A Study of Conflict and its impact on Family Managed

Business: with Special Reference to major cities in

Western Maharashtra

Dissertation Submitted

To

Padmashree Dr. D.Y. Patil University

Department of Business Management
In partial fulfillment of the requirements
for the award of the Degree of

Master of Philosophy
In
Business Management

Submitted by
Ms. ASHWINI SURENDRA KADAM
(Enrollment No.: DYP-M.Phil-11022)

Research Guide
Professor Dr. Pradip Manjrekar
Dean
Padmashree Dr. D.Y. Patil University
Department of Business Management
Sector 4, Plot No. 10,
CBD Belapur, Navi Mumbai
January 2014
 A Study of Conflict and its impact on
Family Managed Business:
with Special Reference to major cities in Western
Maharashtra
 DECLARATION

I here by declare that the dissertation entitled “A Study of Conflict and its impact on

Family Managed Business: with Special Reference to major cities in Western

Maharashtra” submitted for the Award of Master of Philosophy in Business

Management at the Padmashree Dr. D. Y. Patil University, Department of Business

Management is my original work and the dissertation has not formed the basis for the

award of any degree, associateship, fellowship or any other similar titles.

The material borrowed form other sources and incorporated in the dissertation has
been duly acknowledge.

I understand that I myself could be held responsible and accountable for plagiarism, if
any, detected later on.

The research papers published based on the research conducted out of an in the course
of the study are also based on the study and not borrowed from other sources.

Date : Ms. Ashwini Surendra Kadam

Place : Navi Mumbai M.Phil Scholar
Enrollment No: DYP-M.Phil-11022
 CERTIFICATE

This is to certify that the dissertation entitled “A Study of Conflict and its impact on

Family Managed Business: with Special Reference to major cities in Western

Maharashtra” is the bonafied research work carried out by Ms. Ashwini Surendra

Kadam, student of M.Phil at Padmashree Dr. D. Y. Patil University, Department of

Business Management in partial fulfilment of the requirements for the award of the

Degree of Master of Philosophy in Business Management and that the dissertation has

not formed the basis for the award previously of any degree, associateship, fellowship

or any other similar title of any University or Institution.

Also certified that the dissertation represents an independent work on the part of the

Candidate.

Place : Navi Mumbai

Date :

Prof. Dr. R. Gopal Prof. Dr. Pradip Manjrekar

Director & Head of the Department Dean & Research Guide

 ACKNOWLEDGEMENT

I am grateful to Padmashree Dr. D. Y. Patil University, Department of Business

Management for giving me an opportunity to pursue M.Phil. I am especially grateful

to Prof. Dr. R. Gopal, Director and Head of the Department for his encouragement

and guidance.

I would specially like to express deep gratitude to my Guide Prof. Dr. Pradip

Manjrekar, Dean, Department of Business Management, Padmashree Dr. D.Y. Patil

University. It would be no exaggeration to say that this research would not have been

completed today without his rock steady guidance and moral support.

I sincerely thank my family for allowing and supporting me to spend my free time on

this project work and thus have helped me in completing the project work

successfully.

Lastly I also wish to thank all my near and dear ones who have been directly and

indirectly instrumental in the completion of my dissertation.

Place: Navi Mumbai

Date: Ms. Ashwini Surendra Kadam

M.Phil Scholar
 CONTENTS

CHAPTER PAGE
TITLE
NO. NO.

List of Tables
List of Figures
List of Abbreviation
Executive Summary
1 Introduction to Family Managed Business 1-17
The evolution of family business 3
Family Business Definitions 4
Various Types of Family Business 10
Characteristics of a Family Business 10
Features of Family Business 12
Professionalism in Family Business 14
Governance in family managed business 15
Contribution of Family Business 17
Scope of the Study 18

2 Literature Review 19-52

Global Family Business 19
Research on Family Business 19
Indian Research on Family Business 31
Studies on Conflict 37
Indian Family Managed Business and Conflicts 51
Research Gap 53
Objectives, Hypotheses & Research
3 54-64
Methodology
4 Family Managed Business and Conflicts 65-76
Causes of Conflicts in Family Managed Business 67
Types of Conflict 71
Managing Conflict in Family Managed Business 76
CHAPTER PAGE
TITLE
NO. NO.
Indian Family Managed Business and
5 77-83
Conflicts
The role of family business in the economy 79
The challenges faced by family business in India 79
Conflict and its impact on Indian Family Business 82
6 Data analysis and Interpretations 84-125
7 Major findings and Conclusion 126-132
8 Recommendations 133-135
Bibliography 136-149
Annexure
Annexure I – Questionnaire 150-156
Annexure II – Region Profile 157-159
Annexure III-Global scenario of Family Managed
160-171
Business
 List of Tables

Table No. List of Tables Page No.

1 Family Business Definitions 6

2 Geographic spread of the respondents 84

3 Type of Business of respondents 85

4 Age of Respondents 85

5 Gender of respondents 86

6 Qualification of respondents 86

7 Work experience of respondents 87

8 Designations of respondents 88

9 Respondents involvement in business 89

10 Working Members in the sample family business 89

11 Split in sample Family Business 90

12 Number of splits in Family Business 90

13 Status of business after split 91

14 Family Council 92

15 Relationship Conflict 93

16 Latent Conflict 95

17 Process Conflict 96

18 Task Conflict 96
19 Lack of Conflict Prevention Norms 97

20 Mean Score according to types of conflicts 98

21 Level of Relationship Conflict 99

22 Level of Latent Conflict 100

23 Level of Process Conflict 102

24 Level of Task Conflict 103

Bivariate frequency table according to split in

25 104
business and level of Relationship Conflict
Descriptive Statistics Relationship conflicts of
26 107
different cities
Bivariate frequency table according to Split in
27 109
business and level of Latent Conflict
Descriptive Statistics Latent conflicts of different
28 112
cities
Bivariate frequency table according to Split in

29 business and level of Bivariate frequency table 113

according Process Conflict
Descriptive Statistics Process conflicts of
30 116
different cities
Bivariate frequency table according to Split in
31 business and level of Task Conflict 117

Descriptive Statistics Task conflicts of different

32 120
cities

Bivariate frequency table according to Split in

33 122
business and level of Conflict Prevention norms

Descriptive Statistics lack of conflict prevention

34 124
norms of five different cities
 List of Figures

Fig. No. List of figures Page No.

1 The "3-circle" model of family business 16

Relationships among governance structures

2 16
(source: John Davis, 2001)
Mean Score according to types of conflicts
3 98

Split in business and level of Relationship

4 105
Conflict

5 Split in business and level of Latent Conflict 109

6 Split in business and level of Process Conflict 114

Split in business and level of Task Conflict

7 118

Split in business and level of Conflict Prevention

8 122
norms
EXECUTIVE SUMMARY
 EXECUTIVE SUMMARY

A family business constitutes most businesses in India, as anywhere else. In the

context of the emerging dual economy, a family business is one of the engines of the
post industrial growth process. The family business scenario in India differs from that
of the Western countries because of the family structure in India, the number of
people involved in the household, the close family bond and so on.

This study aims to contribute to the research on conflict and its impact on family
managed business. The research contributes to the understanding of conflict
phenomenon, its causes and impact in the form of split in the family managed
business such as participation of women, succession planning, and entry of younger
generation, separation of ownership from management control, family council, and
attributes of split family businesses.

This study aims to contribute to the research on conflict and its impact on family
business. It reviews and analyzes concepts, characteristics, and contribution of family
business, overall and specifically in Indian context. Since liberalization of the
economy, Indian businesses have been exposed to a plethora of business opportunities
and at the same time, due to an onslaught of global competition, they are facing a dire
threat of survival and a message from the environment- change or parish. Feuds and
rancorous splits in the business houses have started appearing more than ever before,
Shaking the age-old institution of family business. In the given study, an attempt is
made to present from a historical to a contemporary perspective of family business,
with a focus on conflict and its impact leading to divisions and splits. Conflict as a
phenomenon is discussed along with its constructive and harmful effects on the family
businesses.

Conflict seems to be a prominent characteristic of family business. This reputation

may have developed from highly publicized family disputes in which volatile
conflicts destroyed families and businesses (Levinson, 1971). Although many family
businesses find ways to control conflict (Lee & Rogoff, 1996), there is less awareness
about Conflict and impact in the form of split. And although there are case
descriptions and theoretical articles about conflict (e.g., Harvey & Evans, 1994;
Levinson, 1971; Kaye, 1991), there are relatively few data-based studies.

The studies that have done so far have not touched Family Managed Businesses in
Western Maharashtra. So the topic of this study is concerned about the Study of
Conflict and its impact in the form of split in the Family Managed Businesses: With
Special Reference to major cities in Western Maharashtra.

Objectives of the study are:

1. To study demographic characteristics of Family Managed Businesses.

2. To study causes of conflict in Family Managed Businesses for split and non split
firms.

3. To study association between types of conflict and split in business.

4. To study association between types of conflict and split in business in split and non
split firms.

5. To study possibility of dissimilarity in extent of difference between types of

conflict and major cities in western Maharashtra.

The study is based on both Primary & Secondary Data. The possible insight into
conflicts in family managed business was investigated with the help of primary data
and Secondary Data.

The geographical area for the study was Western Region of Maharashtra state and
major cities of Western Maharashtra were selected as a research area and 250 family
managed businesses were selected using stratified random sampling.
Conclusion:

1. The analysis revealed that family managed businesses involvement is according to

the type of business skewed towards manufacturing sector.

2. A Finding shows that male gender dominance is still owning and managing family
businesses. Succession rights are passed on to the male members in most cases and
only in few or exceptional cases, women, either wives or daughters are made
successors and given ownership rights.

3. One of the characteristics of the family business is that it can be an employment

platform for the family members. Many a times, some family members are legally
shown to be employed in the business but do not participate in the business or at
times, family members work part-time in the business, especially the youngest or the
oldest member.

4. Number of family members working in the family business is an important criterion

from conflict perspective. Dynamics of the family business changes with the number
of family members working in the business.

5. The analysis revealed that 45% respondents mentioned that both the businesses are
doing better after the split in family business as compared to when they were together.
Therefore split could be a strategic tool for the family businesses to exploit growth
opportunities in the business and becomes a new ownership structure with different
businesses.

6. Establishment of a family council is one of the core mechanisms that help in long
term sustenance of family businesses, particularly addressing issues of succession and
prevention of conflict.

7. Analysis reveals that succession planning is given low importance in family

managed businesses. Difference on succession and future leadership are prominent
causes of conflict, classified under Relationship Conflict. Respondents, who did not
go through a split in their family businesses, disagreed that they had problems of
succession and future leadership.

8. Analysis reveals that respondents from split and no-split family businesses strongly
agreed that entry of younger generation in their family business has caused or
increased conflict, during generational transition, differences arising among two or
multiple generation members on business decisions, operational issues, long term
strategies etc.

9. The study also shows that Level of Relationship Conflict, Latent Conflict, Process
conflict, Task Conflict for the survey respondents who had witnessed split in the
family managed business is considerable higher than the level of Relationship
Conflict, Latent Conflict, Process conflict, Task Conflict for the respondents who had
never witnessed a split in the family managed business.

10. The analysis revealed that Lack of conflict prevention norms is highly responsible
for the split in family managed business.

Recommendations:

1. Inclusion of Younger generation

Separating younger members amicably from the main family business and allowing
them to take an independent path of career is a practical solution for preventing the
possibilities of sourness of relationships and severe conflict in future. However,
managing these differences by inducting younger generation in a planned manner or
using other conflict management mechanisms can be proactive steps in reducing the
chances of aggravated conflict which leads to split.

2. Family Agreement

Family Agreement is a flexible, possibly legally binding document designed to record

and commits the family to the decisions. Such agreement builds trust and
understanding among family members. Hence generating such a written Family
Agreement will help to prevent possibilities of conflict which leads to split.
3. Family Councils

Family Councils are regular, structured forums (meetings) of family members who are
involved in, or have an interest in, a family business. They are conducted as retreats
to help families maintain a reasonable level of communication amongst themselves
over important issues that affect them and their family business.

Family Councils addresses the issues/grievances of the working and non-working

family members. Family Councils help to avoid conflicts by ensuring that family
members have a regular opportunity to hear and to be heard about all matters affecting
the family business. Establishing such family councils in family managed business
will help to prevent possibilities of conflict which leads to split.

4. Separation of Ownership from Management Control

Incompetent family members at the top of many businesses is a main reason of

conflict in many family managed businesses. Reducing such conflict family business
must be able to professionalise. To professionalise means that the family must make
the mental leap and distinguish between the families interest and the company’s
interest by separating ownership from management control.

Therefore separation of ownership of the business from managing it is a prudent step.

However, such a step is beneficial to avoid and reduce conflict which leads to split in
family managed businesses.

5. Creation of a balanced portfolio of business

In the family managed businesses family values and cultures, including the trusteeship
role provide a strong building block for the future generations to perpetuate and grow
the business. There are systems, processes, practices and rituals to instill them. Of
course, there are conservative families and the relatively aggressive families trying to
perpetuate their families and businesses. Hence Creation of balanced portfolio of
business will beneficial to avoid and reduce conflict which leads to split in family
managed businesses.
6. Succession Planning

Succession plan is necessary for the future existence of the firm and it is very
important part of family firm human resource management. Proper succession
planning helps to keep the business, the individuals and the families together and also
creates an environment where it is possible to celebrate the successes of the past that
make the planned transition both possible and worthwhile. Hence family managed
businesses must plan for future succession planning to avoid conflict.

