Family unity key to a successful family business, finds IIM Lucknow study

The key to running a successful family business may lie in maintaining a cohesive family structure, with clearly defined roles and responsibilities for everyone, found a recent study by the Indian Institute of Management (IIM), Lucknow.

The study also highlighted the role of family unity and conflict resolution strategies as essential mechanisms in enhancing the lifespan of a family business.

The research evaluated existing literature, looking at how successful family businesses across the world manage their governance structure and the consequent economic and non-economic benefits that ensue from it.


Titled ‘Family Governance Structures in Family Businesses’, the study emphasised the role of family governance in establishing ground rules to resolve conflicts, promoting effective communication, strengthening family relationships and fostering a sense of attachment among family members and towards the business.

“As businesses expand in size and scope, they become increasingly complex. Similarly, families managing businesses face complexity as they become multigenerational and increase in size,” said Sabyasachi Sinha, associate professor and one of the authors of the study.

Unlike corporate structures, where positions and hierarchies are established due to regulatory requirements, a family business structure is voluntary and unique.

“The adoption of family governance structures by family businesses results in transformative changes both within the family and the business. It leads to the peaceful resolution of family conflicts and successful addressing of business challenges,” said Sinha.

The researchers suggested that it is paramount to distinguish between the family –relationships, roles, interactions, complexities and conflicts – and the business aspect of a family business to create a balance in both family and work life.

The study identified five crucial family structures – family meetings, a formal family council, a family office for wealth management and a written document detailing policies and principles or a family constitution.

On the relevance of having family mechanisms in place, Sinha said, “As they (family businesses) expand their business and family, they should conduct more structured family meetings, establish family offices and initiate processes to adopt a family constitution.”

He added, “These measures will enhance family unity, build a more coherent relationship between the family and the business, ensure a smoother transition of succession and better utilise the capabilities of family members.”

The study deemed informal governance structures, such as family celebrations, activities and retreats, as important.

Governance structures might serve different requirements of a business family. The research team highlighted that future research should differentiate between various family governance structures while exploring their influence on family and business systems. Future endeavours must also investigate why family firms adopt a particular governance structure instead of others, the study said.

The research findings – of Sinha and Vinod Thakur, assistant professor at Management Development Institute, Gurgaon – have been published in the Journal of Small Business Management.