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"A combination of entrepreneurial qualities and professional management was the best way to grow businesses."

Kolkata , May 10

FAMILY businesses, if they have to survive in the current highly competitive scenario of rapidly changing markets, have perforce got to professionalise their management, restructure their business portfolios and carry out timely succession planning.

Speaking at an interactive session on "Family business in transition", organised by the Bharat Chamber of Commerce here, Prof Ranjan Das, Strategic & International Management, Indian Institute of Management, Calcutta and Brand Director, IIMC Long Duration programmes, said such businesses today need to separate ownership from management.

Pointing out that the two broad business structures were family controlled, but professionally managed and family-controlled and family managed, Prof Das said while ownership was okay in its place, lack of professional management can disturb the asset structure of companies in the long run.

Suggesting that CEOs in family-controlled businesses should be competent enough to handle competition, he said if a non-professional is entrusted with the top job by virtue of his being a family member, the customers, employees and the assets in that order will simply disappear in the face of severe competition.

"Emotions must be controlled and a crack management team, with clear systems and procedures, like in the A.V. Birla group companies, must be given the responsibility."

Stressing on the need to respect a professional manager, he felt professionalisation was not a dilution of ownership, but a sure way of maximising returns for all shareholders.

Suggesting that a diversified portfolio of businesses was not always good for companies, as companies such as Tatas or ITC or even Reliance were classic exceptions, Prof Das said ideally businesses should look at core competence and related areas, and should know clearly how and when capital should be unlocked.

In the context of succession planning, for the position of a CEO, he also included non-family members who are professionally qualified. Competence and not blood connection should be looked at while planning for succession even in family controlled businesses.

Cautioning against sibling rivalry and pressures and counter-pulls from other family members including daughters-in-law in closely held family businesses, Prof Das said a combination of entrepreneurial qualities (which come from ownership) and professional management was the best way to grow businesses, just as it is in the US, where eight lakh companies are born every year.

Pointing out that family-controlled Indian businesses were today truly at the crossroads, Mr Santosh Rungta, President of the Chamber, said it was imperative that such businesses changed their outlook and try to restructure if competition has to be faced.

"We need to change our outlook and one of the methods of doing this would be continuous upgradation of human resources through training."

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