7. Conflict prevention Norms

Family managed businesses should have formal conflict resolution mechanisms for
dealing with disputes between family members which provide a forum where the
family members in dispute can air their differences and resolve the issues in an
amicable way. Families should set up conflict resolution committees which include
the involvement of an outsider, a person who is trusted and well respected by the
family, who offers that independent voice. The role of the independent outsider is
extremely important as they bring in objectivity when they are called to help resolve
family conflicts.

8. Family Governance

Family businesses should implement reasonable governance procedures to deal with

the business dimension. Families should set up formal governance structures for the
family and owners dimensions which develop a common platform of communication
through family council and specify rules and norms. Collective consensus on family
governance norms is essential for cohesion and harmony in the families of the family
managed businesses.
 CHAPTER 1
INTRODUCTION TO FAMILY MANAGED
BUSINESS
 CHAPTER 1
INTRODUCTION TO FAMILY MANAGED BUSINESS

Interest in family business is recent, and most often creation of knowledge in this field
is limited to Western academics. Family Businesses are the lifeline of India’s
economy. Almost 90% of Indian Businesses are family-owned, which makes the rest
of the business community largely depend on them. Family businesses are important,
not only because they make an essential contribution to the economy, but also because
of the long-term stability they bring, the specific commitment they show to local
communities, the responsibility they feel as owner and the values they stand for. This
is primarily driven from the fact that amongst millions of business units that are
registered across nations, majority are small businesses primarily owned and managed
by families. Most often, family businesses stemmed out of family strength of doing a
certain activity well. Everything revolves around the family, which is the reason for
much of these businesses to remain family owned. The growth of family business can
be traced back to the industrial age, when it was very difficult to start large-scale
industries without large resources.

From entrepreneurship perspective, family businesses are great platform for

promoting young minds to come into business and try out different things. The
proportion constituted by global business enterprises that are owned or managed by
families is estimated conservatively to be between 65-80% (Dreux, 1990). But just
like any other businesses, family businesses have their own set of conflicts. Conflict
in a family business includes disputes over economic interests, power and control, as
well as issues concerning the relationships among stakeholders. Conflict is caused by
individualism among family members; unstructured decision-making; lack of clear
vision and commitment and fear of succession. Although some claim that in a family
business dispute the interpersonal family relationship dynamic should be from the
business conflict that everyone should leave their baggage at the door-it is improbable
to assume this is possible (Sharma, Chrisman, & Chua, 1997).

Family business is owned or controlled by a group of people related by blood,

marriage or adoption. Businesses are complex, dynamic organisms, with plenty of
opportunity for conflict to develop over a range of issues, and between ranges of
players within this organism. A business with family members adds another level of
complexity to an already complicated system. As family businesses enter second and
then later the generations, the number of involved family members (children,
grandchildren, and a host of cousins and in-laws), and thus family complexity, often
increases (Miller and Le Breton-Miller, 2006). Elements of family businesses that
make them somewhat different from other businesses are also the elements that are at
the core of classic family business disputes. Harvey and Evans discuss several classic
types of conflict that arise in family businesses. They include family members who
are either not capable of executing the duties of a certain position they were given, or
are not interested in following the plan that was laid out for them as a member of their
family. For example, a child may be groomed for a position in a family business for
the entire life, but may not get involved. The result may be a member of the
management of said business who has no interest in being a part of the team running
it, which has an impact on all those around, including family members and non-family
members employed in the business (Harvey & Evans, 1994).

A recent research study by McKinsey on family-owned companies suggests that

Family-owned companies run by outsider appear to be better managed than other
companies, while family-owned companies run by eldest sons tend to be managed
relatively poorly.

For the family businesses that are owned by the families and managed professionally,
corporate governance norms are as important as it would be to non –family owned
businesses. Anderson and Ribb (2004) state that the prevalence and substantial
influence of founding families in many large, public-firms creates the potential for
severe moral hazard conflicts with minority investors. Their research shows that the
most valuable public firms are those in which independent directors balance family
board representation. According to Kumar Mangalam Birla Committee Report (1999),
firms in India and abroad have shown that markets and investors take notice of well-
managed companies, respond positively to them, and reward such companies, with
high valuations. A common feature of such companies is that they have a system of
good corporate governance. In contrast, in firms with continued family ownership and
relatively few independent directors, firm performance is significantly worse than in
non-family firms. In such cases, minor ‘investors’ interests are at conflict with the
promoters interests. Corporate governance and balance of power can therefore
mitigate such conflicts Chrisman et al., (2006) state that fundamental assumptions of
any theory of the family firms are that family firms will behave in a way which will
differ from non-family firms, and that the behaviors of family firms will also exhibit
substantial variations.

Family businesses are fascinating because of the mutual dependence of two

ecosystems (family and business) that have inherently conflicting characteristics.
Some of the key dimensions that determine the cohesiveness of both the family and
business are: succession planning, remuneration and rewards planning, recruitment
and rewards for non-family professionals, retirement planning, induction and
grooming, ownership structure, preserving wealth, resolving conflicts, business
vision, strategy and governance, family vision. Research evidence suggests that these
come under strain especially when their operating environment comes under pressure.
Growing interest in corporate governance has its positive effects on family
governance too especially in introducing greater level of professionalisation in the
business. In family businesses where management delegation as compared to outside
professionals is very high, leaving limited space for the new generation to enter, there
is greater possibility for entrepreneurship to flourish among young generation. In such
contexts, families do not have many options to accommodate them in the business (K.
Ramchandran).

The evolution of family business

Throughout history, families have been critical to the creation and operation of
businesses. Families are the most important sources of human capital, social capital,
financial capital, and physical capital. Worldwide, from ancient to modern times, and
from agricultural and cottage industries to multinational corporations, family
ownership is pervasive (International Family Enterprise Research Academy (IFERA),
2003). Morck and Yeung (2004), for example, in some countries, like Mexico, family
firms make up about 100 percent of all firms, while in other countries, like Sweden,
they represents about 50 percent of all firms, and in the USA and the UK, family
firms are in minority. The reasons why family businesses and family entrepreneurship
is been an ignored stem from the fact that most business research has historically been
industry based in its samples and methodologies, leaving a long legacy of segmented
and disjointed studies which are most often industry or market specific.

Although some early researchers gave recognition to businesses who are involved
family members, these exceptions were predominantly business consultants who
observed the nature of business in general. Donnelley (1964) developed an early but
narrow definition of family business. His definition included one or more of the
following conditions:

- existence of family relationships as a key factor in succession

- presence of family member on board of directors

- reflection of family values in businesses

- actions of family members reflected on reputation of business

- presence of relatives involved and who felt obligated to hold stock rather than the
financial reasons

- relationship between family members' positions in the business and their weightage
standing in the family

- entering the firm being a part of family members' career decisions.

Family Business Definitions

Whether utilizing a broad or narrow definition of family business, it is clear that

family businesses comprise a very significant proportion of business throughout the
world. Family businesses can range in size from a small corner store to a large
multinational corporation (Birley and Godfrey, 1999). Family firms are one of the
oldest forms of entrepreneurial organisations and nowadays are considered to be an
important factor of world economy”(Bowman-Upton 1991). Family businesses
represent a prevalent and prominent form of enterprise in the economic and social
landscape (Alcorn, 1982; Beckhard & Dyer, 1983a, 1983b; Danco, 1980; Stern,
1986).
Shanker and Astrachan (1996) note that the criteria used to define a family business
can include:
• Percentage of ownership;
• Voting control;
• Power over strategic decisions;
• Involvement of multiple generations; and
• Active management of family members.

They argue that a broad definition of a family business should incorporate some
degree of control over strategic decisions by the family and the intention to leave the
business in the family (Shanker and Astrachan, 1996). In an effort to resolve the
definitional uncertainty surrounding family business research, Litz (1995) suggests
that a business can be defined as a family business when its ownership and
management are concentrated within a family unit. Furthermore they argue that to be
considered as a family business, the business’ members must strive to achieve,
maintain, and/or increase intra-organizational family based relatedness. He identified
family businesses conceptually based on ownership, management, and intention to
transfer.

Most definitions seem to include notions of family ownership, family control or

management, family involvement, and/or the intention to transfer the family firm
(Heck and Trent, 1999). Some definitions are very narrow and limited by their
inclusion of the criteria having two generations involved in the business while others
are very inclusive of any business owned by one or more family members.

Handler (1992) identified four ways in which theorists usually define family business:
degree of ownership and/or management by family members, degree of family
involvement, and potential for generational transfer, or multiple criteria.

Winter et al. (1998) defined family business as a business that is owned and managed
by one or more family members. These same researchers used the concept of a family
household, which was defined as a group of people related by blood, marriage, or
adoption, who share a common dwelling unit and participated in the ownership of a
business.
Habbershon and Williams (1999) and others that followed have attempted to identify
the influence of the family on and in the business by delineating ways in which the
family's factors were present within the business. Family's presence in the business is
simply the manifestation of the internal dynamics of the family in and of itself.
Researcher still recognize the family presence in the business and do not recognize
the presence, importance and the role the family itself relative to the business or
entrepreneurial activity.

Table 1 provides a representative sample of definitions published in the scholar

journals and books.

Table 1: Family Business Definitions

Author(s) Definition
A company is considered a family when it has been closely
identified with at least two generations of a family and when
Donnelly, 1964
this link has had a mutual influence on company policy and
on the interests and objectives of the family.
An enterprise which, in practice, is controlled by the
Bernard ,1975
members of a single family.
Barnes & Controlling ownership is rested in the hands of an individual
Hershon, 1976 or of the members of a single family.
A profit-making concern i.e. proprietorship, a partnership, or
Alcorn, 1982 corporation. If part of the stock is publicly owned, the
family must also operate the business.
Organization where one or more extended family members
Tagiuri & Davis,
influence the direction of the business through the exercise
1982
on kinship ties, management roles, or ownership ties.
It is the interaction between the two sets of organization,
Davis, 1983 family and business, that establishes the basic character of
the family business and defines its uniqueness.
Any business in which majority ownership or control lies within a
Rosenblatt et al.,
single family and in which two or more family members are or at
1985
some time were directly involved in the business.
 One in which two or more extended family members
Pratt & Davis, influence the direction of the business through the exercise
1986 of kinship ties, management roles, or ownership rights.
Is the kind of small business started by one or a few
Babicky,1987 individuals who had an idea, worked hard to develop it, and
achieved, usually with limited capital, growth while
maintaining majority ownership of the enterprise.
What is usually meant by ‘family business’… is either the
Churchill & occurrence or the anticipation that a younger family member
Hatten, 1987 has or will assume control of the business from the elder.
We define a family business as one that will be passed on
Ward, 1987 for the family’s next generation to manage and control.
Lansberg et al., A business in which the members of a family have legal
1988 control over ownership.
An organization whose major operating decisions and plans
Handler,1989 for leadership succession are influenced by family members
serving in the management or on the board.
Are economic enterprises that happen to be controlled by
Dreux,1990 one or more families (that have) a degree of influence in
organizational governance sufficient to substantially
influence or compel action.
A company in which more than 50% of the voting rights are
Leach et al., 1990 controlled by one family, and /or a single family group
effectively controls the firm, and /or a significant proportion
of the firm’s senior management is members from the same
family.
A business where a single family owns the majority of stock
Gallo & Sveen, and has total control. Family members also form part of the
1991 management and make the most important decisions
concerning the business.
The ownership had to reside completely with family
Lyman,1991 members, as least one owner had to be employed in the
business, and one other family member had either to be
 employed in the business or to help on a regular basis even
if not officially employed.
Any business in which decisions regarding its ownership or
Holland & oliver, management are influenced by a relationship to a family or
1992 families.
One in which ownership is concentrated and owners or
Welsch,1993 relatives of owners are involved in the management process.
A business firm may be considered a family business to the
Litz,1995 extent that its ownership and management are concentrated
within a family unit, and to the extent its members strive to
achieve, maintain, and /or increase intra organizational
family- based relatedness.
A business with much family involvement has at least one
Shanker & family member in a management position and multiple
Astrachan,1996 generations work in and own the company.
A business governed and/or managed on a sustainable,
Sharma et al., potentially cross- generational, basis to shape and perhaps
1997 pursue the format or implicit vision of the business held by
members of the same family or a small number of families.
A family enterprise is a proprietorship, partnership,
Neubauer & Lank, corporation or any form of business association where the
1998 voting control is in the hands of a given family.
The family business is a business governed and/or managed
Chua, Chrisman with the intention to shape and pursue the vision of the
and Sharma, 1999 business held by a dominant coalition controlled by
members of the same family or a small number of families
in a manner that is potentially sustainable across generations
of the family or families.
A family business is a company that is influenced by one or
Klein ,2000 more families in a substantial way. A family is defined as a
group of people who are descendants of one couple and their
in-laws as well as the couple it self.
 A Proprietorship, partnership, corporation or any form of
Birdthistle, 2003 business association, which is classified as an SME and
where the majority ownership is held by the family and
family members are employed in the family business and/or
the family is represented on the Board of Directors.

Variations and contextual differences in the family business definitions clearly

highlight the need for consensus on the definition. A connection between the family
and the business is well established.

The Expert Group adopted a common European definition (2013), according to which
a firm, of any size, is a family business, if:

• The majority of decision-making rights is in the possession of the natural

person(s) who established the firm, or in the possession of the natural
person(s) who has/have acquired the share capital of the firm, or in the
possession of their spouses, parents, child or children’s direct heirs.

• The majority of decision-making rights are direct or indirect.

• At least one representative of the family or kin is formally involved in the

governance of the firm.

• Listed companies meet the definition of family enterprise if the person who
established or acquired the firm (share capital) or their families or descendants
possess 25 per cent of the decision-making rights mandated by their share
capital.

