Innovative Structures Of Family Business Management Commerce Essay

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A Family-owned business is one that is owned and managed (that is controlled) by one or more family members. Family-owned firms are - "organizations where two or more extended family members influence the directions of the business through the exercise of kinship ties, management roles, or ownership rights." A family - owned business is any business in which a majority of the ownership or control lies within a family. It is also a complex, dual system consisting of the family and the business. Members involved in the business are part of a task system and also a part of a family system and these two systems may overlap.

Family - owned businesses exist all over the world and some of the worlds oldest firms are family- owned e.g. Kongo Gumi of Japan was founded in 578 AD and is currently managed by the 30th generation. Some of the largest wealth creators and businesses are family owned like Wal Mart. In India too, the highest generator and creator of wealth are family - owned businesses. The issues faced and the interests involved by family-owned businesses all over the world are more or less the same. The importance of the family in business and the blurredness of the distinction between business and family are predominant issues. Over 80% of world business is controlled by families. They employ around 50% of world work force. They contribute around 40 to 50% in world GNP. But the sad picture is that only 15 to 20% of family businesses survive till the third generation.

Indian Family Business:

Today's Indian industrialists rose from the bazaar. Their roots in industry are relatively recent, going back largely to the First World War. Before that they were traders and moneylenders engaged in the hustle and bustle of the bazaar. Even in Bombay and Ahmadabad in western India, where the cotton textile mills came up earlier in the last half of the 19th century, it was the trading communities who became industrialists. Aggarwals and Guptas in the North, the Chettiars in the South, the Parsees, Gujarati Jains and Banias, Muslim Khojas and Memons in the West, and Marwari's all over India.

Initially they were in small business which required small investments letting the families manage the business on there own. But once they entered into manufacturing sector(industry), they felt the need of heavy investments. But they were also aware of the fact that if they allow anyone and everyone to invest, then they can lose there control over the management of the entire business. To spread the risk, therefore, the families setting up industrial undertakings enlisted the cooperation of others, usually close friends or relatives, and allotted to them blocks of shares, while making sure that the majority control and, therefore, the management of the company remained with the promoting family. Thus was born a system of corporate management that was a strange combination of joint stock principle and family control. As the stock markets were yet to develop sufficient momentum, and the joint family system remained firmly intact, there never was a threat to the power of business families over their industrial empires built up through the ingenious device, popularly known as the managing agency system. All critical decisions about the firms were taken by the promoting families, euphemistically termed managing agents, with their heads exercising as much authority over the companies under their care as over any other matter affecting their families in any other sphere of life.

In due course this system of corporate management became so deeply entrenched that on the eve of India's Independence, hardly any industrial firm of consequence was out of its orbit. This meant that practically all business operations in the country were controlled by a few families. R.K. Hazari, a well-known industrial economist, had concluded after an exhaustive analysis that most of the prominent industrial firms on the contours of Indian business during the 1950s, were in the hands of just 18 Indian families and two British houses.

Within a decade of India's freedom, three major developments disturbed the tranquil situation that earlier prevailed on the business horizon. These developments were:

1. The nation's resolve to accelerate the pace of economic development held out an attractive invitation to the private sector to partake of new opportunities for business gain, notwithstanding the myriad restrictions imposed on the freedom of enterprise.

2. Both the Union and various state governments set up a number of financial institutions to provide industrial finance to private sector companies.

3. The joint family system, once the bedrock of the Indian social structure, began to increasingly experience severe strains, thanks to growing urbanization and westernization.

These developments caused many changes in the family businesses. Due to the magnanimous size of the country's infrastructural projects, families were no longer able to mobilize the required resources which gradually passed the financial control of the firms from the families to the financial institutions. Also the families started showing cracks. The Dalmias were the first prominent business house to break up after freedom. The pace, however, accelerated beginning with 1970 and the following 25 years witnessed splits in at least as many business families. And these included such illustrious names as the Birlas, Modis, Sarabhais, Bangurs, Singhanias, Mafatlals, Shrirams,

Thapars, Walchands, and Goenkas. Inspite of the loosening financial control over their companies and growing splits, the control of business families over the management of their concerns remains almost unimpaired. According to a recent tally the management of as many as 461 of the 500 most valuable companies is under family control.

