Dr. Subhash Chandra Show: Are family run businesses better than professionally run ones?
Business houses are popularly classified on the basis of their ownership - Family Owned Business and Professionally Owned Business. And more so, the ownership styles can influence the culture of the business. So which style of running the business is better?
An edition of The Dr Subhash Chandra Show discussed the pros and cons of both family-run and professionally-run businesses. Chairman of Essel Group and ZEE, Dr. Subhash Chandra, rendezvoused with several medium and small industry entrepreneurs who shared their experiences about starting a business and the ways in which they took it forward.
The main question for the discussion was: Are professionally run businesses better than family run businesses?
To explain the distinction between the two, Dr Chandra enlightened the gathering, by putting the below points:
Family run businesses are those which are owned and managed by a family. These businesses can also have several investors. In India, it is the oldest way of running a business - with 85% of businesses being family-run.
On the other hand, a professionally run business is one which the ownership can be of a person’s, but the actual business is managed and run by paid employees or employees who are incentivised to run the business.
Like two sides of the same coin, there are pros and cons to businesses managed by family or by a professional.
Though family run businesses are close knit with faster access to owners and accommodative in terms of working atmosphere, they may be apprehensive on sealing decisions that involve taking risks in the business. On the other hand, professionally run businesses are driven by numerous policies and processes that have 'one-size-fits-all' culture that may not appease all employees but these businesses may have a more risk taking appetite.
Though distinctive on their own, these differences do not deem either of the style of functioning of businesses to be superior over the other. Dr Subhash Chandra tied this discussion by inferring that the two businesses cannot be directly compared against each other, rather they must co-exist with each other. After all, any business should be system run and not run by an individual.
To explain this Dr Chandra illustrated with a Venn diagram of 3 circles. Each circle depicted the following: Ownership/ Family/ Business.
This diagram illustrated the need to maintain an intersection of two of the three elements, but avoid any element completely overlapping the other. An overlap may give rise to problems in one or more of the elements, thereby disrupting the correlation.
Encouraging the concept of taking risks, Dr Chandra talked about getting rid of the fear of losing. "Fear is what keeps dragging a person back," he said and added that expanding one's business requires a lot of help from people. "If you employ experts, and people who have a good grasp and knowledge about the field, you will be able to expand faster," he said.
In conclusion, one must know that any business starts small, be it family run or professionally run. But as the business grows, so do the challenges. The true test of any business is in facing challenges and taking risks, regardless of its ownership.