One reason that there are still definitional issues in family business studies is that the
field itself is still relatively new and unresearched (Sharma, 2004; Litz, 1997). The
words ‘family business’ only occasionally appeared in the literature before the 1980s,
and it was not until 1988 that the first journal devoted to family business studies, the
Family Business Review, was published (Astrachan, 2003). But while the field is in
its early development stages, family business research is becoming increasingly
empirical and more rigorous (Bird et al., 2002).
Various Types of Family Business

A family owned business is for-profit enterprise in which a controlling number of

voting shares (or other form of ownership), typically but not necessarily a majority
of the shares, are owned by members of a single extended family, or are owned by
one family member but significantly influenced by other members of the family.

A family owned and managed business is for-profit enterprise in which a

controlling number of voting shares (or other form of ownership), typically but not
necessarily a majority of the shares, are owned by members of a single extended
family, or are owned by one family member but significantly influenced by other
members of the family. The authority conferred by this controlling interest permits
the family to determine objectives, methods for achieving them, and policies for
implementing such methods. And this business has the active participation by at
least one family member in the top management of the company so that one or
more family members have ultimate management control.

In a family business, ownership is a key factor. Leaders of a family business provide

viable ownership by promoting trust in operations and in clear communication. The
family business leader promotes trust by initiating a caring organisational culture,
stimulating growth in development and selling the family business mission to family
members.

In general, family businesses handle down cycles differently from non-family

companies. Family businesses stay more consistent in their investment spending,
R&D, product and market development. They also tend to hold on to people and
usually have lesser debt on their balance sheet. In fact, downturns, for some family
concerns, are an opportunity to acquire distressed or under-valued assets (Madhavan
N., 2010).

Characteristics of a Family Business

Family businesses have unique characteristics and competitive advantages.
Entrepreneurial spirit of founder and involvement of family members promote long-
term commitment, loyalty, stability and passion toward creating enterprise value.
It reflects family structure:

Most often, family businesses clearly indicate the family structure. The head of the
family is always respected as the highest person. There is only one person who takes
most of the decisions, while others are consulted and inputs taken. The hierarchy of
the household is the same as the hierarchy of the business and is followed to the word.

It has closed Management style:

It is very popularly said that in family businesses, most of the business decisions are
taken in the dining room. The reasons statements like this are made is because most
of the time, people involved in the business, are people who stay under one roof.
Most people in the business are family members. There is no formal approach to
decision-making and there is no form of transparency for people who are not a part of
the family.

There is a strong founder influence:

Most family businesses, even those that have grown, have been shaped and given
value systems by the founder of the enterprise. When the next generation takes over,
they try to retain the family values which have been extended to the enterprise. So
there is an overbearing influence of the founder; and most often external inputs to
improvise and take them forward are not welcomed openly.

Women and their roles:

In the olden days, women were restricted only to do household work, but when it
comes to family businesses their reliance on women for advice and managing the
family members has been always high. Most of the family businesses relied on
women to have a say in the business. With the growing influence of women in
learning, education and work force, family businesses are also considering women to
take over and run their businesses.
Growth ambition:

Most of the small businesses across the world do not have great growth ambitions in
reality. While some of them who are on the cusp of family and professionally
managed type of situation speak about large levels of growth and scaling, it is very
rare to see a family running business which actually grows. Growth ambitions are not
there because it is not needed in most other cases. This is because the intention of
starting the business was only to ensure livelihood and wealth creation.

Nepotism/Favouritism:

Family businesses tend to work in closed quarters and hence may not prefer to take
people from outside. Most often, people working in their business are brought from
hometowns or are close relatives and the businesses being given to outsiders
(vendors) will also have an overbearing of nepotism.
(Source: Entrepreneurship Theory and Practice, Raj Shankar, 2012)

Features of Family Business

A few specific features of family venture can be observed. These are as follows:

1. Formation:

The method of formation of such venture is very easy and simple. In order to develop
such enterprises, no legal formalities are to be complied with. The members of the
family are united and form the new enterprise.

2. Nature:

From the viewpoint of nature, this type of business may be of two types: (a) family
business by inheritance, and (b) joint family business. The first type is mostly similar
to that of sole-proprietorship business. This business is owned and managed by a
single individual. After the death of the owner, by inheritance, the man of next
generation becomes its owner. On the other hand, the joint family business is such a
business in which all the members of the family have ownership but the task of
management and control of business is delegated to the senior-most member of the
family.

3. Creation :

Sincerity, perseverance, skill and energy of an individual are involved in the

formation of family business. Now the giant-sized businesses which have been
running gloriously were promoted at the initial stage as a contribution of one or more
families. These businesses have been formed with some objectives, viz., creation of
the source of family income, ensuring the means of earning for the members, etc.

4. Capital:

The owner, the senior-most member of the family provides necessary capital for the
business. If needed, the owner at his own risk and responsibility of by procuring
family loan can increase the amount of capital.

5. Ownership:

For the first type of business, either a single individual or sometimes more than one
enjoys the ownership right. But in case of second type of business, i.e. in case of joint
family business, all the members of the family enjoy the ownership right by birth.

6. Management:

In case of inherited business, the main entrepreneur or his legal successor after his
death enjoys the right to manage the business. But in case of joint family business,
the task of management is delegated to the owner or the senior-most member of the
family.
7. Stability:

The first type of business lacks long stability. The stability of business will last so
long the entrepreneur remains alive. But after his death, if the suitable successor is
available, the business is not closed down; but if the suitable successor is not
available, the business will come to an end. On the other hand, for the second type of
business, the stability is comparatively long; because the death of the owner or any
member, the business is not abolished.

8. Profit Sharing:

In case of inherited business, the owner-entrepreneur is entitled to the full share of

profit or loss. That is, in case of profit, he enjoys it along. The whole amount of
profit and in case of incurring too, he has to bear the full amount of loss. In case of
joint family business, profit is divided among the coparceners on the basis of share of
ownership. In case of death of a member, other coparceners share will increase.

9. Extent of liability:

The owner has unlimited liability. But the liability of other members is limited up to
the share of ownership. Owner of the family business will remain personally
responsible to the third parties for debts and liabilities and the family as a whole will
be jointly responsible.
(Source: Bholanath Dutta (2009),Entrepreneurship Management Text and cases)

Professionalism in Family Business

The topic of professionalism is sensitive when it comes to family businesses. Outside

intervention is considered more of interference and does not get a warm welcome.
However, there is a recent trend towards seeking growth even in family businesses by
collaborating with outside parties in terms of key employees, vendors, partners or
professionals.
Family businesses today tend to look at the growth, using professional management as
a tool. There is an emerging trend towards separating ownership and management.
Companies that have grown from a family business into a large set-up have retained
the ownership to a large extent, so that control can still be exerted on strategic issues.
But running of a company has been transferred to trained professionals, with every
unit head being a capable person from outside of the family. The management team
has been created which reports to the owners. In some cases, the business has been
taken to the public. But a large controlling stake is still held by the key family
members (Source: Entrepreneurship Theory and Practice, Raj Shankar, 2012).

Indian family businesses are in the transition mode and are trying to cope with the
business pressures of building competencies, hiring skilled professionals, creating
flexible and adaptive work culture, along with managing multigenerational family
members, who may or may not be competent to be at the top positions. For family
businesses, to survive and sustain in a globally competitive scenario is a challenge.
Professional management of the business is the need of the hour, as Das(1999)
mentions that a successful family firm must be able to professionalise.

Governance in family managed business

The governance of a family business is more complicated than non-family owned

business because of the central role of the family that owns and typically leads the
business. In a family business, the business, the family, and the ownership group all
need governance. In family businesses (companies whose ownership is controlled by
a single family) and other kinds of family enterprises including family foundations
and family investment funds, the lack of effective governance is a major cause of
organizational problems.

The world of family enterprise generates a mixture of business, family and ownership
concerns that can make these systems emotionally charged environments for planning
and problem solving. In these systems individuals must manage issues within and
across three overlapping groups: the family, the business, and the ownership group
(Ref.Fig.1). The overlap among the three groups often leads to differing points of
view among individuals depending on their location in the three circles.
 Fig. 1 : The "3-circle" model of family business(source: John Davis, 2001)

Effective governance does not eliminate tensions in family enterprise systems. But it
can reduce tensions and improve the effectiveness and harmony of these systems by
clarifying family-business-ownership needs and managing the conversations needed
to agree on goals, values, and policies (John Davis, 2001).

The relationship among the governance structures is depicted in the following figure
below:

Fig. 2: Relationships among governance structures (source: John Davis, 2001).

The family council sets policy for the family and recommends policy that concerns
the family to the board (e.g. policy about family employment in the business). The
board of directors sets policy for the business and may also make recommendations to
the family council in matters that concern the business. These board and family
council will ideally coordinate their efforts but they should not overstep into each
other's domains. For the family businesses that are owned by the families and
managed professionally, corporate governance norms are as important as would be to
non-family owned businesses.

Contribution of family Business

Family businesses employ more than 85 percent of the working population. Family
businesses occupy a leading role in the economic and social life of all the free market
economies, where entrepreneurial initiatives are strongly encouraged. In spite of
universal presence of family managed business, there are as good as no statistics
complete enough to map the presence of family owned businesses in their respective
countries (Cappuyns et al. 2002).

In a family business, the family and the business are so entangled that emotions are
unavoidable (Alderfer, 1988). Consequently, family firms are often advised to appoint
outside board members. For family firms that are not large enough to attract outside
board members, family councils (Lansberg, 1988; Ward, 1987), review councils
(Jonovic, 1989), or advisory councils (Tillman, 1988) are recommended. Proponents
argue that outside board members bring fresh perspectives and new directions (Jain,
1980); monitor the progress of the family business and act as arbitrators (Lane, 1989;
Mace, 1971); help in the succession process by providing support for the newly
elected leader (Harris, 1989); analyse perceived strengths and weaknesses more
objectively (Mathile, 1988); help reduce the loneliness of the owner-manager
(Gumpert and Boyd, 1984; Mathile, 1988); and act as catalysts for change (Mueller,
1988), sounding boards for the owner-manager (Heidrich, 1988), and low-cost
consultants (Heidrich, 1988).
 Scope of the study

Research studies suggest that family business is a complex, dual system consisting of
the family and the business. Each system has distinct, incompatible characteristics and
its own rules, roles, and responsibilities. When these systems overlap, conflict occurs
and intense conflict threatens the survival of the family business. Since liberalization
of the economy, Indian businesses have been exposed to a plethora of business
opportunities and at the same time, due to harmful and constructive effects of
conflicts they are facing a dire threat of split. Feuds and rancorous splits in the family
managed business houses have started appearing more than ever before, shaking the
age-old institution of family business. Under such circumstances it is very essential to
study the impact of conflict on family business.

This study contributes to the understanding of types of conflict, its causes and impact
in the form of split in the family managed business. It reviews and analyzes concepts,
characteristics and contribution of family business in the Western Maharashtra
context. It evaluates causes and types of conflict experienced by the owner manager
of two categories of family businesses: those who had gone through split and who had
never gone through split, although have experienced conflict. Study aims to make an
association with other facets of family managed business such as succession planning,
entry of younger generation, family governance and conflict prevention norms. The
analysis of study classifies causes of conflict and types of conflict that impact
positively on the possibility of split in the family managed business.

The study is geographically limited to major cities of Western Maharashtra. Joint

family system which was the backbone of this geography began to experience severe
strain due to growing urbanization and westernization trends. The trend was greater
towards a nuclear family ethos. Most of the family managed businesses in this
geography are concerned about emotions, focus inward and generally resist change.
Therefore there is a huge scope to study how different types of conflict affect a family
managed business survival.

Hence the scope of the study is to study conflict and analyze its impact on family
managed business.
 CHAPTER 2
LITERATURE REVIEW
 CHAPTER 2
LITERATURE REVIEW

Global Family Business:

A family business creates an estimated 70% to 90% of global GDP annually. The
majority (two-thirds) of family business in Barclays/Economist poll ensured a
livelihood for their dependents by running the business (Barclays Wealth and the

Economist Intelligence Unit; Barclays Wealth Insights, 2009). The environment for
innovation in family businesses improves when more generations of the owning
family are actively involved in the business (Shaker A. Zahra, 2005). Many small and
medium-sized family companies face problem of participating in global markets, due
to lack of necessary resources, other personal factors and because of political
influences. Internationalization becomes more likely when younger family members
are involved in managing the company (Zulima Fernández & María J. Nieto, 2005).
Family businesses in developing countries are often owned by foreign minorities –
known as middleman minorities – and tend to be the dominant force in those
economies (Michael Carney, 2007.)

Research on Family Business:

According to the research conducted by William T. O'Hara, President Emeritus of

Bryant College in Rhode Island and author of Centuries of Success: Lessons from the
World's Most Enduring Family Businesses reveals:
1. Over 75 per cent of all registered companies in the industrialized world are
family business.
2. One-third of Fortune 500 companies have families at their helm.

In Asia, family businesses are still predominant in Asia’s most developed economies,
notwithstanding the varying degree of control and management between countries
(Chua, 1991). According to Beyond the Bamboo Network, a report by Anderson
Consulting, Chinese family businesses control an extremely large percentage of Asia's
economic wealth in comparison to their proportion of Asia's overall population.
In Singapore, enterprises are family owned typically small scale, with a turnover of
less than US $10 million. Nevertheless, there are top-paying listed local firms that are
family businesses, such as Kim Eng Holdings, Lum Chang Holdings, Gk Goh
Stockbrokers, and Hong Fok Corporations. Furthermore, about 80-90% of local
industrial firms are operated by family businesses and they usually employ about 10
to 100 workers (Lee, 1996). It thus remains apparent that family businesses continue
to be a vital force in the economy of Singapore.

