The Secret to Surviving and Thriving: Developing a Sense of Ownership in Family Managed Businesses

According to a recent study by the Family Business Association of India, the success rate of family-managed businesses in India is around 70%. This success rate has remained relatively stable over the past few years, with some fluctuations.

The study also found that the main challenges faced by family-managed businesses in India are succession planning, conflict resolution, and maintaining a balance between family and business interests. Around 30% of family-managed businesses in India fail due to these challenges.

Additionally, the study found that family-managed businesses in India are more likely to succeed if they have a clear succession plan, strong communication and conflict resolution strategies, and a commitment to professionalism and corporate governance.

Overall, the success and failure of family-managed businesses in India largely depend on the ability of the business to adapt to changing market conditions and the ability of the family to effectively manage the business and address any challenges that may arise.

There are several reasons why family-managed businesses in India struggle to survive. Some of the issues that may affect such businesses include:

1. Lack of succession planning: Many family-managed businesses in India do not have a clear succession plan in place, which can lead to conflicts and power struggles within the family when it comes time to pass on ownership or leadership of the business.
2. Poor financial management: Without proper financial management and planning, a family-managed business may not have the resources to sustain itself over the long term.
3. Limited management skills: If the members of the family who are running the business do not have the necessary management skills or experience, it can lead to poor decision-making and a lack of focus on the business's long-term success.
4. Personal conflicts: Personal conflicts within the family can also affect the long-term viability of a family-managed business. If family members are not able to work together effectively, it can lead to a breakdown in communication and decision-making, which can ultimately harm the business.
5. Lack of external support: Unlike professionally-managed businesses, family-managed businesses may not access the same level of external support, such as expert advice and mentorship. This can make it difficult for them to adapt to changing market conditions and remain competitive.

All this sounds so good. Right? The MSME sector is the backbone of the Indian economy. Tier 2 and 3 cities are coming forward to contribute heavier in the last 1-2 decades. The sudden rise of digitization post-covid has made every business owner sensitive to its usage and success.

Digitization only is not the reason for the business growth. The fundamentals of management remain the same. One needs to integrate the technology with the management basics.

Other than the above-mentioned reasons for challenges for FMBs, one neglected challenge is the lack of creating a sense of ownership among the employees and other stakeholders.

I was reading an article in a newspaper by Bhavesh Upadhyay , and he rightly mentioned that 'one needs to learn to delegate the responsibilities to others.'

Authors like Bhavesh are straightforward and open in their observations. Similarly, MSME owners must have such people around them - who are open to sharing their opinion, not flattery, who are more concerned about the business overall and not nurture the owner's ego.

Many owners show that they are very adaptive and open to accepting anything for the betterment of the business, but ultimately they dominate. This is a serious challenge with the current FMBs in India. Owners fail to create that much-needed sense of ownership in others.

Soumya Rajan, a family business expert and the founder and CEO of Waterfield Advisors, said, “Today, the family businesses have not just to operate in a competitive landscape that has established businesses seeking to be domain dons but also several niche startups mushrooming all over with some pushing the valuation boundaries as decacorns with specialised offerings and attracting investors. This, along with a changing face of the consumer with the largest purchasing power sitting with the millennial group who are largely digital natives, will keep triggering a need to constantly try and adapt and realign businesses to succeed in such an ecosystem.”

While we are seeing the rapid growth of NAMO (Nano and Micro) enterprises in India's tier 2 and 3 markets, adaptation delegation and a sense of ownership are the more significant challenges. Such small businesses grow very fast in the initial year because of serval reasons, but at one point, they get stagnant. They start seeing more complaints from customers and see more operational challenges.

The owner of the business cannot do everything. This is the right time to start delegating the work to the domain experts. When I say delegating, I mean it—giving the portfolio to employees or vendors is not delegation. Along with it, they must empower them. Remember, delegation and empowerment go hand in hand.

There are several ways to create a sense of ownership among employees and stakeholders:

1. Share company goals and objectives: Ensure all employees and stakeholders are aware of the company's goals and objectives. This helps them understand the big picture and how their contributions fit it.
2. Involve them in decision-making: Encourage employees and stakeholders to participate in decision-making processes and give them a voice in the company's direction. This helps them feel like they are an integral part of the organization.
3. Offer incentives and rewards: Recognize and reward employees and stakeholders who contribute to the company's growth and success. This could be through bonuses, promotions, or other incentives.
4. Encourage communication and collaboration: Foster a culture of communication and collaboration among employees and stakeholders. This helps build trust and a sense of teamwork, which can lead to a greater sense of ownership.
5. Empower employees and stakeholders: Give employees and stakeholders the autonomy and resources they need to take ownership of their work and positively impact the company.
6. Provide opportunities for growth and development: Offer employees and stakeholders opportunities for professional development and advancement within the company. This helps them feel invested in the company's success and gives them a sense of ownership in their own career growth.
7. Avoid interference: Once the delegation of work is completed, please let the employees or agencies work according to their expertise and knowledge. Many things are subjective in a business. Everyone can have their own opinion about good or bad. The owners may see things differently, but that's fine! There may be many other things in the company where the owners can divert their energy. If they do not empower people to work as per their expertise, the employees or external agencies may never develop a sense of ownership.

Employees and external agencies will feel more invested in the company's success and more likely to go above and beyond in their roles by fostering a sense of ownership.

Additionally, involving stakeholders in the decision-making process can help to build trust and create a more cohesive team.

Developing a sense of ownership benefits everyone and can lead to increased productivity, innovation, and customer satisfaction. So if you're a family-managed business looking to thrive in today's competitive market, consider implementing strategies to cultivate a sense of ownership among your team.