How do family businesses create a legacy?
One-third of the 1,000 largest companies in the world are family businesses.
Some 70% of the BSE listed Indian companies are family controlled and account for two-thirds of India’s gross domestic product (GDP).
However, according to the German economist Max Weber, hardly 3% family businesses go on to the fourth generation due to lack of guidance on succession planning.
Walter Vieira and Mita Dixit share their collective experience garnered through advising hundreds of family businesses through narratives of value preservation by family businesses in their book, “The 5Gs of Family Businesses”. This book dialogs about a transformational journey which family businesses need to survive and succeed in. The 5Gs encapsulate the essence of five core elements for building an eternal family business.
During the present Covid-19 pandemic, the business environment is chaotic, complex, and uncertain about how the new normal will take shape. It is in times like these that reading empowering stories of real businesses that have sailed through testing challenges of survival such as wars, tsunamis, and pandemics, helps entrepreneurs, business owners, and successors to build the needed resilience.
A fresh law graduate who declined to manipulate his first legal case doomed his legal career before it even started in 1894. Later, with his arduous zeal, this gentleman “Ardeshir” started a lock making business which supplied his first product in 1952 for safeguarding ballot boxes for independent India’s first election. Today, his legacy continues to be a 120-year-old highly respected and diversified conglomerate – the Godrej Group.
Using these narratives from long lasting family businesses across the globe, the book synthesises and decodes this journey in 5Gs – Genesis, Growth, Gen -Next, Governance and finally Giving Back.
Genesis -the first G refers to the source code of the family business’s culture. Numerous examples of feuds between generations are discussed where the values failed to percolate within the family. The Singh family of Ranbaxy Laboratories and Gucci family’s conflict are leading examples which led to loss of business empires.
Interestingly, the fifth element, Giving Back is an emerging trend across the globe for sustainable businesses. Businesses thrive on resources from the society and hence they are morally bound to all the stakeholders. This is especially relevant in a country where there is growing economic disparity. According to an Oxfam report, the top 10% of the Indian population holds 77% of the total national wealth.
Apart from the interesting anecdotes, the simplicity with which the book decodes practical lessons is amazing. The big takeaway is not in the narratives. Rather, the book calls for deep introspection by entrepreneurs, business owners, and successors.
Finally, one of the most important lessons is to remember your raison d’êtr
e and work passionately towards achieving the long-lasting legacy of your family business. If you are serious about taking your business to the next generation, you will find this book as a ready reckoner with great mantras to guide your pathways.
Authors: Walter Vieira and Mita Dixit
Published by: Sage Publications, 2019
(Arunima Haldar is a faculty member in the finance area at SPJIMR with research interests in corporate governance. Views are personal.)