In Fortune magazine’s yearly list of top 500 companies; onethird of the companies
listed in 1970 had vanished by 1983. In reality, survey findings reveal that the average
life of a corporation in Japan and Europe is no longer than 12.5 years independently
of whether they are family-owned or not. There are many reasons for short life cycles
in businesses; yet, family ownership is often particularly mentioned. In reality,
however, the contrary is frequently the case: Family businesses on average not only
outlive, but also outperform non-family corporations. A study shows that family firms
generated Return on Equity of 18.5% as compared to 14.1% from non-family
corporations (John Ward, 2007). A Newsweek (April 12, 2004) study shows that
family firms outperform their rivals in all leading stock indexes of Europe.

Berenbeim (1990) has examined the findings of qualitative study of twenty large
family businesses (above $100 million) from the United States, Europe and Latin
America. The study focuses on the family businesses that have successfully
completed the transition from founder to professional management, and it identifies
many of the emotional and managerial dilemmas that arise as companies move from
one generation to next. The author outlines the specific steps these companies have
taken in order to constructively manage successions and continuity.

Dean (1992) states the findings from an investigation of business owned and managed
by African and American families in the los angels’ area. Its dual purposes are to
identify salient characteristics and to explore commonly held assumptions about
African American family businesses and their owner managers. Several widely held
beliefs about African American family businesses were not supported.
Wong (1993) has examined three aspects of Chinese economic feminism nepotism,
paternal and family ownership. The research is concerned with the last aspect and the
resultant phenomenon of the prevalence of family firms among privately owned
Chinese commercial and industrial enterprises. He found that firms are not necessarily
small, impermanent and conservative because tend to behave differently at various
stages of their developmental cycle. He identified four phases of development-
emergent, centralized, segmented and disintegrative.

Harris and ward (1994) conducted a research on family business strategy, and
concluded that family business is a significant portion of the nation’s largest
companies and family controlled. This research provides a frame work for family
business strategy. He included the topics such as mission, industry and situation
analyses, global strategy, and strategy implementation.

Davis and Harveston (2000) used age as a surrogate for generations. In other words,
in a multigenerational business the older owner must represent the first generation. On
this basis they hypothesized that older family business entrepreneurs would be less
likely to internationalize. Their analysis supported this notion. Using age as a
surrogate makes sense if it is shown that multiple generations are involved in the firm
simultaneously. Graves and Thomas (2008) found (based on qualitative case study)
that succession to younger generations did not lead to greater internationalization of
the family businesses.

Carlock and Ward (2001) have developed an approach called “Parallel Planning
Process”. Planning together for the family and the business helps family members and
management understands the critical factors for long-term business growth and helps
to build long-term goals. Family commitment (Handler, 1992) provides a foundation
for coordinating, directing and controlling business activities and long term goals
balance the business family’s additional challenges of management and ownership
succession while maintaining family relationships.

Poza and Messer (2001) described six different types of roles adopted by spouses of
successful family firms: jealous spouse; chief trust officer; partner; vice-president;
senior advisor; and free agent.
Curimbaba (2002) reported that Brazilian women occupied either a professional,
invisible or anchor role in their firms. Due to the small convenience samples these
studies mainly provide an indication of the varying types of women’s roles. However,
it is mostly expected that women occupy the second rank or head up one of the
business functions, traditionally finance and accounting or sales.

Duffy, Solomon (2002), found that the rigorous qualitative research, grounded in the
personal experience of family business members is limited in the current body of
knowledge. They focus on subjective reality of family business members and use
analytic induction to explore the specific experiences of organizational and
interpersonal dynamics of family business members.

In a study of S&P 500 firms (Anderson and Reeb, 2003):

33.6% are family businesses in which the founding family has, on average, 18% of
firm equity.

• Family firm performance is greater and EVA is 5.5% greater ($118.6 million
on average) when founding families maintain an ownership stake.
• Young family firms and old family firms (50-year-old threshold) outperform
non-family firms.
• ROA is greater in family businesses, with a 6.65% greater return than non-
family firms.
• Families own for an average of 78 years.
• Family firm CEOs earn on an average nearly 10% less than their non-family
counterparts.
• The oldest FOB operating in the United States is the Zildjian Cymbal Co. of
Norwood, MA founded in 1623 in Constantinople and moved with the family
to the United States in 1929 (Family Business Magazine, Spring 2001).

• Of primary importance among family firm wealth holders is transferring not

only their financial wealth but also their values surrounding their wealth to
subsequent generations. Primary values taught include encouraging children to
earn their own money, philanthropy, charitable giving, and volunteering.
 (Wealth with Responsibility Study/2000, Bankers Trust Private Banking,
Deutsche Bank Group).
• Over the next five years, almost 90% of family entrepreneurs expect to still
control the family firm.
• Between 10% and 15% of U.S. family firms are now managed by non-family
executives (Barclays Wealth and The Economist Intelligence Unit, Barclays
2009.)

Poza(2004) has done an exhaustive research on the contribution of family businesses

to the United States and world economies. According to his study, in the worlds free
economies family businesses constitute 80 to 98 percent of all businesses and generate
75 percent GDP in most countries other than the United States. Family businesses
employ more than 85 percent of the working population around the world.

Carney (2005) identifies three characteristics of the family form of governance that
distinguishes it from managerial and alliance governance: parsimony, personalism and
particularism. Parsimony refers to the propensity of family firms to carefully husband
resources due to the fact that family owns these resources. Personalism is the
concentration of power from a combination of both ownership and control held within
family. Personalism frees family firms, relative to non-family firms, from the need to
account for their actions to other internal and external constituencies, giving them the
discretion to act as they see fit. Particularism is the product of this discretion. Family
firms have the ability to employ idiosyncratic criteria and set goals that deviate from
the typical profit-maximization concerns of non-family firms (Chrisman et al., 2004).
Carney (2005) concludes that these characteristics of the family form of governance
provide family firms with advantages in efficiency, social capital, and opportunistic
investment.

Chrisman et al., (2006) state that fundamental assumptions of any theory of the family
firms are that family firms will behave in ways that differ from non-family firms, and
that the behaviors of family firms will also exhibit substantial variations. In the above
context, the he has reviewed several articles and commentaries on how personalism
and particularism of family businesses influence their behavior and potential to obtain
sustainable competitive advantages. The review also emphasizes the limits of
potential competitive advantages, some of which may change or diminish over time.

Tokarczyk et al. (2007) examined the manner in which intangible and other unique
resources within family business construct translate into competitive advantages held
by family businesses. Their finding suggests that family business qualities, including,
but not limited to strategic focus, customer orientation, family relationships, and
operational efficiency, do contribute to a propensity for execution of an effective
market orientation.

Birdthistle, Naomi, Fleming, Patricia (2007) has outlined the structure and
composition, and the management of the family business, and training conducted by
family businesses in Ireland. The findings identifies that family businesses in Ireland
are established as private limited companies, with a well-defined hierarchy and
structure. The most typical form of family business is that of a husband and wife
team. This finding has managerial implications for family businesses due to the fact
that divorce is now widespread in Ireland. Husband and wife teams need to consider
the implications divorce may have on their business and necessary plans need to be
devised for this possibility. The family predominantly owns family businesses, with
few family businesses having non-family shareholders. Boards in family businesses
are more frequently composed of family members and thus may be more
representative of the family interest than that of the business. The study further shows
the importance that family businesses plays a role of the family in the business by
maintaining ownership within the family and/or providing a source of employment for
family members and/or decision-making authority being held by family members.
However, some family businesses in Ireland do practice nepotism by employing
family members even if their skills and experience do not fit the necessary
requirements. The implications for management are that by practicing nepotism they
may be open to legal action by unsuccessful candidates. It is therefore important for
family businesses to pass the responsibility of interviewing candidates for positions
within the family business to a recruitment specialist.

Gordon and Nicholson (2008) provide many thoughts on the pros and cons of family
businesses. They refer to family business as a competitive advantage in a part
specifically because of the love, trust and past history of people who know each
intimately-almost telepathically. They also offer that when the dynamics is healthy
and good, it is an evidence that family businesses outperform their large and small
non-family competitors. Conversely, if the dynamic of the family system is negative,
the “spillover” can be dangerous to the success of the business. Sharma, et.al. sum it
up in this way, “the family business may differ from non-family businesses because
the controlling family’s influence, interests, and values have overriding importance”
(Sharma, et al, 1997).

Allouche et.al (2008) in their research study on the Impact of Family Control on the
Performance and Financial Characteristics of Family Versus Non family Businesses
in Japan: A Matched-Pair Investigation examined that FBs achieve better average
performance than NFBs. Study examined that FBs perform better than NFBs. Also
study state that the need for further reassessments of this performance differential,
given the unique Japanese cultural and institutional context. Study found that the level
of family control has consequences for performance.

Firstrust Bank partnered with the Greater Philadelphia Chamber of Commerce (2008)
conducted a survey of regional and family-owned businesses. The participants of this
survey were smaller, privately held companies in a variety of industries, of which 27
percent were family businesses. Thirty-six percent of the family businesses had fewer
than five employees and two-thirds reported revenues under five million.

Chamu Sundaramurthy (2008) has presented a model of sustaining trust based on an

integration of trust literature with the family business literature. The basic premise of
the model is that trust in dynamic and multiple dimensions of trust need to be
developed through structures and processes to sustain interpersonal trust inherent in
the early stages. Implications of the model and future research directions are outlined.

A study has been conducted on Italian family business by Mazzola et.al (2008) has
examined the issue of training next-generation family members once they have joined
the management team in their family firm. The qualitative analysis of strategic
planning process shows that involving next generation family members in the
planning process benefits their development process. The findings indicate that this
involvement provides the next generation with crucial tacit business knowledge and
skills, facilitating interpersonal work relationship between incumbents and next
generation leaders and building credibility and legitimacy for the next generation.
Their findings extended current understanding topics in family business: the post
entry phase tanning of the next generation and strategic management in family firms.

Tatoglu et.al (2008) has examined the key issue for much family- owned business
(FOBs) is intergenerational management succession. This study investigated the
dynamics of the succession process for FBOs that have already taken the succession
decision and have selected their successors. The primary goal of the study is that to
delineate the factors behind the section process by investigating selection, training and
entry mode of successors as well as the involvement of family members and
stakeholders in the succession process. He collected the data from the predecessors of
408 FOBs in turkey reveals a number of insightful findings regarding major
characteristics of the FOB succession process including the views of processors on the
succession process, successor selection criteria and the post-succession period.

Hall and Nordquist (2008) argue that professional family business management rests
on two competencies, formal and cultural, of which only the former is explicitly
recognized in current family business literature. They have elaborated on the
meanings and implications of cultural competence and argue that without it a CEO of
a family business is likely to work less effectively, no matter how good the formal
qualifications and irrespective of family membership.

Jaka Vadnjal, Blaz Zupan (2009) in their study on Role of Women in family Business
explores possible differences in the views of men and women who manage small
family firms. Their attitudes opposing the traditional business roles of women,
different views on managerial, ownership and transition issues and possible gender
discrimination are examined. They find that the paradigm of a different, more
feminine style of management, while signs of discrimination are not clearly revealed.

Cater and Justrin (2009) have conducted a study for better understanding the
development of successors in the small family business, including their approach to
the leadership of the firm. They examined variables (and their relationships) that help
to explain family business successor leadership. A case study approach was used by
collecting the information from six family businesses. Study provided six propositions
for future research-namely, concerning positive parent-child relationships, acquiring
knowledge, long-term orientation, cooperation, successor roles, and risk orientation.

Distelberg and Sorenson (2009) has extended and explained current system views of
family business and provides a frame work for interpreting family business
holistically. The framework extends the definition of family-fist that represented
balanced system emphases. The study discussed the goals, resource transfer,
strengths, and limitations of each type of system and describes how firm adaptability
and resource flows influence and change these family business systems. Study
concluded that to understand family businesses health, one must understand the values
and goals that guide the family business, business, and ownership systems, as well as
the overall family business system; and it presence an inclusive definition of family
and business based on systems membership.

Sorenson et.al (2009) have examined the new concept, the family point of view, and
provides theoretical arguments with the help of three hypotheses (a) the family point
of views emerges from collaborative dialogue, which helps development agreement to
ethical norms;(b) the presence of ethical norms further helps cultivate social family
capital; and (c) as a source in a family business, family social capital is positively
related to the family firm performance. Findings of the study indicate that a fully
mediate relationship is there among collaborative dialogue, ethical norms, family
social capital, and firm performance. The study highlighted the importance of moral
infrastructure in family firm and helped to clarify components of family capital.

The study conducted by Basco and Rodriguez (2009) contributed to the family
business literature by empirically demonstrating that family enterprises that give more
emphases to family and business as a whole have better family results and similar
business results when compared to these enterprises that limit governance to only the
businesses. The study identified a set of four basic dimensions that focus on different
aspect of family enterprise. The study then combined measures of these dimensions to
describe both the governance and the nature of the family and the business. A study
concluded that balanced attention to governing the subsystems is an effective route to
family enterprise management.
Okoroafo, Sam C; Koh, Anthony C (2010) investigated that family businesses' views
about internationalization did not vary by generations. They were remarkably
consistent in their views on internationalization. Collectively, their perceptions of the
benefits of internationalization are unappreciated. So it appears that if a family
business does not get involved in foreign markets in the first and second generations it
is unlikely to do so in later generations. The third generation's views were strongly
more negative on internationalization than the first or second.

