Family run businesses were going through a flux externally because of the rapidly changing financial structure.
Internally, they faced problems as younger generations came back with training from elite management degrees abroad and sought to apply textbooks ideas pertaining to a different economic situation in India, and precipitated conflicts.
There was a great deal of similarity between a family structure and that of a business institution, causing problems in conflict resolution in either structure, Joydeep Datta Gupta, executive director of PricewaterhouseCoopers, told members of the Bengal National Chamber of Commerce and Industry at a seminar on the 'Growth potential of family business'.
BNCCI membership is almost entirely made up of small and medium family-run businesses.
Another critical human resource issue in family run businesses was that of performance measurement.
According to Gupta, to evolve in today's intense competition, the most important tools had to be meritocracy and impartial performance evaluation bechmarked against market standards.
The measurement has to be structured in such a manner so as to encourage individuals with potential irrespective of relationships.
The aim should be to attract the best talent in the given sector, said Gupta.
Gupta quoted research figures to establish that accumulated reserves did not last for more than three generations of ownership.
The largest employers in India starting off as one-man businesses, but by using information technology enabled processes, even medium sized businesses could successfully compete and grow in the present scenario, he said.
Family run businesses, according to Datta Gupta, have to juggle and balance the interest of the shareholder-owner vis-a-vis the business manager and deal with issues to minimise any friction between the two roles.
There were active and passive family members with different levels of involvement in the process of running a family business.
The current trend was that members actively involved often brought in additional private equity of upto 10 to 15 per cent with professional management in tow, noted Gupta.
This was done often to bring in not only professionalism but also to safeguard the position of the family member through greater rapport with professionals, which was imperative in running the business.
Gupta said he believed that such actions could lead to a lot of misgivings regarding professionals.
Many family members felt professionals eroded wealth as they had no stake in the company unlike the owners.
Such suspicions made structuring of the management even more difficult and achieving balance between empowering employees and keeping control became very difficult.
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