FAMILY BUSINESS
Family held and run businesses are the oldest and most prevalent form of business ownership
anywhere in the world. Family businesses form the backbone of any country’s prosperity and
economy. In India, keeping business ownership within a family is a deeply-rooted practice since
ages. India enjoys a rich and glorious history of family-owned businesses. Initially, family
business in India started in the form of trading and money lending involving the hustle and bustle
of the bazaar. It was also confined to certain communities, notably the Gujarati and Marwari’s
especially in the western and northern India. Today, family business almost contributes around 80
percent of national GDP annually. According to various estimates, more than 80% of the
companies in India are family owned.
In India, there are many highly successful family businesses which are operating for more
than 100 years and not only in India but all over the world. The list includes:
1. Tata Group – Founded in 1868 by Jamsetji Tata
2. TVS Group – Founded in 1911 by T V Sundaram Iyengar
3. Aditya Birla Group – Founded in 1857 by Shiv Narayan Birla
4. Kiroloskar Group – Founded in 1911 by Laxmanrao Kirloskar
5. Godrej Group – Founded in 1897 by Ardeshir Godrej and Pirojsha Burjorji Godrej 6.
Shapoorji Pallonji – Founded in 1865 by Pallonji Mistry 7. Reliance Group – Founded in 1966
by Dhirubhai Ambani
Advantages of family run businesses
Family businesses are still thriving in today’s competitive economy. The following are
some of the advantages of family run business: Stability Family business are ideal in nature
as they are loyal to the principles of the founder and top leadership, which results in overall
stability within the organization. Leaders usually stay in the position for many years, until a
life event such as illness, retirement, or death results in change. Commitment: There is a
greater sense of commitment and accountability by all family members due to involvement
of reputation stake of the entire family. These level of commitment is almost impossible in
non-family businesses. It is natural that all family members demonstrate and share a level of
commitment to the firm since the core of any family business is a shared business vision
and identity.
Leadership : In family run business, most of the time leadership is centred to the senior
most people in the family. So each family members show faith and loyalty in the top
leadership.
Trust :Since all family members know each other and related by blood relations, there is
feeling of trust in each other.
Flexibility :In family run business, all family members can take any role which the business
needs. You won’t hear, “Sorry, this is not my job” in a family business. They can take
several different tasks outside of their formal role in order to ensure the success of the
company.
Decreased Cost: All family members contributing land, labour, capital and
entrepreneurship means there will less cost of running and managing business. In hard times
just like COVID-19, family members even can take a pay cut or work without any pay.
CIRCLE MODEL OF FAMILY BUSINESS
The Three-Circle Model of the Family Business System was developed at Harvard
Business School by Renato Tagiuri and John Davis in 1978.
It quickly became, and continues to be, the central organizing framework for
understanding family business systems, used by families, consultants and academics
worldwide.
This framework clarifies, in simple terms, the three interdependent and overlapping
groups that comprise the family business system: family, business and ownership. As
a result of this overlap, there are seven interest groups present, each with its own
legitimate perspectives, goals and dynamics. The long-term success of family
business systems depends on the functioning and mutual support of each of these
groups.
Two Circles Became Three Circles
Conceptual model of a family business system was a two-circle framework, which
showed the family and the business as two overlapping systems or circles.
The Two-Circle Model recognized the influence of family and business on each other,
and the need for alignment of family and business goals and interests. This model also
made it easier to understand the confusion that individuals and the system could feel
because of competing norms of the family and the business.
Three-Circle Model Explained
The Three-Circle Model of the Family Business System shows three interdependent
and overlapping groups: family, ownership, and business.
An individual in a family business system occupies one of the seven sectors that are
formed by these three overlapping circles. An owner (partner or shareholder)
and only an owner will sit within the top circle. Family members will occupy the left-
hand circle, and employees of the family company the right-hand circle. If you have
only one of these roles, you will be in just one circle. However, if you have two roles,
you will be in an overlapping sector, sitting within two circles at one time. If you are a
family member who works in the business but has no ownership stake, you’re in the
bottom-center sector. If you are a family member who works in the business and is an
owner, then you will sit right in the center of the three overlapping circles.
“The Model identifies where key people are located in the system,” Davis explains,
“and think about different roles that family members have: being a family owner, or a
family employee. These overlap areas in the Model indicate role overlaps and
potential role confusion.”
With the Three-Circle Model, one can depict seven distinct interest groups (or
stakeholders) with a connection to the family business:
1. Family members not involved in the business, but who are descendants or
spouses/partners of owners
2. Family owners not employed in the business
3. Non-family owners who do not work in the business
4. Non-family owners who work in the business
5. Non-family employees
6. Family members who work in the business but are not owners
7. Family owners who work in the business