Casillas et.al (2010) has examined the scholars understanding the relationship
between entrepreneurial orientation and the growth of family firms. According to him
entrepreneurial orientations growth relationship is contingent on different contextual
variables- environmental dynamism and environmental hostility-and an internal
variable-generational involvement. He concluded by conducting a research on 317
Spanish family firms that entrepreneurial orientation positively influences growth
only in second- generation family businesses and the moderating influence of the
generational involvement is related to the risk- taking.

PricewaterhouseCoopers Family Business Survey (2010/11) revealed that :

• Nearly half of the family firms interviewed told us that they have argued about
the future direction of the family business.
• Nearly two – fifths said they have argued about the performance of family
members employed in the business.
• Over a quarter of the family businesses argued about the setting of
remuneration levels for family members actively involved in the business.
• Over 70 percent of the family businesses surveyed did not have any
procedures for dealing with disputes between family members.

Hot et.al (2010) states that the field of family business research is advanced by
examining the validity and reliability of Klein, astrakhan, and simonies’ family
influence of power , experience, and cultural scale. He conducted a survey from 831
family businesses and analyzed to assess the measures construct validity using
exploratory and confirmatory techniques. The hypothesized three factors model
emerged to include culture, power, and experience. Extending the previous effort, the
measures convergent validity was tested by assessing differences between the
measures score and the desires of the senior generation and the commitment of the
next generation. Results support an initial level of convergent validity.

Kowalewski et.al (2010) has investigated the influence of family involvement on firm
performance in an emerging market economy. Using a panel of 217 polish companies
from 1997 to 2005, he investigates an inverted U- shaped relationship between the
share of family ownership and firm performance. He concluded that firms with family
CEOs are likely to perform their counterparts that have non family CEOs.

According to Lorna Collins and Nicholas O'Regan, (2011) Family business today is a
well accepted and respected field of enquiry. They state that it is time for a re-think
because the focus of previous family business research has become somewhat
convoluted with small- and medium-scale enterprises research (at least in the UK) and
with particular parts of the family business rather than the entire family business
system. To continue its impressive upward trajectory, family business management
and research needs to embrace new theoretical perspectives and approaches,
particularly those that come from disciplines such as psychology that at the moment
have tenuous links to family business studies. According to him it also needs to
embrace learning that can be gained from practitioners and develop useful discourse
between stakeholder groups in the family business community.

Sanjay Goel, Pietro Mazzola, Phillip H. Phan, Torsten M., Pieper, Ramona, K.
Zachary(2012) in their study on Strategy, ownership, governance, and socio-
psychological perspectives on family businesses from around the world highlighted
possible future research directions. According to them future research needs are
delineated. Researchers are challenged to (a) question the extant business research in
general, (b) broaden their research perspectives to both the family system and the
business system, and (c) begin dialogue with scholars in related and relevant
disciplines.

The study has been conducted on Family business by Alexandra Dawson (2012)
focused on the construct of human capital in family businesses. He identified that
human capital in family businesses is a dimension of knowledge, skills and abilities,
individual attitudes and motivation. He focused on conditions under which family
businesses can achieve and sustain over time an alignment of interests between
individual human capital and organizational goals. The study concluded that these
conditions vary depending on static and dynamic external environment.

Lucrezia Songini, Luca Gnan, Teemu Malmi (2013) in their research study on role
and impact of accounting in family business investigate that why has accounting, one
of the eldest disciplines in business, only recently started to consider family business.
They throw some light on what is the role of accounting in family business? Which
accounting issues are relevant in family business? How different is accounting
practices implemented in family business? And how do these practices affect various
family business outcomes and dynamics? They concluded the study by focusing on
three key family business characteristics: involvement of the family in ownership,
governance and management, socioemotional wealth and succession. The study
pointed out that distinctive research questions, methodologies, and theoretical
frameworks are needed to study financial and managerial accounting in a family
business context. They suggested several topics in both financial and managerial
accounting relevant to family business that can be explored by future research. The
study highlighted that managerial accounting represents an area in family business
that requires increasing attention from accounting scholars.

Pramodita Sharma, Jess H(2013), Chua conducted a research on Asian Family

Enterprises and family business brought attention to a notable trends in family
business studies and pointed future research opportunities. They discussed the role of
context in research and some of the particularities of the Asia Pacific Context. In the
section on Strategic Management they shared the status of current knowledge on some
of the most studied topics.
Indian Research on Family Business

Although family businesses are vital to the Indian economy, little attention is paid
unless there is an opportunity to criticise them. They are often accused due to lack of
professionalism, of nepotism, infightings, and mismanagement. There is a famous
cliché, which is quoted frequently and seems to have been accepted as a universal
truth: The first generation builds, the second generation consolidates, and the third
generation destroys the family business. When accusing family businesses of such a
short life span it is often conveniently forgotten that longevity is an objective difficult
to achieve for any business.

Since economic reforms and liberalization, the Indian family businesses are
undergoing a paradigm shift (Dash, 2003). Indian industry is largely dominated by
family owned businesses and account for significant proportions in all spheres of
socio-economic-political life of the country. According to a Business Today survey
(1998). 93 percent of country’s corporations were owned and controlled by family
business during mid-1990s, at the beginning of liberalization of economy. More than
half of the top 100 companies in the BT 500 (Sahad, 2005) are family owned.

Piramal (1999) compared top 50 business houses of Mumbai during 1964-1990 and
1990-1999 and found that:

i. the groups which dropped out in the list of 1990-1999, were all from the bottom half
of list of 1964-1990(e.g. Scindia, Thackersey, Kilachand). The conclusion was drawn
that the size of the business matters for survival and the bigger family groups take
longer to wither away or are more resilent(e.g. TATA, Birla, Bajaj, Mahindra and
Wadia).

ii. of the drop outs, almost half of the business houses had family splits(e.g. Ghia,
Walchand, Kilachand, Khatau, Thackersey).

iii. The list of 1990-1999 was radically different. 31 family groups dropped out of the
top 50. The new 31 groups that dropped were either tightly focused on one business
and very often were operating through just one company or had a flagship company.
iv. The dropout businesses were either older groups, founded or acquired in the 1950s
and 1960s such as Mafatlal, Shriram, Kirloskar, Walchand, Parry or the newer groups
that were active in 1980s such as Modi group, Singahania, Mehra Brothers, Shroffs.
The first cluster had internal managerial issues as their bigger challenges and the
second cluster faced competition from new entrepreneurs as a challenge.

Piramal (1999) further noted that by late nineties, while dominance of Marwaris
continued, their clout had begun to fail. The relevance of business communities had
diminished in the post-reform era in the 2000s. As the community ties were no longer
serving competitive advantage or the seed capital or the managerial talent which were
important and tangible benefits in earlier decades.

According to Tripathi(1999) the management of as many as 461 of the 500 most

valuable companies in India was under family control. However, over five decades of
post independence the entrepreneurial base in India broadened substantially. The
private sector firm operated with uncertain directions in protected atmosphere
constrained by the license-permit dispensation.

Das (1999) analyzes characteristics of Indian family businesses and mentioned that
Indian family businesses are overwhelmingly owned and managed by families. This
is not necessarily a disadvantage as long as the family businesses can overcome their
historic weaknesses and learn to separate the family’s interest from the company’s
interest, create an environment to recruit and retain outside talent, bring focus to their
operations, upgrade their skills and knowledge through joint ventures and follow a
consistent strategy.

Ward (2000) estimates about 6 million small scale industries in India with less than
Rs.2.5 Core net worth and almost all are family businesses. India’s small and medium
sized enterprises predominantly consisting of family owned and managed businesses
to contribute 22 percent share in national GDP (Jindal, 2008). Family businesses,
either privately held or public list companies, have been playing a pivotal role in the
economic progress of the country.
Businessmen the world over may be handing over the reins to professionals, but for
Indian entrepreneurs, retaining control over the business and passing it on to the next
generation is still the driving passion. This is a key finding of a global study on family
businesses by consultancy firm Grant Thornton(2003). The study says that as many as
46 per cent of Indian businessmen feel that their successor should come from within
the family. In comparison, only 22 per cent of North Americans and 24 per cent of
Europeans subscribe to this view.

A study conducted by Manikutty (2000) on family businesses used the resource based
view of firms to understand the strategic responses of nine family groups to the more
liberalized environment in India’s emerging economy. Using the concepts and
empirical finding in the resource-based view (RBV) stream of literature, this study
offered six hypotheses related to the restructure of business portfolios, structural
changes within organization, and the induction of professional family and non family
members. The study identified five emerging trends in the responses and used them to
test the hypotheses. The study concluded that resources based view of the firm
provides an excellent theoretical framework for understanding and interpreting
responses.

Sampath (2001) observed for the Indian family groups to be in the reckoning have had
to consider restructuring. While some have formed alliances to be globally
competitive others have perished. He found that most of the progressive family
groups have restructured their organisations and have also adopted strategic business
unit model. He further observed that Indian Family business have been slow to
respond to the internet revolution and seem to be uncomfortable with the rise of new
economy technology businesses with never-before-seen valuations.

Sharma et.al (2003) have examined the theory of planned behavior to hypothesize the
influence of the incumbent’s desire to keep the business in the family, the family’s
commitment to the business, and the propensity of trusted successor to take over on
the extent to which family firms engage in succession planning activities. The results
show that the propensity of a trusted successor to take over significantly affects the
incidence of all succession planning related activities. Succession planning may, then,
be the result of push by the successor more than of pull by the incumbent. Such a
view has negative implications for the successions process that the family firms in our
sample follow.

Sharma (2004) analyses 217 referred articles on family business and finds that the
interest in family business studies is increasing, as the number of articles on ‘family
business’ in peer reviewed scholarly journals have increased fourfold from 1990-1999
to 2000-2003.

Narayan (2005) quotes a CII study that family businesses are the backbone of any
country’s business and trade contributing about 60 to 80 percent of the GDP in
developing as well as advanced countries. But in second and third generations internal
squabbles and lack of dynamism lead to disintegration with only 4 percent family
businesses surviving beyond third generation.

Moody’s ICRA (2007) report on corporate governance and related credit issues for
Indian family-controlled companies mentioned that although a few notable companies
are leading the way in emphasizing the importance of good governance and adopting
global best practice, important governance issues persist. These are the issues not
covered or partially covered by regulations – including leadership transition,
transparency on ownership/control and related-party transactions and independence of
directors.

Ritu Bhattacharyya (2007) in her research on Road Blocks in Enhancing

Competitiveness in Family-Owned Business in India have examined the road blocks
in family owned business in India. Very major road block “succession" has been
studied by the author in her Doctoral study because the scenario has changed since
succession has been studied again. She analysed that Family ties and traditions are
very deep rooted in family firm. Some families tried to separate ownership and
management but it did not work for the long and unfortunately in many of the cases
the movement of the family outside the management resulted in fall in the business
fortunes and the family was forced to get actively back into business. This has
resulted in old timer giving this example to all that the family keep the interest of the
business paramount and an outsider never thing that it is his baby. She concluded that
the dialogue continues as to what is best for family-owned firms in India.

Subrata Chakrabarty (2009) in his research on the influence of national culture and
institutional voids on family ownership of large firms has presented competing
theoretical viewpoints on what influences country level variation in both the extent to
which large publicly listed firms are family owned and the dominance of such family
owned firms in the stock markets. According to this author on the one hand
institutional economists have suggested that institutional voids can have a strong
influence while on the other hand cultural sociologists suggest that a country’s culture
can also exert strong influence. The country level empirical study conducted by this
author has suggested that both national culture and institutional voids influence family
ownership patterns around the world and that institutional voids moderate the
influence of national culture.

The study conducted on Family Owned Business In India by Lindsay Leaver(2009)

explained that major changes have taken root in India’s economy, and many of the
family-run businesses, have changed with the times. Author states that Indian family
owned businesses have made the change from a family company to a corporate
family. Author explained with the example of ten Indian families who have been able
to transform their family businesses into globally competitive firms. He concluded
that the family-run companies that are currently successful in India, are those who
expanded beyond their original industries, showed vision, ability to adapt, willingness
to expand, and became truly professional on the global scale. The families are highly
educated and focused, and use their family ties and trust to build their empires.

K. Ramchandran(2011) in his exploratory research on Indian Family Business studied

how families grow their businesses beyond three generations in highly competitive
environment. He focuses on the way family and business dynamics functions in the
fourth generation. With the help of six case studies on Indian family businesses viz.
The Murugappa group, Dabur group, Wadia group, Godrej group and Kirloskar group
he examines the process of entry and succession planned. He found that all the five
families have undergone some form of restructuring in the post-1991 period. Except
for one instance each in the Dabur and Wadia families, they have been able to retain
high quality management professionals. This is because at the top they find it easier to
work with professionally qualified family members who have been groomed over a
period of time. This creates a shareable common platform. Interestingly, the
involvement of family members in these firms has not become interference, or at least
not so felt by the professionals. One of the reasons for this is the process of induction
they have for their younger generation. Besides, there is a clear demarcation of roles
at the top. Trouble triggers when this blurs. He examined that the presence of a large
team consisting of older generation with tempered (balanced) views and reduced risk
taking propensity because of age, and adventurous younger generation leads to the
creation of an interesting balance that facilitates family business to perpetuate over
generations. He analyzed that the young generations in all these groups showed clear
indications of their wish to set up green field businesses in rapidly growing industries
such as IT (Murugappa), financial services (Godrej and Kirloskar) and food
processing (Dabur) at different points in time. They seem to be looking for greater
degree of freedom to express themselves as entrepreneurs.

