It is usually seen that many family businesses established well by the founding generation grow till their lifetime, however, very few are able to sustain that pace in succeeding generations as well.

In the case of successful multi-generational family businesses, it is common to find family members who feel responsible towards the family name and are inspired by the success of their family. At a deeper level, they have commitment to the family’s values. These values are then passed on through generations and form the culture of the organisation, influencing the day-to-day working and performance of the business.

This culture can have a long-term impact, having the potential to either inspire or discourage the next generation to invest in this culture and in turn grow the business or not.  In the words of W. Gibb Dyer, Jr., Academic Director of the Centre for Economic Self-Reliance in the Marriott School of Management at Brigham Young University, “The culture of the family firm plays an important role in determining the success of the business beyond the first generation.”

The main issue

The culture of family businesses is often neglected or given much less time and attention than it requires. It is essential to realise that the need for cultural change is dire for family businesses to sustain with the changing times and to reach the next level. Let us understand the reason behind this. Founders of family businesses tend to have direct control over all levers of business and it serves them well at that initial stage of the business. In many cases, frugality is preferred over risk-taking due to limited resources. The founding generation’s dreams, principles and behaviour often become part of the family businesses’ DNA. This DNA which serves both positively and negatively is often passed down to future generations. “I am fed up of competing in the market with our 50-year-old machines because the promoters are so frugal and don’t want to invest in new technology,” said a senior employee of a 100-year-old family business.

Need for a professional mindset 

One of the key and crucial steps for the growth of a family business is embarking upon the culture-building journey.

Prof N. Krishnan, Faculty for Entrepreneurship and Family business Management, Entrepreneurship Development Institute at Gandhi Nagar, says “Culture is like the soil in which the seed is sown. Every seed requires conducive soil to sprout. The seed is the talent that we attract into the family business or nurture within the family business. Every family business needs to create a soil appropriate to the seed to be sown.”

It is difficult to change the existing culture of any business, and the starting point could be leadership’s commitment to change. Promoters of successful family businesses such as GM Rao, Chairman of GMR Group; Puneet Dalmia, MD Dalmia Bharat Group; Pawan Singhania, MD, Jaideep Ispat & Alloys have depicted through example that large-scale cultural change starts with the promoters’ commitment to growing themselves personally as human beings and as leaders. They then focus on bringing in this change in the senior leadership level in the same planned systematic way. The next step is the co-creation of core values and a code of conduct for the entire workforce and setting up mechanisms to incorporate it in their everyday’s conduct so that all family and non-family members have a mutual commitment to these shared values.

Thus, for a family business to become an everlasting institution, a professional mindset starting from the promoters to each and every level in the organisation is required.