6 Pointers for a Successful Family Business

Family businesses generate up to 90 per cent of worldwide GDP. Given this figure, it is surprising that only about 30 per cent of family-owned businesses survive into the second generation, according to the Family Business Institute. Another 50% don’t survive the transition from the second to the third generation.

Our company, NR Group, was founded in 1948 by my grandfather, the late Shri N. Ranga Rao, a visionary whose intelligence, integrity, keen business acumen and hard work laid the foundation for our organisation. Honesty, purity and social responsibility – the guiding principles of this business when it began, remain at the core of the company. From a humble cottage industry to the largest manufacturer of incense sticks in the country, we have had the opportunity to develop his legacy into one of India’s most iconic companies. In my view, while we are blessed to have a foundation of such clarity and purpose, there is one clear driver of NR Group’s present success and scale – family.

The institution of family was one of the main reasons my grandfather wanted to start his own business. He was a man of strong familial values and believed that they make people strong, healthy and ambitious, as a unit. NR Group’s success is testament to his conviction.

One question I am asked frequently is ‘What is the key to running a family business? How did you do it?’ It always makes me think. Although there is no single clear cut answer, there are some strategies and nuances I’ve picked up over the years in our company’s journey and I thought I’d share them in a post. So, here we are. My top tips for people looking to build and grow a family business.

1. Family bonding is key. It can be easy to put business over family, but contrary to popular belief, family must always come first. A bond of trust will ensure that everyone is pulling in the same direction and that drives the business forward too. In our family, we take special care to maintain this relationship. In fact, every year on a Saturday closest to the 19th of October (to mark the birthday of our founder), we celebrate Family Day.
2. Groom the next generation early. Although this should be fairly obvious, family members should not be pressured to join the company. You must, however, try to involve children in the family business. The hands-on experience in various aspects of the company or even just conversations about it will help them make an informed choice about joining the business eventually. As a young boy, I developed a keen interest in the workings of our business. Every conversation at the dining table involved talking about different scents and aromas. I even spent many a summer vacation learning how to smell different fragrances and even used to travel in a van conducting sales across Kerala. The experience was invaluable.
3. Meritocracy. If your children are joining the family business, make sure you never hand over the reins of the business to the next generation on a platter. Give them a chance to earn their seat at the table. This process could mean working in the company or gaining valuable experience in the outside world that teaches them about more than just financial gain. A good education also goes a long way in providing a valuable perspective on how the business world works and specifically their family business. Before I was appointed to a leadership position, I was working as a sales rep for a special agarbathi called Manmohak all across Tamil Nadu. I also had to travel to the North East and Maharashtra to learn the market dynamics.
4. Strive for professionalization. Hiring and promotion of non-family members is an important factor. It is essential to identify and give due credit to their contributions towards the business. All employees, family or non-family need to be treated the same way when it comes to praise, criticism and promotions to prevent conflict and resentment. In our own company, we have non-family members occupying senior positions of CEOs and General Managers.
5. Create a Family Constitution. While it might sound formal, clarity is paramount to trust and it will provide a framework to deal with situations which arise in the course of the family business’s operation. Our family business was divided when three of my father’s brothers opted out to pursue different aspirations. It was an amicable separation, and we remain close to this day.
6. Value each generation’s perspective. Sometimes, there may be resistance to views from the older generation or, on the flip side, where the young family members assume that seniors are out of touch. Make an effort to consider opinions across generations. A different perspective always helps with difficult decisions. We continue to seek counsel from the older generation who sit on the advisory board to this day.

Running a family business is an emotionally and professionally rewarding experience, considering the opportunity to build a legacy with the people who understand you best. A healthy dose of diligence, trust, objectivity, and innovation can go a long way in ensuring your business enjoys the success it deserves.