Characteristics of Indian Family Business:

Loyalty: Family, extended family and relatives have a very strong sense of loyalty to the family that automatically translates as loyalty to the business.

Family relationship: Family relationship is the most important factor in determination of the position a person holds in the business.

Male Dominated: Sons and male members are more likely to hold higher positions and Succeed the CEO. Role of women is that of facilitator to the male members and the mother figure to the family and employees.

Active and non-active members: family members include those who are not contributing or are involved in the business are on the Board of Directors.

Passing the Baton:

A general pattern that families deploy to pass the leadership of the business to its next generation consists of three basic components:

1. Grooming the new generation: Families start preparing the young generation early in there life cycle so that they can understand the intricacies of the business till the time they are called to takeover.

2. Steady growth of stake: large business families have created a web of shareholding companies and they are at the top of the pyramid holding the group together by controlling the management of the entire group. They employ there young generation the shareholding companies on a salary basis. This way they not

only gain an insight of the business but they are also encouraged to buy stakes in these group companies using there earned money.

3. Gradually reach the top: With the passage of time, the next generation is ready to take the charge of the family business as it has acquired both, business knowledge and stake in the company. They keep galloping the ladder to the top.

TATA Group:

Tata Group is one of India's largest and most respected business conglomerates, comprising 98 operating companies (out of which 28 are listed companies) in seven industrial sectors viz. IT systems and communications, engineering, materials, services, energy, consumer products and chemicals. Tata Aviation (now Air India) were the first to

operate commercial passenger services in India. The group has operations in more than 85 countries and its companies export products and services to 80 countries. The total employee strength is around 246,000.

In a country where family firms have dominated the landscape for generations, the House of Tata remains primus inter pares. In India's tiger economy, nobody roars louder than the Tata Group, a $17-billion conglomeration that is the country's largest by market

capitalisation, and accounts for 2.8 per cent of India's GDP.

Tata Sons, the premier promoter company of the Tatas was established as a trading enterprise by Group founder Jamsetji Tata in 1868. It is the promoter of all companies of the Tata Group and holds the bulk of shareholding in these companies. The chairman of

Tata Sons has traditionally been the chairman of the Tata Group.

Currently, Ratan Naval Tata is the chairman of the Tata Group. Mr. Tata is the nephew of J.R.D. Tata, a leading industrialist in the days of British rule and the years of socialist autarky thereafter. Ratan Tata discovered that each division was run by a different chieftain as a private fiefdom, with no proper central control. Ratan Tata's elevation to the throne coincided with the opening up of the Indian economy in the early nineties, and the end of the so called "License Raj" that had stifled business growth since Independence. He shook up the group, focusing on the development of high-tech companies and putting the Tatas at the forefront of the Indian economic miracle.

Nearly 66% of the equity capital of Tata Sons is held by philanthropic trusts endowed by members of the Tata family. The biggest two of these trusts are the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust, which were created by the families of the sons of Jamsetji


Tata goes Global:

In 2000 Tata tea acquired Tetley group (2nd largest tea manufacturers),

In 2001 Tata a joint venture between the Tata Group and American International Group Inc (AIG)

In 2005 Tata Steel acquires Singapore-based steel company NatSteel.

In 2007 Tata Steel acquires the Anglo-Dutch company Corus

In 2008 Tata Motors acquires the Jaguar and Land Rover brands. Tata Motors unveils Tata Nano, the People's Car, at the 9th Auto Expo in Delhi.

Having found that, it will be imperative to comment that it's the family values nurtured by the Tata family and the family unity which it has shown since the first generation has propelled Tata to the status they enjoy, not only in the business world but also in the society. There are many families earning fortunes but the trust and respect enjoyed by the Tatas in unmatched in the history. Tata is one of the best cases for those families who are trying to build there business and are concerned with the future prospect of their family and the business. Tatas enjoy there respect and trust worthiness because they have shown a way to manage your business without spilling the family beans in the public and nurturing a highly principled value system in the family.

