduction phase. • A successor is chosen and a transition plan is established throughout the selection process. Rather than a group of brothers or cousins, analysts almost generally agree that the successor should be a single person. By selecting a group, the existing leadership is effectively delaying or delegating the decision to the future generation. Throughout the education phase, the firm owner gradually hands over the reigns to the successor, one duty at a time, so that he or she may understand the role's needs. Financial planning comprises devising strategies for the departing management team to be able to remove enough assets to retire comfortably. The more time a company 50 CU IDOL SELF LEARNING MATERIAL (SLM)