India is a country where as much as 85 per cent of businesses are family run. Many are from India's vast hinterlands, with little to no exposure to nationwide markets, global best practices, opportunities in other regions among other things. The NMIMS Deemed-to-be university in Mumbai runs a program that specially aimed at family-run businesses and empowering the next generation of such businesses to become successful entrepreneurs. Professor Seema Mahajan, Director - Pravin Dalal School of Entrepreneurship & Family Business Management, shares more details on what the program offers and how its transforming one family business at a time.
Q. You were a pioneer in starting a school of entrepreneurship and family businesses. What was the thought process behind that?
This journey goes back to 1999. We were quite well known when it came to MBA education in the country. I was coming from a background where I had dealt with some of these family businesses. I was working for a marketing house and I was dealing with the family-run businesses there. So, when I joined this institution as a full-time faculty, I expressed the desire that the needs of these sectors, which are self structured in the country are very different. So, my boss then, Dr. Y K Bhushan, he immediately agreed and he said that yes, what managers need and what is their requirement is too different, if you can look into it.
We started with six students. The model that we followed didn't replicate any of the western models. We were getting students who were coming from interiors of India and those who were actually the backbone to the world market.
The methodology was learn through them. So, while we understood their need to know management studies, we also as a school tried to become the integral part of their family and tried to provide solutions to their family problems, their business problems. From the six students then, today we have alumni base of over 6,000 students. We have over 950 entrepreneurs on campus, ranging from Rs 30 crore to Rs 4,500 crore.
Q. Family-run businesses account for 85 per cent of businesses in India. But, their success rate is low. Why?
The challenges that I see are in several areas. Number one is professional versus personal conflict. They may have educated their child in the best school in the world, but when the child wants to bring in processes, there will be a client who will call up the parent and say I will not listen to it, you just get it done for me. Self structured businesses work purely on relationships. Number two, most of these family businesses were family focussed and not business focussed.
Third was, people didn't believe in processes. We also felt a very big problem, where there were no KRAs. So, father and son, father and grandson, there would be no methodology to actually have a performance appraisal. So, there was no KRAs, no diversification plan in place... So, what happened was, they were very good, but remained confined to their own areas. At the most, they would grow up to one or two more states, but not going beyond the boundaries.
Even today 70 per cent of my class doesn't have a digital presence. They are happy and tell me we have a big market. So, family business problem is more to do with scaling up. Visioning that the family should think beyond what is there... There is also a problem of identifying skill set. If its not there at home, why not hire and get a professional help. This is what actually at times becomes a hindrance. Transformation not in place, not taking timely decisions, not trying to go out and get exposed to world class practices and put a benchmark. That is what led to a kind of ceiling on their growth.
Now, I am seeing an era of Atmanirbhar Bharat. So, there is a very strong wave in the market and a very strong growth. People are diversifying, students are looking at expansions, bringing in world class practices, there is an internal ambiance created for entrepreneurship. Education is at the peak.
One of the students who joined us, their family is into namkeen (savoury snacks). When I see their growth story, completely, logistics has changed, pattern of packaging has changed, they have defined new markets, from one state of Gujarat, he has moved to seven states... So, today I think this whole fundamental that these family businesses would die in fourth generation is not applicable. If they have synergy and strategy in place and if they are able to map the growth, which government is supporting, they are doing wonders.
Q. What kind of unique aspects does this program have and why do you think these programs are important for family businesses to take their operations forward?
There have been grandparents who have come and told me my business is already worth Rs 1,000 crore, what will you teach me? I have also seen the parents coming and saying you educate, but business we will teach. This is what we face. We first of all become an integral part of each family. So, there is something called core management issues. There is something called family issues. We brought in a perfect marriage. They do core programs of any management school, but along with that, they're also propped up with all peripheral programs like how do you do successful inheritance? So, while we teach the child how to take over his business by understanding his business well and mentoring him in a span of two years, we also interact with his father. We become a change agent between the two. Through this inbuilt roughly 52 courses/ 126 credits that he/she studies, every credit will have some inbuilt project that has to do with his father.
Families don't have a formal flow of information. So when this happens, father actually formally conveys to the child where the business stands, what are the challenges... So, during these two years the child starts with knowing his business. He starts with what is the competitive factors that the business is going through, what is the competitive advantage and what are the threats that the company is facing from the family end and corporate end, and then we expose him to world class practices. So, while we nurture him, we try to transform him on these parameters, which actually family feels quite benefited from. So we have seen when students study these subjects, the transition of inheritance is very easy, HR practices get very strong. they take control of marketing, the complete digital footprint...
Now, 74 of our applicants are their brothers and sisters. We never advertise. There are cases where we have taught seven generations and there are cases where we have the next generation coming up. So the trust and the confidence that we have been able to create as a school in them. So, while we take them fundamentally strong, we have also created a skill set, so that they're able to do it. In less than three years after joining business parents start seeing the results.
When they meet fellow colleagues, the learning from peers is very strong, which helps them to open up. They are more adaptive, flexible, open to the new methodologies.
Q. Beyond classroom teaching, what goes into practical exercises that you do. You also have other entrepreneurs who are coming and guiding these students. Give us a perspective of that?
The first component is academic where we have lots of projects, like know your business, learn from peers. These guys actually go and work with someoneelses father. They actually work for six weeks. You have to pick up the father of your choice, business of your choice and go and work there. Learning from peers has been a very successful exercise. Then, we take them abroad for a span of 15 days. We cover four countries where they are exposed to international businesses. That cohort is very well picked up. Forty per cent are family businesses there, 40 per cent are world class big businesses and 20 per cent are new startups using ecosystems. So, these kids go and get an opportunity to deal with them. With this international exposure, we expose them to world class best practices, to culture, we expose them to the way family businesses are running there, we expose them to think beyond boundaries.
We spend a lot of time in holistic development of our entrepreneurs on campus . So, we have outbound training programmes, focussing on team building , empathetic leadership, principles of care and concern, understanding and respecting other persons view, how do you appreciate learning, how do you break the barriers... Post pandemic, through simulations, through role plays, through our group discussions, we have created a strong this thing in their minds, that empathetic leadership is the future mantra. There are also lot of sessions on Indian culture, Indian art appreciation, Indian way of ethics, we also teach them fine wine and dine too. So, this is a complete package. While we teach them business etiquette, we also teach them about the love for their culture. So, I think my institution is playing a very strong role in creating a socially sensitive Atmanirbhar Bharat. Six thousand plus students are becoming finessed entrepreneurs.
We actually played a very significant role in this country by nurturing an entrepreneurship and bringing it to a a very different scale, by creating a very strong future generation.
Q. You have been an advisor with a lot of companies. So how do you leverage these connections?
Through these connects, we invite them. We involve them very strongly. They are here as guest speakers; they are here on critical issues; they are here on family business subjects, like dealing with a tough father. So, I had a student who graduated in 2007. He comes and says this was my problem and this was how I took over my family business with my father convinced now to work with me. They are in my board of studies, they are in my regular teaching, they are in my selection committee, they deal with all the subjects... On an average in a year, we have about 100 outsider family businesses coming and talking...
