Why do only less than four per cent of family businesses last up to the fifth generation? According to Kavil Ramachandran, Executive Director, Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business, most families are unable to sustain the entrepreneurial spirit of the first generation promoter.
Long-term survival of family-run businesses depends on both entrepreneurial quality and ‘family governance’, says Ramachandran, who has authored a book on the topic, 10 Commandments for Family Business , which was released on Tuesday.
Addressing a session on sustaining entrepreneurship in family businesses, he said entrepreneurship suffers when the focus shifts to day-to-day operations and management from innovation.
Lack of family governance results in an absence of alignment within the family on the long-term goals. Entrepreneurship should be encouraged as a family value.
Tricky times CK Ranganathan, Co chairman, CII Innovation and Entrepreneurship Council and Chairman and Managing Director, CavinKare Pvt Ltd, who released the book, said the job of the first generation entrepreneur is relatively easy as compared a time when the organisation grows and more members from the family enter the business. Challenges arise whether the business does well or not. A clear vision and distinct role for those concerned is important. Successful business families treat the well being of enterprises as sacrosanct and the prosperity of the family naturally follows, he said.