'Only 15% of Indian family businesses have robust succession plan': report

Indian family businesses are slowly turning to professionalism as only 35 per cent plan to pass the business fully to the next generation, with only 15 per cent having a robust succession planning in place, according to a survey.

According to PwC’s 2016 India Family Business Survey Report, there has been a shift in the thinking of family business owners when it comes to future plans for management of their companies.

Only 35 per cent of Indian family businesses plan to pass the business fully to the next generation, lower than 40 per cent in 2014.

Further, nearly half of the respondents in the survey, up from 40 per cent in 2014, plan to pass on ownership but bring in professional management, the report said.  The report noted that only 22 per cent of businesses have a succession plan for all their senior executives, 31 per cent have a plan for senior most executives, while nearly half the people surveyed said there is no succession plan. 

Even more alarming is the fact that only 15 per cent of those surveyed have said that their succession plan is robust, documented and has been communicated.  “Strategic planning in both dimensions of a family business - the family and the business - will go a long way in enabling family business leaders to achieve their goals,” said Praveen Bhambani, Partner and Leader - Private and Entrepreneurial Business, PwC India.

Around 78 per cent of family businesses in India have involved the next generation in the business, but at the same time, “professionalisation imperative is high”, the report said.

Of the participants surveyed, 81 per cent have non-family members on board, 72 per cent plan to bring in non family professionals to help run the business.  Around 35 per cent plan to pass on management to next generation, while 48 per cent of family businesses plan to pass on ownership but will bring in professional management, it added.

The report said 85 per cent of Indian family businesses have a mechanism in place to deal with family conflict including by way of shareholder agreements, measuring and appraising performance, family councils etc.  Over 2,800 family business leaders across 50 countries and in India along with 102 family business leaders were surveyed for the report.