Though family businesses account for more than 85% of businesses in India, yet there
is paucity of knowledge about their ways of organising and managing business in
these rapidly changing times. These are the findings of a report on ''challenges faced
by family businesses in India'' released by the Indian School of Business (2012).
Among the family businesses surveyed in the study, 52% agreed that the eldest family
member had the absolute and final authority on business matters even though 68%
agreed that younger family members participated in the decision making process in
their businesses. However, Indian family businesses are learning to let go their control
and family hierarchy is not the only criteria anymore in assigning responsibilities.
Another important finding was that more than half the respondents disagreed with the
statement that the eldest family member's decision can't be questioned. Kavil
Ramachandran & Navneet Bhatnagar (2012), said that Indian family businesses need
to adopt professionalization.
Studies on Conflict

Conflict in Family Business

Literature on “conflict in family business” is largely based upon conflict theories

applied in organizational behavior and management fields, and also family business
literature. Conflict studies are often done without much reference to the particulars of
the social and business context involved. The context of conflict management in
family business is critical, yet there have been few empirical studies conducted on
antecedents and correlates of conflict within family businesses. In spite of major
academic research on family business is done in the U. S. and European countries,
most of the studies are anecdotal in nature and study on conflict in family business
almost (Tjosvold, 1996). Bergmann and Volkema (1994) confirms that the
consequences or an outcome of conflict is the least studied stage in the conflict
process. Although there are case descriptions and theoretical articles about conflict in
family business literature (Harvey & Evans, 1994; Levinson, 1971; Kaye, 1991), there
are few data-based studies about family business conflict.

Research on task and relationship conflict is extensive and positive and detrimental
effects of each conflict in the organizational set up has been studied, Pinkley (1990)
studied conflict on a multidimensional scaling, and uncovered a task- versus
relationship dimension of conflict, Jehn (1992), in a ,multidimensional scaling study
of group conflict, found that members distinguish between task-focused and
relationship- focused conflicts, and these two types of conflict differentially affect
work group outcomes. Empirical research shows a negative association between
relationship conflict, productivity, and satisfaction in groups (Evan, 1965; Gladstein,
1984; Wall & Nolan, 1986). It interferes with task-related effort and decreases
goodwill, mutual understanding between the members of the group (Deutsch, 1969).
Chronic relationship conflict can have serious detrimental effects on group
functioning. To date, there has been no evidence of positive effects of relationship
conflict on either performance or Satisfaction (Coser, 1956; Jehn, 1997).
Literature on conflict has elaborated that task conflict can improve decision-making
outcomes and group productivity by increasing decision quality through constructive
criticism and moderate levels of task conflicts are constructive, since they stimulate
discussion of ideas that help groups perform better (Cosier & Ross, 1977; Jehn, 1995;
Amason, 1996). However, very high levels of task conflict may interfere with task
completion, and also it is possible that task-related conflicts may transform into
relationship conflicts (Jehn,1995). McGrath’s (1984) Study indicates that conflict
theory and research has primarily focused on disagreements about ends, but conflict
can just as easily occur about means, even when ends (For Example, goals) are shared
as they are in the most organizational groups. The “means versus ends” difference
provides an important framework in conflict literature to examine various types of
conflict that can occur in organizational groups (Tyler et al., 1996).

Process conflict has largely been neglected in studies of conflict except the studies
done by Kabanoff (1991) and Jehn (1997), Process conflict is defined as the conflict
about how task accomplishment should proceed in the work unit, who is responsible
for what, and how things should be delegated. It includes disagreements about
assignments of duties or resources, i.e. about the means to accomplish specific tasks
(Jehn 1997). Process conflict is similar to past organizational constructs such as
distributive conflicts (Kaanoff,1991 ). At higher levels, it is detrimental to
performance. Relationship conflicts Focus on interpersonal relationships, task
conflicts focus on the content and the goals of the work, and process conflicts focus
on how the work gets done. Process and relationship conflicts are detrimental to
satisfaction and performance, while moderate to high levels of task conflict are
positively related to group performance. This Suggests that group performance is
seriously affected by the type of conflict members are facing (Jehn,1997).

The substantive or task-oriented conflict is defined by Luce and Raiffa (1957) as “an
individual is in a situation from which one of several possible outcomes will result
and with respect to which he has certain personal preferences.”
A review of the literature shows that relationship conflict can divert attention away
from business objectives and can hurt a firm’s productivity (Amason, 1996; Jehn,
1997b; Simons & Peterson, 2000).

Very few family firms survive to the second (Beckhard & Dyer, Jr., 1983) or third
generation (Applegate, 1994). Common explanation of this phenomenon include lack
of planning for the next generation (Ibrahim et al., 2001), the neglection of the
expectation of the next generation (Handler, 1989; Ward, 1997), and failure to
effectively manage conflict (Beckhard & Dyer, 1983).

Beckhard and Dyer (1983) observed a number of key issues that leaders of the family
businesses should address during change or transition periods, which may otherwise
result in destructive conflict. The failure to adequately control conflict may contribute
to the high mortality rate of family- owned firms. These key issues are ownership
continuity or change, executive leadership continuity or change; power and assets
distribution; and the role of the firm in society. Davis and Harvest (2001) based on
these key issues, studied influence of substantive conflict in the family firms across
generations, as a result of the members familial relationship with the owner- manager
of the firm and their positions occupied in the family work group and social (non
work) group. Their analysis showed that the increasing number of close family
relations in the firm’s day to day operations increases the frequency of conflict, and
also increases the likehood that one or more owner/ managers will disagree over the
firms’ goals or actions. Other findings indicated that when family business owner-
managers are active social participants in their families interacting with a wide range
of family members beyond the work setting, conflicts arise, or at least become more
discernible. The results also showed that both the extent and frequency of conflict in
family firms increase across generations. Specifically, third or later generation firms
were subject to more conflict than were either first or second generation firms (Davis
& Harvestion, 2001) .

According to Rahim (1985), a comprehensive diagnosis includes measures of the

amount of conflict, styles of handling interpersonal conflict, their effectiveness, and
sources of conflict. Intervention is needed when in the organization there Is too little
or too much of intrapersonal, intragroup, and intergroup conflict, and /or the
organizational members are not effectively using the five behavioral styles to deal
with different situations effectively.

Managing the obligations of both work and family has also been described as a source
of conflict for the entrepreneur. Dyer (1992), in his study of over one hundred
entrepreneurs, describes several entrepreneurs facing conflicts between work and
family.

The study by Harvey and Evans (1994) discusses when a business is in its first stage
of development that “time and capital concerns” and the scarcity of these resources
can lead to tension which results in conflict (Harvey & Evans, 1994). Additionally
they discuss when founders “take too much of the ‘build the business’ on
themselves…[and] extend themselves beyond their expertise” (Harvey & Evans,
1994). Harvey and Evans also consider the impact of sibling rivalry when siblings
enter the business, and the problem of the founder not “letting go” to allow for the
next generation of leadership (Harvey & Evans, 1994).

Barnes (1994) has conducted a research on should a family business in the family? He
examined that when the management moves from one generation to the next, the
transition is often far from orderly. As the company develops, there is need for a
management style that goes beyond survival thinking, and entrepreneurs tend not to
be recognized. He stated that bitter power struggle is responsible for downhill of the
fortunes of the company. In other cases, power struggles are part of a healthy
transition. He explained that family and company transition are more productive when
they are simultaneous. The external problem involves the older generation making use
of flexibility and new ideas of the succeeding generation. Study concluded that third
party involvement may help to prevent irreparable family rifts and company
stagnation. Dialogues between all the parties-family managers, employees, and
outsiders – can also help.
Based on work-groups conflict literature (e.g., Jehn, 1995, 1997), three types of
conflicts have been conceptualized: task (disagreement on what tasks should be
accomplished), process (disagreement on how to accomplish the tasks), and
relationship (based on interpersonal incompatibilities about values, attitudes, etc.).
Cross-sectional studies (e.g., Jehn, 1995; Shah & Jehn, 1993) have revealed that
relationship conflict is detrimental to individual and group performance, reducing the
likelihood that members of a group will work together in the future. A moderate level
of task conflict has been found to increase group performance in cognitively complex
tasks as it allows groups to benefit from different opinions and avoid group thinking
(Janis, 1982). Process conflict has been associated with lower levels of productivity
and group morale (Jehn, 1997). Most of these studies, however, have been cross-
sectional in nature, focusing on static levels of conflict and ignoring temporal issues.
Even in a case where an attempt was made to understand patterns of conflict over
time (e.g., Jehn & Mannix, 2001), the study was conducted on graduate students who,
at best, have to work together on projects for the relatively limited duration of their
program of study.

Jehn (1997) investigated organizational conflict in six organizational work teams. An

in depth qualitative analysis captured the sensitive dynamics of typical conflict and
resulted in a generalized conflict model. Model evaluation indicated that organization
employees identified two types of conflicts, task and relationship. Those who had
experienced conflict perceived task-focused conflicts different from relationship
conflicts, having different effects on group and organization outcomes. The study
found existence of a third type of conflict, process conflict. This conflict was
described as “responsibility disagreements” and “disagreeing about utilizing people”.

Haynes and Usdin (1997) discussed other issues that arise in family businesses
including “management, power struggles, and arguments over the payment of
dividends versus reinvestment, disagreements over the future direction of the
company, severance pay disputes, and problems brought on by the divorce of one of
the principals “(Haynes & Usdin, 1997, p. 117). Some of these issues cited as classic
family business conflicts are also conflicts that could arise in any business (incapable
Family relationships have long, deep, emotional histories). When conflict arises, trust
is often the “first casualty;” as conflicts escalate trust decreases and distrust increases
(Deutsch, et al, 2006, p.111). This distrust can impact the parties’ ability to act
cooperatively together in order to work through conflict.

Filbeck, Smith (1997) found that relationship conflict may hinder innovation and
entrepreneurial behavior because personal conflicts have been found to have dramatic
influence on the way family members process information make decision and interact
with one another.

Richard A. Cosier, Michael Harvey (1998) in their study explores on Functional

Conflict in family businesses. He describes some types of conflict are negative and
should be minimized; other types are helpful and should be understood and
encouraged to improve decisions. He identified three types of conflict related to
family business issues by using Jehn's (1997) framework. A framework for conflict
resolution is presented. He gave recommendations for introducing and managing
positive conflict in family businesses. He conducted a survey of 59 family businesses
and reveals that in comparison to nonfamily businesses, family businesses have a
more complex set of issues to consider when managing conflict. Collaboration,
accommodation, and compromise strategies produce relatively better outcomes for
both family and business. A competitive strategy results in relatively negative
outcomes for both business and family. High levels of collaboration contribute to
positive outcomes for both family and business, and high levels of compromise and
accommodation contribute to positive family outcomes. Based on a comparison of
means, this study identifies conflict management profiles for achieving positive
outcomes for both business and family.

According to Danes et al.(1999), the unique content and goals of family business
conflicts fall into five areas: justice conflict (problems of compensation and quality of
treatment along with allocation of resources), role conflict (confusion and
disorientation among roles when family members work together or around the
inside/outside phenomenon when the family business employs others who are not part
of the family), work/family conflict, identity conflict (gender conflicts, sibling rivalry,
and parent/child interrelationships), and succession conflict.
Another stream of literature has attempted to understand how conflicts may be
resolved and the impact of adopted resolution strategies on financial and nonfinancial
dimensions of firm performance. Sorenson (1999) examined the five conflict
management strategies of competition, collaboration, compromise, accommodation,
and avoidance used by family firms. Although collaboration strategies lead to positive
outcomes on both family and business dimensions, the avoidance and competition
strategies performed poorly on both dimensions. Compromise and accommodation
were better for the family-related outcomes but not for the business-related ones.
Astrachan and McMillan (2003) and Habbershon & Astrachan (1996) have suggested
that systems for regular collective encounter among family business stakeholders aid
in the development of shared cognitive maps and beliefs. In turn, these shared
perceptions enable prediction and pro-active management of conflict, thus increasing
the effectiveness of intervention strategies, should these be used.

Sorenson, Ritch L.; Kaye, Kenneth ( 1999 ) conducted survey of 59 family businesses
and states that in comparison to non family businesses family businesses have a more
complex set of issues to consider when managing conflict. This study provides
insights into conflict management norms that promote desired business and family
outcomes in family businesses. The results are compelling and consistent with other
research on conflict management.

James Marshall Page(2001) has investigated the relationships between family

business owners’ leadership and conflict management styles, their perceptions of the
importance of succession planning and actually planning for succession, and the
demographic variable of the business owner’s age and the number of generations the
business has been in operation. These relationships were studied using a national data
set of family business owners and a structural equation model was employed with
leadership styles, conflict management styles, and the importance of succession
planning as the primary constructs of interests. Significant relationships were found
between the owners’ age and a controlling conflict management style, and between
the numbers of generations the business had been in operation and the flexible
conflict management styles, cooperative leadership styles, and the perceived
importance of succession planning on the part of the owner.
A research study conducted by Alvaro Vilaseca(2002) on The shareholder role in the
family business: Conflict of interests and objectives between non-employed
shareholders and top management team examined the role of family business
shareholder and relationship between non-employed shareholders and the top
management team regarding their diverse interests in a family business. The diverse
interests in the organization create conflicts inevitably. Based on Agency Theory,
study examined the elements that influence the conflict of interests and objectives
between non employed shareholders and the top management team and its impact on
commitment to the family firm. Study stated that there is a relationship between
employment in the business and the organizational commitment that will decrease the
conflicting interests. Study suggested that non-employed shareholders should be
active in the firm's decision-making process and outsiders would also contribute to
the family business success when they participate in the decision-making process.
result show that the degree of commitment to the family business is negatively
correlated with the number of family members on the board of directors.
Nevertheless, the most robust and statistically significant correlation (positive) was
found between the number of external board members and the commitment level of
the non employed shareholders.