Reliance Group:

Family tree of Reliance Group:

One of the leading Indian businessmen was born on December 28, 1932 in Chorwad, Gujarat. Popularly known as Dhirubhai Ambani, he heads The Reliance Industries, India's largest private enterprise. Dhirubhai started off as a small time worker with Arab merchants in the 1950s and moved to Mumbai in 1958 to start his own business in spices. After making modest profits, he moved into textiles and opened his mill near Ahmedabad. Dhirubhai founded Reliance Industries in 1958. After that it was a saga of expansions and successes.

Real rags to riches journey took off in 1958 on his return to India. Along with his cousin, he started Reliance Industries with the capital of Rs 15000. Later, due to the risk-taking nature of Dhirubhai, his company achieved many milestones. Dhirubhai's new style of

management was really successful and earned him the confidence of 1.2 million investors as early as 1985. Later the business tycoon established such a big business house that every body in India and abroad was envy of the progress.

It was in 1977 when Dhirubhai Ambani took initiative for first IPO. In 1993 the IPO of Reliance was the largest IPO of India at that time. The meteoric rise and growth in the business was so enormous that by 2007 the combined fortune of the Ambanis was 100 Billion dollars. In 1992, Reliance became the first Indian company to issue GDRs in

global market. Later in 1999-00, the company established world's largest integrated grassroots refinery in Jamnagar.

Another mile stone was, the launch of the CDMA mobile telephony in India in 2002. This was the year when the mobile communication actually entered the revolutionary era. The famous 500 Rs mobile offered by the company, brought mobile phones to every nook and

corner of India. From CEOs to auto rickshaw drivers every body was laced with mobiles! The high growth figures and innovations of company made it the first Indian private sector company to enter Fortune's Global 500 list.

The Big Split:

The great visionary, Mr. Dhirubhai Ambani, who loved to dream big and to attain them, lacked the vision to carve a succession plan for such a giant corporation. He passed away without providing the company with clear cut succession route. May be that he never

thought that even such huge empire will fall short of the aspirations of his two little Ambanis. He failed to understand the strategic importance of planning the succession in advance and the in year 2004 the sibling rivalry in reliance became the most talked story

in the business world.

Result After Split work

Step 1: Split the Ambani family stake in RIL in the 30:30:40 ratio among the two brothers and Kokilaben. Anil Ambani to relinquish control to Mukesh, who gets full control of Reliance Industries' core oil and gas business.

Step 2: Create a special purpose vehicle to house RIL's stake in Reliance Energy and Reliance Capital. Anil Ambani to continue heading the two firms.

Step 3: In lieu of Anil giving up control in RIL, Mukesh Ambani transfers part of his 45% stake in Infocomm to Anil, who now gets to run the venture.

Reliance split is a burning case presenting the biggest challenge for any family indulged in business. Just after the split the company slipped in Forbes list.Even if the reliance do not suffer severely, it certainly devalues the status of the family in the society and trust of

the customers and the shareholders. If Mr. Ambani had planned a business envisioning the inherent conflict it could have been another story altogether where both the siblings would have complemented each other with their unique skills and have consolidated the

empire created by their father into a well established and cared family business not just another business.

Advantages of Family Business:

There are certain advantages enjoyed by the family businesses which is generally not found in other businesses.

1. Common Values: Family members share same ethos values and belief. This gives

an extra sense of purpose and pride, and works as a competitive advantage.

2. Strong Commitment: Closer ties between the family members and there emotional attachment with the family's occupation instills them with strong commitment towards the business.

3. Stability: Family businesses seem to be more stable and consistent in long term planning.

4. Loyalty: Due to strong personal bonds family members are likely to stick together in hard times.

Controlling the Empire:

After going through the huge empires build by the families in India one gets tempted to study there group structure to find out the ways using which they are controlling the management of these empires without investing much of there personal fortunes. When one goes a bit deeper into the investment-web created by these families in there

companies it becomes clear that almost all of them have created a pyramidical structure by using the tool of Cross Holding.

