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• Nearly all firms start as family businesses.\u00a0 No firm on earth started out as a corporate.<\/li>\n<\/ul>\n
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  • 33% of S&P listed companies still have 1 family member onboard. Globally, 70 to 90% of GDP comes from family run businesses.<\/li>\n<\/ul>\n
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    • FMB\u2019s are more stable during economic recessions.\u00a0 When compared against non FMB\u2019s on profitability parameters \u2013 they tend to outperform, especially during downturns in the economy.\u00a0 However, during the uptick in the economic cycle, they also grow slower than their non FMB counterparts. This is a function of the inherent conservative DNA and focus on capital preservation.<\/li>\n<\/ul>\n

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      \u201cFamily Managed Businesses are more stable and profitable during economic recessions, but they also grow less during economic upturns.\u201d \u2013 Prof S Sriram, Great Lakes.\u00a0<\/em><\/strong><\/p>\n

      Professionalization<\/b>:\u00a0 The word \u201cProfessionalization\u201d has different meanings. In many cases, FMB\u2019s believe that if they get an outside CEO they have \u201cprofessionalized\u201d. In other cases the word is applied to any structure which separates ownership from management.\u00a0 However, we believe that Professionalizing is a mindset and an attitude \u2013 it\u2019s about how you think and take decisions. It has nothing to do with ownership \/ management or structure (i.e. whether the company is a private or Public Sector Company). \u201cHow objective you are in decision making determines how professional you are.\u201d<\/p>\n

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      \u201cHow objective you are in decision making, determines how professional you are\u201d \u2013 Prof S Sriram, Great Lakes.\u00a0<\/em><\/strong><\/p>\n

      
      Why companies professionalize<\/b>:\u00a0 The usual motive is to deal with the pressures introduced by growth. Growth vs control is the classic dilemma that family businesses face especially, because in India, not only are 80% of businesses family owned, they are also privately held.\u00a0 Some businesses look at the listing process to introduce not only external capital but also governance. Making a company list-worthy usually involves bringing in an external \u2018professional\u2019 CEO \u2013 this is one of the popular definitions of \u2018professionalizing\u2019.<\/p>\n

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      Challenges<\/b>: Key challenges are around success planning, \u201cletting go\u201d and finding a convincing answer to the question \u201cWhy professionalize?\u201d.<\/p>\n

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      Succession planning<\/b>: 15% of FMBs globally survive to the 3rd\u00a0generation. The biggest challenge is therefore succession planning and management \u2013 i.e. changing from an entrepreneurial mindset to a managerial leadership mindset.\u00a0 This change is evidenced\u00a0when the decision making process moves from individualized to a data based, consensus making decision process.<\/p>\n

      \u201cWe believe that the definition of a professional entity is one which places the interest of the consumer and the organization above self-interest. The decision maker may or may not be the owner of the company. This is easier said than done\u201d.<\/p>\n

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      \u201cThe challenge of \u2018letting go\u2019 \u2013 at its simplest level is answering the question of \u201cWhat am I going to do with my time, now that I am no longer actively managing the business?\u201d\u201d \u2013 Prof S Sriram, Great Lakes\u00a0<\/em><\/strong><\/p>\n

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      \u201cLetting go<\/b>\u201d:<\/b>\u00a0Once the owners professionalize the second challenge is about \u2018letting go\u2019 \u2013 at its simplest level its answering the question of \u201cWhat am I going to do with my time, now that I am no longer actively managing the business?\u201d.\u00a0 Any attempt to professionalize will not work unless there is a concrete answer to the above.<\/p>\n

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      \u201cWhy professionalize<\/b>\u201d.<\/b>\u00a0 Often this is the biggest challenge to starting the process.\u00a0 While the usual answer is \u201cscale is the tipping point\u201d \u2013 most entrepreneurs chose control over growth. The internalized, often un-articulated reason is also because they believe that \u201cif something isn\u2019t broken, don\u2019t fix It\u201d. In other words, scale can be subverted to control.<\/p>\n

      \u201cThe unarticulated reason for not professionalizing is that many entrepreneurs believe that scale can be subverted to control\u201d \u2013 Prof S Sriram, Great Lakes\u00a0<\/strong><\/em><\/p>\n

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