What drives resilience in family businesses?

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The common factors that make up the family business resilience and regeneration formula are a strong entrepreneurial orientation, emotional attachment to their business, and ambitious next-generation leadership seeking new experiences beyond the family business, according to a study by ISB, STEP Project and KPMG.

Entrepreneurship: “The Regenerative Power of Family Businesses: Transgenerational Entrepreneurship” noted that maintaining the founder’s entrepreneurial spirit is a major contributor to innovation, even in well-established family businesses. In a study of 2,439 family business owners of family businesses in 70 countries and territories, it found that potential next-generation successors are educated on how to take calculated and responsible risks and make decisions. on their own, with small amounts of family capital. allowing them to learn from first-hand experiences.

Besides entrepreneurship, socio-emotional richness and motivational leadership also hold the key to the resilience of family businesses.

Socio-emotional wealth: Family control and influence allows for quick decision-making. Their “socio-emotional wealth” is seen as an essential endowment, one that the family values ​​and protects. For many respondents, this is a measure of performance beyond financial wealth, and one that is often difficult to replicate in non-family businesses.

Motivational Leadership: Entrepreneurship and socio-emotional wealth go together as competitive differentiators. They are further enhanced by the impact of a transformational or charismatic leader, according to the report.

India results

Although this information comes from 2,439 family business owners of family businesses from 70 countries and territories, the Thomas Schmidheiny Center for Family Enterprise at the Indian School of Business conducted the survey in India, as an affiliate of the STEP project.

Speaking of the 53 Indian companies in the sample, Nupur Pavan Bang, Associate Director, Thomas Schmidheiny Center for Family Enterprise, ISB, said, “The good news is that Indian companies seem to have a better ability to challenge the adage of sleeves of shirt. to shirt sleeves in three generations. A higher proportion of Indian businesses are led by the third and fourth generation (25% and 8%) compared to the global averages (14% and 4%). It is also an indication of the longevity of family businesses in India,” Bang said. “However, Indian companies lag behind other global family businesses on the key aspect of involving women at management level. Only 9% of Indian companies in the sample had a female CEO compared to the global average of 19%.

Professor Sougata Ray, Executive Director of the Thomas Schmidheiny Center for Family Enterprise, added: “Indian family businesses seem well placed to support entrepreneurship. Entrepreneurship, family identification with the business, and family control and influence over the business are among the highest for Indian family businesses within the global sample,” said Professor Ray. “However, Indian business families lag far behind their global counterparts in having structured family governance in place, as only 11% of Indian respondents said they have a family council, compared to a global average of 24%. “

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