Learning the house rules

Look around and you will spot them everywhere. From the very established Birlas, Tatas, Goenkas and Bajajs to plenty of first and second generation heavyweights like the Mittals, Munjals and Biyanis.

Family-owned businesses have always dominated the landscape of corporate India — dismantling of the licence raj just made the elite club a little porous and more inclusive.

Many first-generation entrepreneurs have entered the fray over the last 15 years and in fact, most big businesses in India today are still family-run and managed by families. This is not just true for India. Of the 13.2m businesses in the US, about 90% are family-owned and managed. About 200 of the Fortune 500 companies are family-owned.

And contrary to the popular perception of unprofessional, clannish, ad-hoc management in these companies, data and historical performance clearly suggest otherwise. Family-owned and managed businesses globally have been outperforming professionally-managed firms.

An analysis of companies in Standard & Poor’s 500 list, spanning 1992 to ’01, reveals that family-controlled firms beat non-family firms - the former generated a higher average net profit over the study period, even as they invested more money into capital investment.

In India, it isn’t just about performance — family-owned firms here are the biggest and most ambitious players and employers. For aspiring executives looking for exciting challenges, these firms provide the best opportunities to learn and grow. But the ground rules in working with a family-managed companies vis-à-vis professionally-managed ones are different.

Here’s what you should keep in mind while working for such family-run organisations:

Veto Power: Remember the promoter has the only veto power in the company and he can use it for anything anytime. If you do not like something, do not make a hue and cry about it. Express your views gently if you need to — and let him decide.

Quick Decisions: They have the authority and the risk-taking ability to take quick decisions. Kingfisher’s Vijay Mallya placed a $1-bn aircraft order overnight - professional CEOs will never do it. With controlling stakes and high-commitment level, these owner-managers are not headquarter-driven and do not need to constantly cover their backs.

Relationship Matters: You may call them ‘his’ coterie, ‘his’ secretariat or ‘his’ loyalists — but you need to just accept that there are important power centres in a family-managed company. Handle them with care. Relationships and loyalty here are far more important than in a professional-managed firm.

Not System-Driven: Expect a lot of ad hoc behaviour and whims and fancies because it is more individual-driven, not so much system-driven for top-level decisions. Also, being in favour and out of favour is part of your job deal and could be very cyclical. Learn to temper your mood while riding the highs and the lows.

Straddling Micro-Macro: Owner-managers thinks big and small - almost at the same time. So don’t be surprised if your boss gets stingy about your business class travel while discussing that billion-dollar deal. These owners have just mastered the art of being both penny and pound wise. “At a very primitive level, they see their top managers as “Rs 50-lakh-a-year expense head and constantly try to justify it”, says one source.