Here we have used the web created by the Tata family in Tata group as a case. When Mr. Ratan Naval Tata became the chairman of the Tata group in 1991 he found that the group was a loose confederacy of 300 companies' having sales of around Rs.86 billion. Moreover Tata Sons enjoyed very little control over the management of the group companies. Mr. Tata decided to change the group. The Tata group structuring involved various steps such as building Tata brand, reviving its managerial recruitment and retaining practices, changing the portfolio of business lines and most importantly making the group more cohesive and controllable.

While the brand name of Tata group would have ensured that there would be no risk to loss of management control still the group decided on increasing its ownership stake in its affiliates. An increase in the cross-holding structure of group companies combined with

pyramid structures provided a mechanism to the Tata group to control firms within the group without necessarily having significant equity investment. It can also be said that in quest to increase stakes in the companies Tata has hurt the investor's interests.

The pattern which is observed in the Tata Sons is generally found in all the other family businesses in India. It keeps them at the helm of business affairs. The system also helps in aligning the profits of different group companies. But the sad part is that it inhibits transparency and can hurt share holder's interests.

Structure of Tata groups listed firms during 2005:

Restructured Tata:

Major Group


Tata Sons Stake in Group

Major Group Tata Sons Stake in Group

Companies Company

FY95 FY96 FY05

Tata Iron &Steel 2.3 8.5 19.5

Tata Motors 1.8 2.7 21.9

Tata Power 5.6 6.3 28.7

Tata Chemicals 7.9 8.2 15.2

Indian Hotels 13.3 13.3 12.9

Tata Tea 7.6 8.6 15.8


Challenges/problems in Family Business:

In spite of the strong position of family business in India there are a couple of inherent problems in family businesses. Family and business are two quite different institutions.

And so there values and principles may clash at times. The challenges faced by familyowned firms vary according to the size of the company and its level of development.

Some of the most inherent problems or challenges which we found worth mentioning are listed below.

1. Family Emotions:

Emotion is a big dimension in family-owned firms, as brothers and sisters, uncles and aunts, nephews and nieces, and fathers and children work together. The problem arises in recognition of these dimensions of emotions and to make objective decisions. Emotional

outbursts are many in family-owned businesses and the quarrels and ill feelings of relatives have a way of spreading out to include non-family employees. It is very difficult to keep the bickering from interfering with work and the company becomes divided into

warring camps.

Recommendation: It is believed by many business thinkers that emotions are vital to Operate a business. But these emotions and passion have to be related to business. Ego Clashes, sibling rivalry, feeling of been left out, deriving importance etc are some of the

Problems generally seen in a family business. Controlling of ego clashes and sibling is Tough but all the same if the head of the family encourages open communication among Family members and has a system of mentoring every member who enters the family Business then issues can be controlled.

2. Family or Business what comes first:

One of the main concern for the family members is to decide over the direction of the business. There will be times when it has to sacrifice the interest of either business or the family.


Its imperative for the family to sit together and decide over there common goals. They should be ready to trade-off family interest for business to keep developing and growing. There should be a clear demarcation between the family and the business.

3. Succession Planning and fair to all approach:

Succession planning is almost absent in family owned business in India. Even a visionary like Mr. Dhiru Bhai Ambani failed to see the future. It was expected that younger brother will work under the guidance of the elder but the cracks started showing when Senior

Ambani was himself alive. Also, families end to act on a fair to all approach meaning that the business pie is divided equally among all the family members without seeing the contribution they have made to the business. It results in fragmentation of business and cross holdings to ensure that the weaker family member shares is taken care of. This system has worked well for the family but has played havoc for business because in every generation the business gets

divided into smaller units and it also encourages rivalry among various SBU's.


