What are the Common Challenges Faced by the Family Business in India?

The family business is a commercial establishment wherein the decision-making relating to its business is carried out through generations of a family. Family businesses account for almost 80% of the national Gross Domestic Product (GDP) in India.

With over 111 publicly-traded family-operated organisations, India is the home to the third-largest number of family businesses worldwide. Like other businesses, family businesses also face certain challenges over time. If you are wondering what challenges a family business faces, keep reading.

Negative emotions such as jealousy, rivalry, and resentment can lead to various problems in a family business. Some of the common challenges faced by the family business in India are as follows:

• Conflicts in a Family: The physical, financial, and emotional issues among family members are primarily responsible for affecting the regular operation of a family business. Moreover, conflicts between family members are another reason that destroys a family business at its core. This type of family conflict arises due to intergenerational hate, sibling rivalry, and marital disputes. Unfortunately, there is no proper way to resolve such family quarrels.

• Pressure to Hire Family Members: It is difficult to fight back the pressure which comes with the requests from within the family members keen to take part in the family business. Under such circumstances, it becomes very difficult if they lack the general skill and expertise required for the position. In addition, the informal culture in a family causes difficulty in training new employees, whether they belong to the same family or not.

• Lack of External Opinion: Although family members may not come with the same thoughts, they often have similar backgrounds and the same life experiences, which can affect the business's growth and development. Therefore, to flourish, businesses should possess external views about their company and their market competition level.

• Hesitancy to Hire Executives From Outside: Usually, a family business gives preference to family members while hiring to fill the top-ranking executive positions, particularly during the early years. However, if the business is suffering from any crisis, it becomes essential to hire somebody from outside. However, outside hires may need more training than family members, which requires extra time and money. Furthermore, training external employees may also affect the productivity of the business.

• Lack of Progression Planning: This is one of the prime reasons behind the failure of family businesses. Usually, the organisers of a company spend a significant amount of time and energy building the business. When the time comes when they decide on a successor to continue the venture, making mistakes while choosing the heir is quite common. As the founder dies, it passes to their son or daughter, who may not be mentally prepared or unsuitable to run the company.

• Lack of Innovative Ideas: Family businesses are usually slower than large-scale companies when introducing cutting-edge technologies or innovative approaches. Most of the time, family members are unenthusiastic about thinking out of the box and introducing advanced methodologies. Although there could be such rigidity earlier, in today's business realm, any organisation having poor infrastructure and a lack of innovative plans will not survive for long. 

• Poor Long-Term Planning: Sometimes, the first and second generations apply a business model that proves to be successful and is considered a blueprint. The members of forthcoming generations grow up using this model and experience difficulty visualising or planning the changes whenever required. Generally, every business sector requires adjustments over time to overcome market conditions and flourish progressively, or they may face various problems.

Some of the best tips to operate a family business successfully in the long run by evading the challenges are as follows: 

• Communicating Properly: Families come up with their style of communication, so their thoughts and opinions may vary from one to another. Thus, instead of agreeing, communicate openly with your family members and treat everyone's views respectfully. Whenever there is any communication gap, fix it immediately. Moreover, if there is a large issue, consult an expert outsider.    

• Setting Boundaries: Successful family businesses in India are well-versed in setting up boundaries essential for establishing and retaining success. As a thumb rule, it is essential to uphold a complete separation between family matters and work. In other words, you need to keep family issues in a separate box and keep work at the office. By doing so, you can maintain the right balance between your family and business simultaneously.

• Practice Efficient Governance: Besides separating family and work, setting boundaries also enhances the governance of family-run organisations. Good governance needs the association of leaders outside the family. As a result, it takes the shape of an advisory, professional, or supervisory board that involves non-family members with fewer family representatives. This way, you will be able to flourish your family business through effective governance. 

• Recruit Skilled Outsiders: Just as it is important to form governance with non-family members, at the same time, it is necessary to recruit some outsiders in both staff and management positions. There are countless people worldwide having top-notch skills and knowledge. Successful family businesses always search for such bags of talent to join their organisation. So, whenever required, make sure that you recruit skilled outsiders for your business. 

• Treat Employees as Family: A successful family-based business treats everyone like a family, regardless of whether they belong to the same household. Sometimes, this practice extends to consumers as well. Organisations with family-like respect and affection towards employees will make the latter feel valued and cared for. Also, it is essential not to make any partiality among the members associated with your family business.

• Make Plans for Future: Successful family businesses do not leave any stone unturned and constantly focus on improving their infrastructure, administration, and development. They formulate a plan for the future by creating structured family business succession plans beforehand. Furthermore, they need to ascertain the talent in employees, both inside and outside of the family, and deploy them diligently to ensure the company's excellence in the future.

• Evolving Down the Line: When it comes to longevity and success, changing with time is necessary for every business entity, particularly multigenerational family businesses. Improvement can come in any area, such as introducing new technologies, bringing advanced equipment and machinery, upbringing innovative ideas, changing cultural norms, hiring more skilled people, etc.

Following are the outcome of solving challenges in a family business:

• Makes family goals crystal-clear to each member, which adds value to it.   
• Helps increase trust among family members.
• Enhances communication between the family members without any hitches or conflicts.
• Helps in the betterment of direction and strategic planning for the business.
• A better working environment will boost employee morale and make them dedicated and loyal.
• Helps in creating a proper boundary between work and family.
• Improves expertise among family members to manage their business successfully.
• Helps in the development of coordination and collaboration between family members and non-family employees.
• Make the business flourish more, thereby increasing its longevity down the line.

So these are the challenges faced by a family business in India. Knowing the tips to overcome such challenges may help you run the business without hassle. If you find any problem, know its root cause and take expert assistance.