Steier (2003) has argued that variants of agency contracts among family members
occur within a continuum of positive altruistic and economically-oriented rationalities
among family members. As both positive and negative aspects of altruism have
received some empirical support, it is being suggested that family firm leaders engage
in self-control and adopt governance mechanisms that would aid in curbing the
negative tendencies of altruism even when owners and managers belong to the same
family (Gomez-Mejia et al., 2002).

A summary of result of Stafford et al. 1999; Danes and Lee 2004; Danes et al. 2002,
2003, 2004; Amarpukar and Danes 2005; Werbel and Danes 2010 suggest that
conflict is affected by: Spouse employed in the business, education, farm size, locus
of control, off-farm employment, decision discrepancy, endogenous shocks.
A research study conducted by Walsh, T. (2004) on managing family-business
conflicts requires tact, stated that a healthy company deals with conflict in mature
way, which results in an acceptable solution to all parties. Study examined that a
family business that has been successful for about thirty years faces conflict during
transitions from generation one to generation two. Study concluded that shouting,
throwing coffee cups and swearing are the types of solutions they use to resolve
conflict. As a result, non-family member employees with valuable talents and skill get
frustrated and look for employment satisfaction in another company. Therefore, the
family business declines.

Franz W. Kellermanns, Kimberly A. Eddleston(2004) in their study on Feuding

Families: When Conflict Does a Family Firm Good, developed a theoretical model
concerning the effects of task, process, and relationship conflict in family firms. They
state that family firms are characterized by different control structures and
generational involvement. Study state that most family firms do not continue past the
first or second generation due to failure to manage conflict effectively. They
discussed that expected effect control concentration has on task, process, and
relationship conflict, and propose that generational involvement affects the
importance of task and process conflict to a family firm's performance. Study
analyzed that that not all conflict is bad for family businesses. With the help of model
they suggested that relationship conflict moderates the outcomes of task and process
conflict. The degree of relationship conflict in family firms is in turn influenced by
altruism, which characterizes interactions among family members.

Gordon and Nicholson (2008) discuss three causes of conflict within family
businesses: content issues, identity issues and process issues. Content issues include
issues where family members have opposing interests, either concerning resources
(which can be solved by writing a bank check), or value drive issues (more difficult to
resolve, may become intractable). Therefore, some content issues can be solved
following a path of distributive style negotiation, and others, especially those
involving a sense of right and wrong, may be more amenable to the use of mediation
(Gordon & Nicholson, 2008). These authors refer to identity conflicts as the worst
type, “emotion heats up when the resources somehow symbolize a person’s intrinsic
worth. Money often represents all kinds of psychological elements…most powerfully
when it stands for how much one is valued or loved” (Gordon & Nicholson, 2008).

Eddleston, Kimberly A; Otondo, Robert F; Kellermanns, Franz Willi (2008) in their

study on Conflict, Participative Decision-Making, and Generational Ownership
Dispersion: A Multilevel analysis, examines that how participative decision-making
and generational ownership dispersion affect conflict in a sample of privately held
U.S. family firms. Study utilizes a hierarchical linear model approach to investigate
"cross-level" effects between variables from different levels of analysis. Participative
decision-making among family members was found to be associated with cognitive
and relationship conflict. Furthermore, the relationship between participative
decision-making and conflict as individual-level variables was moderated by
generational ownership dispersion, a firm-level variable. When ownership was
dispersed through multiple generations, participative decision-making was found to be
positively related to cognitive and relationship conflict; however, in one- and two-
generation ownership firms participative decision-making was found to be negatively
related to cognitive and relationship conflict.

Mario Pezzillo Iacono, Alessia Berni(2012) in their study on Organisational design,

family business and good conflict develops a theoretical model concerning the
relations among organisational design and the level, type and nature of the conflict in
family firms. By focusing on altruism, control concentration, control systems and
generational involvement, the model captures a wide array of family firms and
explained the uniqueness of conflict in family businesses. The conflict is analysed as a
dependent variable with respect of: altruism, decisional power/decisional
concentration (founder centrality), formal governance mechanisms (strategic
planning) and generational involvement. The study examines how these four families
and business characteristics ultimately affect the functioning of a family firm,
discussing the expected effect of these variables on task, process and relationship
conflict in family firms. The main implication is that if family firms manage to
overcome relational conflict and exploit positively task and process conflict, they can
grow and flourish across generations, providing more jobs, prosperity, and innovation
to the economy.
The steps of conflict resolution, reconciliation, and prevention of conflict to a
successful family business provided by Rhodes and Lansky (2013). In their book on
Managing conflict in the family business addressed twelve conflicts that are common
in family owned businesses by utilizing a mini case study approach. Also they
explained how families can spot them, and then plan for their successful and effective
management in ways that simultaneously uphold the family and the business. This
book identified Family Business Conflict Archetypes (patterns), Frames, Roles, and
Tactics. Keys to effectively managing unique conflicts and the changes they produce
are also discussed. They concluded the study by providing concrete tools and
guidelines to manage and prevent conflict in a family business.

Peter Jaskiewicz, Klaus Uhlenbruck, David B. Balkin, and Trish Reay (2013) in their
research on family businesses, Is Nepotism Good or Bad? Types of Nepotism and
Implications for Knowledge Management investigate that In contrast to the literature
that portrays nepotism as generally problematic, they develop a conceptual model to
explain why some family firms benefit from nepotism while others do not. Study
distinguished two types of nepotism based on how nepots are chosen. Study proposed
that reciprocal (vs. entitlement) nepotism is associated with three family conditions
that indicate generalized (vs. restricted) social exchange relationships between family
members. Further study also suggested that generalized social exchanges are valuable
to firms because they facilitate tacit knowledge management that can lead to
competitive advantage.

Research on family firms has described conflict as the “root” of all evil and as one of
the main reasons for failing organizations (Beckhard & Dyer, Jr., 1983; Dyer, Jr.,
1986; Gersick et al., 1997). Because conflict appears to be inevitable and occurs
frequently, it is important to identify the impact of conflict on family managed
business.
Causes of Conflicts in Family Business:

Succession Planning:

Handler (1994) has examined the research of successions in the field of family
business management. He highlighted five streams namely: succession of a process,
the role of the founder, the perspective of the next generation, multiple levels of
analyses and characteristics of effective successions.

Figener (1994) explores a light on leadership, succession, and executive development

issues, in family firms. The study discussed in detail a comparison of successor
development approaches of the small medium-sized family and non family firms. The
findings indicate that (1) family firms favor more personal, relationship centered
approaches to successor development; (2) no family firms prefer formalized, task-
oriented development approaches; and (3) company size has no real effect on
successor development.

Galiano and Vinturella (1995) have examined the prevalence of biases towards
females and some underlying perception in regard to gender within the context of the
family business. The implications of gender bias for the well-being of family business
are analyzed, with particular reference to the issue of succession planning. Women’s
changing professional and family roles are also examined.

Brown and Coverley (1999) from a sample of East Anglian family firms, found that a
list of requirements for prospective successor candidates showed experience in the
business as essential, experience in a similar business elsewhere as desirable, and a
good business education as optional.

Bachkaniwala et al. (2001) state that most founders educate their offspring in order to
enhance their labour market prospects not just for succession purposes. Study
concluded that founders were also involved in succession planning by guiding their
successors to undertake relevant education.
Janjuha-Jivraj and Woods (2002) found that family members who were not active in
the business had considerable influence during succession, in particular the mother of
the successor who acted as a ‘silent buffer’ between the generations. They also found
that greater communication across the generations resulted in goal congruence
between the predecessor and the successor and a commitment to the long-term
strategy by the successor.

A study conducted by Motwani et al. (2006) on FOBs in the USA, found that in
terms of skill requirements, respondents rated decision-making ability of successor,
the successors’ commitment to the business, and interpersonal skills as the top three
successor attributes.

According to Royer (2008) the succession is a challenge to family business for a

number of reasons, including the need to address the issue of intergenerational
handover. This study focused on various aspects of succession in family business by
investigating when family members are preferred as successor. He concluded that
family businesses indicate a specific (tacit) knowledge characteristics combined with
a favorable transaction atmosphere, in certain context, make a family member the
most suitable successor. A conceptual model is presented that outlines when inside
family succession preferred.

According to Debra A. Holschuh-Houden (2009) Conflict is an inherent feature of

family relations and business-related activities. It can be particularly salient during
succession because succession involves change, and change produces uncertainty.
How families navigate the choppy waters of successive deliberations with minimal
destructive conflict is a critical determinant of cordial familial relations. Because
business-related functions can continue from one generation to the next, families may
no longer want to share or gather at special events, family celebrations, and important
familial milestones because of overt destructive actions. On the other hand, family
members may minimize conflicts or avoid them altogether in hopes of keeping
congenial relations (or their appearance) intact.

Don Bradley and Lance Burroughs, University of Central Arkansas (2010) in their
research on a strategy for family business succession planning have summarized that
most family businesses do not have a succession plan in place due to various reasons
such as reluctance of founders to let go of the reins, etc. leading to astonishingly high
rate of failures in business succession. The authors have prescribed a five stage
process of to ensure successful succession of the business as according to them
succession planning is critical for ensuring the continuation of any family owned
business and for smooth transition in management and ownership with a minimum of
transfer taxes.

M. Awais Gulzar and Wongjun Wang (2011) examined the importance of Corporate
Governance in Family-Owned business and examined the theoretical background of
corporate governance in family businesses in Pakistan. According to these authors,
introducing the concept of good corporate governance is vital for the continuity and
sustainability of the family owned businesses the support economic growth.
Corporate Governance will ensure that family owned businesses are transparent
enough to satisfy various stakeholders such as suppliers, customers and creditors.

Effects of conflict on Family Business

Various researcher have addressed conflict issues and their consequences, either
detrimental or positively contribute to the family business.

Levinson (1971) posits consequences of conflict can be destructive to both the family
and the business and conflict within family can frustrate adequate planning and
rational decision making. When managerial decisions are influenced by feelings about
and responsibilities toward relatives in the business, when nepotism exerts a negative
influence and when a company is run more to honor a family tradition than for its own
needs and purposes, there is likely to be trouble.

Other findings indicated that when family business owner-managers are active social
participants in their families interacting with a wide range of family members beyond
the work setting, conflicts arise. Findings of various studies showed that both the
extent and frequency of conflict
Indian family managed business and Conflicts

According to Garg et al. (1986) the sources of conflict lie in the lack of cooperation
which stems from the feeling of deprivation and denial that a sibling experiences in
the multisibling situation of the joint family system. As time changed, the joint
family system gave way to nuclear family system and sibling did not feel denial and
deprivation as much as they did in earlier generations. As a result entrepreneurs from
a nuclear family background brought in a very different culture into the organisations
as evident in organisations formed by technocrats ( Sampath & Ojha, 2000).

Ward (2000) reckons changes in national economic policies to be the most influential
in shaping particular family and business decisions of Indian Business groups. In
earlier times, culture kept family conflicts unspoken and unaddressed in the Hindu
Joint Families set up. To keep conflict at minimum, the Indian business families
attempt to have each son responsible for his own business. However, such an
approach frequently leads to stronger conflicts and the eventual division of the group
into different, independent businesses owned separately and wholly by each son, a
phenomenon addressed by Ward a partitioning of fiefdom. Emotional differences
among sibling are more public and numerous groups have gone to the court to address
their sibling conflicts.

According to Sampath (2001) reasons such as different styles of father and sons, lack
of succession planning, lack of or different entrepreneurial instinct of two generations
are the seeds of future conflicts and inefficiencies in the system. Other issues that
family businesses have to confront are : handling complexities of both family and
business realities, responding to globalization, and entry of multinationals, attracting
good professionals and retaining them, business succession and estate planning,
creation of enough business entities to accommodate all family members, and training
family member and giving them alternatives if they are not inclined towards business.

Madhavan N (2010) in his articles said that his own research, mostly in the Western
countries, shows only 15 to 20 per cent of all family businesses endure through the
third generation. Classic challenges are the emotions around leadership succession,
the lack of interest of family shareholders in the third or fourth generation, and in
some parts of the world, the death or inheritance taxes. He found, in general, that the
transfer of leadership from the senior generation to the next generation works a lot
better in India. But the number one challenge in India is rivalry and conflict between
siblings.

Split-an Impact of Conflict on Indian Family Business

According to ward (2000) three reasons lead to sibling splits in the families known
culturally for their family orientation and unexpressed conflict are lack of
transparency in salaries and finances, repressed emotions and each sibling wanting to
take care of their own male offspring.

Sampath (2001) mentions prominent splits in the business family groups post-
independence phase, such as Birla and Bajaj. Family businesses created as entities by
the founders during pre and post independence phase, usually had shareholdings of
multiple members.

According to Gupta et. Al.(2007) in a strategic family split, synergies among different
business operations are recognized and splitting is done to make each separate group
more focused and cohesive. He pointed that when the assets are split only to serve the
family sentiments business synergies are ignores, then the separated independent
family businesses are prone to lack critical mass and are forced to spend time and
resources on divesting unrelated and unviable businesses.