Succession planning is something which every family business must do well in advance, most appropriately in the first generation itself. Succession planning must not mean dividing the pie among the family members but it must mean finding a role of each family member in the group without having to divide the group. If the business is not split they have a chance to compete with the best in the world. If all the cotton and jute mills of all th Birla group are put together they will be a very formidable force in the world cotton and jute market but as they are fragmented they are not even national


4. Retaining non-family professionals:

It can be a big challenge to retain the best talents in the organization who are but non-family members. This is mainly because promotions are closed to them after a certain point and they see relatives being pushed into executive offices in spite of not being competent. Outsiders are necessary and managing them is very important.


The business should decide over a crystal Clear HR-Policy based on performance and commitment of every employee (family and non-family). The vision should be to nurture and develop talent wherever spotted. Promotion structure should ensure secure elevation of all the best talents available in the business and this\ elevation could also reach to the top position if there is a case. Non-family executives should not feel insecure in the organization.

Managing the Family Business Strategically:

Family and business are two different systems having different environments, needs, values, perception etc. Family has got emotions deeply entrenched in it and business can do well if they are kept in control. But it does not mean that there should be no emotion at all. Emotions are also responsible for keeping the families together. Business is an activity which requires rational and objective decision making. There should be a genuine effort to synergize the two institutions of family and business. And this effort can be made effective only when the family is dedicated towards the welfare and global growth of the business.

Two Different Systems:

Family System

Ø Emotional Concerns

Ø Family needs

Ø Maintaining stability

Business System

Ø Business Performance

Ø Business Demands

Ø Managing changes

One of the best ways to create synergy between the two systems is to divide the activities involved in family business based on there nature, into two different set of decision making environment. By environment, it means two decision making centers dealing with the specific kinds of activities involved to carry on the business.

There should be two councils working in close coordination with each other but on different set of issues with a different paradigm.

Family Council:

The council contains members of the family (frequently including in-laws, young adults, and family members with no connection to the business). Family members develop a habit of avoiding issues, denying problems, and keeping secrets from each other. If an

issue is controversial families tend to avoid it. The key family members gather to find answer to such questions a succession planning, pie share, role of members in the business etc. Various issues which the family council should take into consideration are:

Ø Mission and values

Ø Next generation development plan

Ø Guidelines for family involvement

Ø Ownership and transfer policy

Common mission and values can be developed into competitive advantage of family managed businesses. It gives a clear road map of future to every one in the family and every one is dedicated towards the family's goals. The natural ties between them ensures that they remain loyal to the family. But it requires a lot of dedication and understanding between the family members. The new generation should be properly educated, not only the management lessons but also the family values and principles so that they can easily gel with the system. The family council should decide over the role of each member in the business. The roles should be divided according to the

competency of the members and they should be properly motivated towards their job. They should also be made aware of there limits in the organization. The ownership Transfer policy should be developed in such a way that the most competent person gets the deserved position and the powers associated with it. The new generation

should be allotted jobs according to their competency and interests and should be motivated to achieve greater heights in their fields. An environment should be created wherein every member understands that what is best for the business is best for him/her and the family. Family values and traditions play a big role in succession planning.

Business Council:

The business council includes both, key family members and professional experts. these experts are vital in the sense that they can give objective opinion towards a problem without being biased. The non-family managers are the eyes of the family managers to see the organization from a different point of view other than family. It

encourages transparency in the company and rational decisions are taken to propel the company towards the heights of value chain.

The business council has following vital issues to tackle with:

Ø Business Decisions

Ø Capital Needs (Family and Business)

Ø Leadership Team Succession

Ø Succession Governance

Decisions related with business require professional expertise and family interest should take a back seat when discussing issues related with the business. Financial decisions like generation of capital, remuneration for family and non-family employees, interest of share holders and personal needs of the family etc are to be arrived by the business council. To decide over the succession of business leadership requires a long term leadership team succession planning to ensure that best talents in organization should get all the opportunity to decide the future of the business by gaining authority and responsibility. A close eye should be kept on the performance of all the family and non-family employees and they should be nurtured into tomorrow's leaders. Talent is often dispersed in the organization and to chose any one among them to succeed as the family and business successor is often a transgenerational process involving almost three generations. The business council which consists of family patriarchs and independent respected elders can ease the passing on of the succession from one generation to another.

