Though the vast majority of companies in India are family-run and employ over half the Indian workforce, very few survive till the third generation. And, a third of business families disintegrate because of generational conflict.
This has prompted Pune-based entrepreneurship development organisation Mitcon to start a training programme to help such businesses sustain and grow.
Under the Mitcon-AGE (Academy for Global Entrepreneurship) initiative, the organisation has introduced a year-long “management programme for family business. Beginning August, it will not only train, but also mentor family businesses manage themselves for the future.
Vinod Paratkar, Director, Mitcon-AGE, points out that family-run businesses face challenges unique to their very nature, preventing their growth and prospective global reach. With the global slowdown, India as the market of choice for MNCs adds to the challenges for most small and medium family businesses.
Adds Dr Pradeep Bavadekar, Managing Director, Mitcon, “The rapid change in business environment requires young business leaders to understand the developing economy and present global perspectives. Mitcon-AGE will engage in a variety of interventions to address capacity building, educational and training requirements of entrepreneurs & executives.”
According to CII Family Business Network (India chapter), the gross output of family run businesses accounts for 60 per cent of GDP or approximately 90 per cent of India’s industrial output.
They contribute 79 per cent of organised private sector employment and 27 per cent of overall employment, after government and PSUs.
Among listed companies in India, 67 per cent are family businesses, the highest among Asian economies.
According to a PwC survey in October 2012, ownership issues crop in the next generation if the owner passes away without adequate arrangements. Other problems include hiring and promotions based on relations rather than merit and issue of who takes control after the founder generation passes away.