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Thankyou Prof. Dixit for writing on an issue which was seemingly insignificant earlier but has now grown exponentially in importance and criticality. Family governance and succession planning have become indispensable in the current landscape of family managed businesses. According to a survey conducted by the Family Business Institute, approximately 88% of current family business owners believe that five years down the line, their businesses will be controlled by the same family. However, actual numbers suggest an altogether different story. Only about 30% of family and businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. Thus, there is a gross mismatch between expectations and reality and this can be largely attributable to lack of family succession planning. I would now like to share some situations I personally know of. I am currently doing a live project with a surgical care equipment manufacturer. He is a mechanical engineer from the best college in India and then went on to do his MBA from a premier business school. He started this venture during his college days with his elder brother who is an optical engineer. The interesting part here is that his family already has a well-established business in surgical equipment. On probing further, he told me that the dynamics of his working is drastically different from that of his family business. Moreover, he wanted to make a niche in high quality equipment comparable to international standards but this flexibility was not available to him in his family business. Although he acknowledges the fact that his startup got tremendous support from his family business in setting up distribution channels, he prefers to work independently. Another trend that I have seen in the recent past is that the younger generations do not wish to do business at all, no matter how well established and cash rich it might be. I would now share the story of a 60-year old Marwari businessman. He is one of the biggest marble manufacturers in Kolkata. However, he is facing issues in succession planning. His only son wants to be a novelist and holds no interest in business. What should the businessman do now? Should he pass on the reins of his business to external hands? Should he have tried to mold his son’s interests towards business since an early age? These are some of the questions that contemporary family business succession planning should answer. It is interesting to note the stark similarities that exist between political dynasties and family businesses. Both need similar governance of the family to be successful and sustainable in the long-run. Let’s take the example of the fault lines created within the Samajwadi Party of Uttar Pradesh. It was clearly a power-struggle between an older and younger generation in a dynastic party experiencing generational change. It is the perfect example of how poor planning can destroy decades of goodwill.

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