All said, it depends on the loyalty and the unity among the family members as to how the strategies unfold. For any positive result the first requirement is the dedication of family members towards each other and the business. If there is a clear understand between the family members it becomes easy to lay the rules of the game.

The Strategic Management Process

Before describing the strategic management process and evaluating the literature on family business from this perspective, it is important to define what we mean by a family business. Following Chua, Sharma, and Chrisman (1996), we define family business as a business governed and/or managed on a sustainable, potentially cross-generational, basis to shape and perhaps pursue the formal or implicit vision of the business held by members of the same family or a small number of families. This definition is important from a strategic management perspective because it implies that there are goals being pursued, a strategy designed to fulfill those goals, and mechanisms in place to implement the strategy and control the firm's progress toward the achievement of its goals.

This is what strategic management is all about.

It is important to point out that this definition is based on behavior instead of a list of components. It encompasses the nuclear-family-controlled firm and even the publicly held firm that is shaped and managed by two or more generations of a family that might not hold controlling interest in the firm. Therefore, a large number of shareholders, which is the legal criterion for classifying companies as publicly held, does not automatically disqualify a firm as a family firm. Consequently, we only discuss family versus non-family firms instead of family, closely held, or privately held versus publicly held firms. While this definition explicitly allows for multiple-family ownership, for expository convenience throughout the rest of this article we refer to the controlling family in the singular.

The basic strategic management processes for both family and non-family firms is similar in the sense that a strategy, whether implicit or explicit, must be formulated, implemented, and controlled in the context of a set of goals. In this sense, even performance is similar, since it should be measured with respect to achieving a set of goals. The differences are in the set of goals, the manner in which the process is carried out, and the participants in the process. For example, in family firms, the owner-family is likely to influence every step of the process (Harris, Martinez, and Ward, 1994), whereas in nonfamily firms, family influences are at best (or worst) indirect.

These similarities and differences hold substantial opportunities for family- business studies. The similarities provide the field with a general working model of the factors that should affect a family firm's performance. The differences, or possibility of differences, suggest that each aspect of the strategic management process in family firms needs to be carefully explored and compared to the processes used in other family firms and in non-family firms. Such comparisons promise to improve the management practices in both types of firms, since the cross-fertilization of ideas cannot proceed effectively without an understanding of what those differences are, why they have occurred, and their results.

The Strategic Management Process

Environmental opportunities & threats

Organizational resources & skills

Managerial values

Social reponsibilities

Family interests

Goal Strategy Strategy organizational

Formulation Formulation implementation performance

With respect to:

Financial returns Strategic planning Corportate governance Financial, market,

Market Share process Orgnizational structure, & social goals

Risk Strategy content evolution, & change Family goals

Growth Social issues Family business culture

Social goals Succession Inclusion of family members

Family goals Intergenerational issues

Sibling relationships

Strategy Evaluation & control

Family culture

Family members involved

Non-family managers involved

The strategic management framework with which we review the literature is based on a simplified model of the strategic management process (Andrews, 1971; Hofer and Schendel, 1978; Schendel and Hofer, 1979). Figure 1 provides a schematic diagram of this model. As the figure shows, the process is dynamic and interactive. Goals must be selected, strategies formulated to achieve those goals, and the chosen strategy implemented. Furthermore, at all stages it is necessary to select and evaluate alternatives, make decisions, and ensure that effective control processes are in place in order to make adjustments where needed. How well an organization accomplishes these tasks in light of the opportunities and threats in its environment, the resources it possesses or can procure, and the values and noneconomic responsibilities held by its managers, determine its performance.

Within this framework, the family business may differ from non-family businesses because the controlling family's influence, interests, and values have overriding importance. How this concentration of control, influence, and values affects the strategic decisions and performance of family firms should be of great interest to family firms, but has not yet been adequately explored. Using this model to set the agenda, we see that for future research to improve familybusiness management, it must help managers do one or more of the following: more accurately define problems and opportunities concerning the environment or organizational capability; refine goals and objectives; generate better strategic decisions; improve the implementation of strategies, policies, procedures, and tasks; or facilitate the evaluation and control process.

