NHRD Network Journal

Globally, family-owned businesses are the oldest and most predominant form of an enterprise, forming an integral part of the organised and unorganised sectors of free economies.

Over the years, with the greater longevity of family businesses in India, there has been a dynamic and strategic shift in Indian families from being ‘family businesses’ to ‘business families’. This shift has come with its own set of challenges, most critical among them being the challenges related to ‘human capital’ for these businesses. The need to balance familial relationships with the pragmatism of business is a unique interplay which creates multiple complexities and inter-related issues for all family members alike.

With close to 75 per cent of the Indian workforce employed by family-owned businesses, it is important to dive deeper into the human resources (HRs) function in Indian Family businesses. Our endeavour is to understand the challenges of HRs in a family business and how this differs from larger corporations or non-family businesses.

A critical challenge in the long-term survival and growth of family businesses is the adoption of professionalisation. The latter itself, when viewed as a multi-dimensional construct, would involve a critical role assigned to HR and HR control systems. This article then seeks to undertake an exploratory research to understand the current reality and the future perspectives of professionalisation in Indian family businesses through the lens of HR and HR control systems. Six caselets explore the experiences of six representative family businesses with regard to their professionalisation journey. The article finds that while the next-generation views professionalisation as imperative for scaling up, HR is still in its infancy stage in these Indian family firms. This would have ramifications for the outcomes of such professionalisation. The article concludes that HR would need to be assigned the role of a regenerative function, rather than a back-end administrative role that seems to be the current reality.

What does it take for a family-run business that has a legacy of generations to become known as a best-in-class professionally run organisation—preferred as a workplace by talent, creating leaders for the industry and ambassadorship among employees and alumni?

This is the HR journey of Marico, led by an evolved owner, Mr Harsh Mariwala.

In this article, we discuss four key HR practices of attracting talent, induction and probation of recruited talent, building accountability and developing talent. These practices work on principles that have withstood the test of time, evolving with the changing context of the business and external environment. These also represent the evolution of the HR role over a period of time.

The author then elaborates how a professional work culture got institutionalised in Marico.

Out of the 100 largest companies listed in India in terms of market cap, more than 50 per cent are family managed. Indian family-managed companies have a distinct organisational culture. Organisational culture shapes and re-shapes people management, influenced by several factors—stage of evolution of the organisation, environmental/economic challenges and owner family culture. The way the owner family conducts itself embodies family governance. Family governance influences corporate governance. Human resource management (HRM) is an essential element of corporate governance. Nature of HRM in family-managed companies is significantly influenced by the way the owner family drives it. Some of the large Indian family-owned companies are consistently high on market cap because they are able to attract and retain the best talent. They can do this consistently because the best talent gets attracted to the best HR practices in an organisation. There is increased awareness of this among Indian owner families and they are now adopting world-class people practices to attract the best talent from the market. Soon we shall have many more Indian family-owned companies indistinguishable from western family-owned companies in terms of people practices.

Family businesses constitute a large portion of successful enterprises in India, as it does in different parts of the world. In its journey from a founder-driven small entity to a professionally run organisation, one key transformation it has to go through is the process of ‘institutionalisation’. The human resource (HR) leader plays a key role in this process. An exploration of the role the HR function has to play during the various phases of this transformation journey could serve as a guide to HR professionals building their careers with family businesses. Our effort has been to develop a model which could work along with validated tools which measure the influence a family could have on a business. We hope that such knowledge would prepare the HR leader to be better prepared to play the role of a partner during the evolution of the organisation into a professionally run entity.

A family is the primary social unit in which individuals are born and get acclimatised to societal culture. Most researches on family businesses are derived from frameworks developed in the United States or other Western societies. The premise of this article is that the way family businesses across the world are managed will vary drastically based on the culture of the society where these businesses operate. Using Australia and India as country examples, we apply Hofstede’s six dimensions of culture to formulate illustrative propositions highlighting the impact of culture on family business governance and management. These propositions are of particular significance to human resource management across areas of both governance and management, and concern, in particular, intergenerational matters associated with succession, management style, employment and developing next-generation leaders.

In this article, we have made an attempt to highlight how culture influences and impacts various aspects of running a family business by answering to certain questions such as:

How does culture influence the strategic thinking in a family business?