This does not mean that we necessarily subscribe to what Hollander and

Elman (1988) characterize as the "rationalist approach" to family-business management. Proponents of this approach (Cohn and Lindberg, 1974;

Levinson, 1971) advocate the excision of family considerations from the business system. They argue that the two subsystems of family and business are so different that they cannot possibly co-exist except in the most unusual situations. In contrast, as shown in the bolded and italicized text in Figure 1, our approach accommodates family influences in various forms and in all parts of the process. Family interests and values are incorporated into the goals and objectives set for the firm. Family relationships influence the strategies considered. Succession within the family can be one of the most important strategies determining the longevity of the firm. Decision criteria are affected by family considerations built into the firm's goals and the choice of alternatives to consider. Family involvement in implementation creates its own dynamics, politics, and possibilities. Finally, family relationships and how the family perceives the role of non-family managers can make it easier or harder to constructively evaluate or control decisions and actions.

The key is to understand these influences and how to harness the potential strengths they convey, and to deal with the weaknesses with which they encumber the firm. In this sense, our view is closer to "systems theorists" such as Barnes and Hershon (1976), Hollander and Elman (1988), and McCollom(1988), who recognize the importance of both subsystems and seek ways to effectively integrate them. What we most want to accomplish with this approach is to connect studies of family businesses with the achievement of their goals and objectives, whether those goals be family-oriented or business-oriented.

As implied above, to gain a better understanding of how to improve the performance of a family business, two kinds of research are key. First, it is necessary to find out how a family business differs from a non-family business with respect to the strategic management process. Isolating these differences makes it possible to determine the reasons for them. Where differences affect performance positively, research should be targeted toward strengthening or exploiting them fully. Where they have a negative impact, research should be directed toward minimizing or eliminating their negative influences. As an added benefit, comparative research of this type allows researchers, consultants, and practitioners to appreciate the extent to which knowledge concerning business in general applies to family businesses in particular, and the reasons why it will or will not apply.

Second, studies that compare and contrast more and less successful family businesses are also essential. Comparative studies of this type will contribute further to our understanding of the family's influences on the strategic management process, how differences in those influences affect performance, and the coping mechanisms used by high- and low-performing firms.

We also recognize that not all family businesses, or non-family businesses, are alike, nor should they be. Thus, we realize the need to acknowledge the legitimate contingencies that cause one family firm to act differently from another. However, what we propose is nothing more than good science, because the classification and investigation of homogeneous populations of family firms is essential for progress in the field (cf. Chrisman, Hofer, and Boulton, 1988; McKelvey, 1982).

In all, we reviewed 204 family business related articles appearing in 32 journals from 1980 to 1994. Only about 37% (77 out of 204) of these articles are based on empirical research. They are catalogued in Appendix 1. Family firms' penchant for privacy and the early stage of the field's development could explain the relative paucity of empirical studies (Davis, 1983; Ward, 1987). The small number of empirical studies clearly emphasizes the need for more research.


"Family is the fundamental unit of every other institution. Business evolved due to symbiotic interaction Between family and society (itself made of families).This symbiosis can be made eternal by strategically managing both the institutions (Family and Business) ensuring that family remains united and business is given full autonomy to chart its way according to the changing needs of the time."

When it comes to family business the rules are very different from other businesses because there are two different set of value systems working side by side and these systems can be often in conflict with each other. Due to changing face of global competition the time has come to face the troubling questions related to family and the business. The conflicts in family business are of different nature often mixed with emotions and personal feelings. These conflicts are resolved keeping in mind the overall unity of the family and the implications of the decisions on the business and the family. If the goal of the family business is to go global, it should institutionalize the business system and develop transparent corporate governance structure so that the business does not feel the heat of family emotions and is given free hand to chart its own way.