Indian Management (2005), Das (1999), Business World (2007) depicted some
examples of conflict causes that resulted in splits of the Indian Business houses are:
i. Differences in personal styles
ii. Lack of succession planning, ownership issues
iii. Younger generation’s desire to carve out a more independent role
iv. Interpersonal family relationships
v. Separation of joint families in second and third generations
The prominent business house that split up in early 1950s was of Dalmias. This was
the beginning of a process that engulfed practically all business families in some
measure sooner or later (Tripathi, 1999)
Research Gap

Academic research on conflict in Indian family businesses is of recent origin and

scant (Tripathi,1992). Entrepreneurial and family business studies are largely in the
form of news articles in print media covering famous family feuds, governance, and
professionalization topics, conference proceedings, and memoirs, biographical
literature, and souvenir volumes (Tripathi,1992; Business Today,1998; Indian
Management, 2005). There is sparse literature that systematically explores the nature
of conflict, and its origins and conditions (Gordon & Nicholson, 2008). The literature
although provides anecdotal evidence of outcome of negative conflict in the family
business, yet surprisingly there is lack of research on severe impact of conflict on
family business. To date, the research has not been conducted to determine if there is
a link between the types of conflict and their impact on family business resulting in
the split.

Family business research tends to focus on conflict at the individual or organizational

level. For example, research often examines how relationships between individuals,
such as siblings (Taylor and Noms 2000; Friedman 1991) or between founder and
successor (i.e., Cabrera-Suarez, SaaPerez, and Almeida 2001; Handler 1992) can
influence rivalries and conflict. Other research has looked at how the generation
currently managing the business affects conflict in the firm (Davis and Harveston
1999; Kets de Vries 1993). What is missing is a study that considers how different
types of conflict associated with family managed business and conflict impact on
family managed business resulting into split.

There has been larger degree of research about Conflict in Family Managed
Businesses and Conflict Management Strategies used in Successful Family
Businesses. However not much work has been done in Indian context highlighting the
conflict phenomenon, its causes and impact in the form of split in the family business
such as participation of women, succession planning, and entry of younger generation,
family council, and attributes of split family businesses.

The studies have done so far have not touched Family Managed Businesses in
Western Maharashtra. Hence this study has been taken up and this study is concerned
about the Study of Conflict and its impact on Family Managed Business with Special
Reference to major cities in Western Maharashtra.
 CHAPTER 3
OBJECTIVES, HYPOTHESES & RESEARCH
METHODOLOGY
 CHAPTER 3
Objectives of study

1. To study demographic characteristics of Family Managed Businesses.

2. To study causes of conflict in Family Managed Businesses for split and non split
firms.

3. To study association between types of conflict and split in business.

4. To study association between types of conflict and split in business in split and non
split firms.

5. To study possibility of dissimilarity in extent of difference between types of

conflict and major cities in western Maharashtra.
 Hypotheses of Study

Based on the objectives, the following are hypothesis:

Ho1: There is no association between relationship conflict and split in business.

H11: There is an association between relationship conflict and split in business.

H01a: There is no significant difference in mean score of relationship conflict of split

firms and no split firms.
H11a: There is a significant difference in mean score of relationship conflict of split
firms and no split firms.

H01b: There is no association between Relationship conflicts of five different cities.

H11b: There is an association between Relationship conflicts of five different cities.

Ho2: There is no association between Latent conflict and split in business.

H12: There is an association between Latent conflict and split in business.

Ho2a: There is no significant difference in mean score of Latent conflict of split

firms and no split firms.
H12a: There is a significant difference in mean score of Latent conflict of split firms
and no split firms.

H02b: There is no association between Latent conflicts of five different cities.

H12b: There is an association between Latent conflicts of five different cities.

Ho3: There is no association between Process conflict and split in business.

H13: There is an association between Process conflict and split in business.

Ho3a: There is no significant difference in mean score of Process conflict of split

firms and no split firms.
H13a: There is a significant difference in mean score of process conflict of split firms
and no split firms.
H03b: There is no association between Process conflicts of five different cities.
H13b: There is an association between Process conflicts of five different cities.

Ho4: There is no association between Task conflict and split in business.

H14: There is an association between Task conflict and split in business.

Ho4a: There is no significant difference in mean score of Task conflict of split

firms and no split firms.
H14a: There is a significant difference in mean score of Task conflict of split firms
and no split firms.

H04b: There is no association between Task conflicts of five different cities.

H14b: There is an association between Task conflicts of five different cities.

Ho5: There is no association between Lack of conflict prevention norms and split in
business.
H15: There is an association between Lack of conflict prevention norms and split in
business.

H05a: There is no significant difference in mean score of Lack of conflict prevention

norms of split firms and no split firms.
H15a: There is significant difference in mean score of Lack of conflict prevention
norms of split firms and no split firms.

H05b: There is no association between Lack of Conflict Prevention Norms of five

different cities.
H15b: There is an association between Lack of Conflict Prevention Norms of five
different cities.
 Research Methodology

Research Methodology

Research Methodology chapter presents the methods and procedures used to explore
and investigate the impact of conflict on the family managed business in the form of
split. The study is based on both Primary & Secondary Data. The possible insight into
conflicts in family managed business was investigated with the help of primary data
and Secondary Data. The research methodology which is presented below specifies
the methods & procedures for the collection of data, sample selection, measurement
and analysis of data.

Descriptive Research

Descriptive research is used to obtain information concerning the conflict phenomena

in family managed business. Review of literature and other available information
from various published and unpublished reports, journals, periodicals, books,
newspapers etc. (including pro-quest database). The descriptive research helped in
preparing the ground-work for the next step i.e. field survey.

Understanding the issue

The research had to be started by understanding the concepts of family managed

business, different types of conflict, causes of conflicts in family managed business in
India to be more precise its impact in Western Maharashtra. The family managed
businesses in the major cities of Western Maharashtra (Pune, Solapur, Satara, Sangli
and Kolhapur City) had to be studied. Secondary data collected through various
magazine, journals, reports, books etc. The Secondary data provided details of the
districts of Western Maharashtra and the nature of family managed businesses. Hence
secondary data analysis was very essential.
Sample design

The state of Maharashtra was selected as a geographical area for the present study as
it is one of the most industrialized states of India; it occupies the western and central
parts of the country. The state of Maharashtra is the third largest state in the country.
The state covers an area of 307,731 km (118,816 sq.ft) or 9.84% of the total
geographic area of India. Mumbai, the capital city of the state, is India’s largest city
and the financial capital of the nation. Marathi is the language of Maharashtra.
Maharashtra has 35 districts geographically, historically and according to political
sentiments Maharashtra has five main regions.

• Konkan (Konkan Division)

• Vidarbha (Nagpur and Amravati Division)
• Marathwada (Aurangabad Division)
• Northern Maharashtra and Kandesh (Nashik Division)
• Desh or Western Maharashtra (Pune Division)

Considering that Maharashtra has 35 districts and is divided into Western

Maharashtra, Marathwada, Vidarbh, Konkan and Northern Maharashtra and also
considering the large size of districts talks with the officials and guide revealed that
the study to be conducted for only the major cities in Western Maharashtra (Pune,
Solapur, Satara, Sangli and Kolhapur City) which was regarded as a representative of
each district.

Sample framework

The primary sample was of family managed business. To qualify for the sample,
business ownership had to be with the family and therefore knowing the ownership
structure and equity holding of owner/promoter was a paramount. The Companies Act
1956, classifies companies in three categories: private limited, non listed public
limited and listed companies on stock exchanges such as Bombay Stock Exchange
and National Stock Exchange. According to SEBI, listed companies have to publish
promoters equity holding information, which is accessible by public. Non listed
public companies and private limited companies have to register owner/promoters
details with the Registrar of Companies; however these details are not available easily
for the public. Similarly for proprietorship and partnership companies, ownership
details are not available except obtaining directly from the owners or their close
associates.

As it was necessary to know the ownership structure or the equity holding pattern of
the owners to qualify their companies for the sample most appropriate source of
database was the membership list of various industry associations. Most of the
organised businesses are members of one or more industry associations. In Western
Maharashtra community and geography based associations have a narrow focus, a
limited reach and restricted membership. A specific association for family managed
business was not found. Hence the database from lists of manufacturer’s associations,
federations and chambers of commerce was obtained. Most of the organised
businesses are members of one or more industry associations. Database from these
associations was found considered to be suitable and adequate for sample selection.

Sample Size:

A convenience sampling technique was applied in selecting the sample size; sample
of 250 family managed business was selected through stratified random sampling
method. Each stratum was decided based on major cities of western Maharashtra
(Pune, Solapur, Satara, Sangli and Kolhapur City) and to have equal
representativeness of various cities in sampling. Hence 50 respondents were chosen
from each representative stratum.

City Sample Size

Pune 50
Solapur 50
Satara 50
Sangli 50
Kolhapur 50
Sample Selection Norms

Many a time, in family managed businesses some family members are nominated on
the board or are assigned senior positions in the management team, however they do
not actively participate in the business. In order to get meaningful response from the
family members who are actively involved and were responsible for taking decisions
in the businesses, which is essential to define their selection criteria.

Sample family managed business selection criteria

Following criteria were applied for selection of sample business as family managed
business:

1. The business must be in existence for a minimum period of 10 years.

2. The management control must lie with the family members of the same lineage,
including extended family members(cousin, uncle).
3. There has to be atleast 4 family members working in the family business.

Respondent Selection Criteria:

Following criteria were applied for selection of sample respondent (owner manager)
as family managed business:

1. The respondent must be of age 25 years and more.

2. The respondent must be working full time in the senior position.
3. The respondent must be a family member.
4. The respondent must have minimum 5 years of experience in family managed
business.
Description of Variables

Independent Variables:

From a detailed literature review 5 variables emerged are contributing to conflict

given below:

1. Relationship Conflict:

• Unwanted influence of non working family members/outsiders on some

family members.
• Some family members are dissatisfied with their share of earnings and profit
from the business.
• Some family members lack trust and respect for other members.
• Some non-working women family members adversely influence business
decision.
• Some family members take advantage of the family name and reputation for
their selfish gain.
• Some family members are not transparent to other members in their
business/financial dealings.
• Some undue importance given to some family members.
• Increasing differences among family members due to entry of younger
generation.
• Competition/rivalry among some family members.
• Dissatisfaction among some family members on sharing of power and
authority.
• Difference among family members on succession and future leadership of the
business.
• Most of the decisions are taken by the leader/head of the family.
2. Latent Conflict:
• Lack of communication among family members.
• Some family members have incompatible conflicting style of running the
business.
• Some family members take important decision without the consent of other
family members.
• Some members do not have faith and confidence in the leader/head of the
family.
• All the working and non working family members do not meet
regularly/frequently.
• Growth/performance of the business is suffering due to the differences among
family members.

3. Process Conflict:
• Some family members have overlapping roles and responsibilities in the
business.
• Some family members spend a lot of time in day-to-day operations rather than
focusing on business growth.
• Lack of transparent, well organised processes and policies in the business
operations.

4. Task Conflict:
• Some family members are ambitious and want to grow the business faster than
the other members.
• Difference among family members on long term goals and future direction of
the business.

5. Lack of Conflict Prevention Norms:

• In some families it is important to follow family traditions and customs.
• All the family members do not have equal standard of living.
• Younger members are not encouraged to start their independent venture to
avoid conflict.
Dependent Variable:

A sample family business is classified in two groups as split and non split which is a
categorical non metric dependent variable. The reason was, respondents belonging to
two different categories of family businesses should understand relevant perception
about conflict.

Instrument for survey

This part includes research questionnaire design. The Primary data is collected
through questionnaire, formal interviews and survey. The research questionnaire is
divided into two sections. The first section of the questionnaire collected information
on the respondents demographic and business: geographic spread, type of business,
gender, qualification of respondents, work experience, designation, involvement in
business, working members, split in business, number of splits in business, status of
business after split, family council. The second section of the questionnaire collected
information on the different variables selected for the study.

Tabulation of Data

From the data collected with the help of the questionnaire, a master table was
prepared. Tabulation process was adopted to summarize raw data and displaying them
on compact statistical table in the form of “Excel Worksheet”. The collected data was
tabulated by coding the questions and subsequently subjected to various statistical
analyses. The tabulation in software package was done in computer in Statistical
Package for Social Sciences (SPSS), it is integrated sets of program suitable for wide
range of operations and analysis such as handling missing data, recording, variable
information, simple descriptive analysis and multivariate analysis. After tabulation of
data the mean score for each conflict was obtained. These mean scores were subjected
to various statistical analyses by employing the following techniques.
Statistical Tools Used for Data Analysis

Comparison of mean scores:

Means and standard deviation were calculated for the scores of the different types of
conflict for various family businesses. Also means and standard deviation were
calculated for the scores of the level of different conflicts. To ascertain whether the
mean score differs significantly among these classifications, one way analysis of
variance test such as ‘t’ test was used. Chi-square was also carried out.

Chi-square test:
To study the association between different types of conflicts and split in family
businesses chi-square test was used.

Paired t-test:
In order to predict the dependent variables by considering other variables as
independent variable the t-test was determined. Mean and standard deviations are
calculated for different types of conflicts of split and no split firms.

Annova and F-test:

To study significance of mean scores of different types of conflicts of five different
cities mean and SD are calculated. To test the significance ANOVA is obtained and
F-test is applied.

Interpretation and Report writing

The analyzed data were finally interpreted to draw the inference and objective of the
study in view.

Limitations of the study

The study was carried out with some assumptions regarding time, study area and
sample size. The identification of the respondents and gathering information from
them was one difficult task faced by the researcher. Accessibility of the researcher to
the major cities of western Maharashtra was also considered while selecting the state
of Maharashtra.
 CHAPTER 4
FAMILY MANAGED BUSINESS AND
CONFLICT
 CHAPTER 4
Family Managed Business and Conflicts

The Success of business depends on its ability to maintain stability while managing
change in the face of internal and external pressures. Although all the organizations
experience some difficulty in adapting to the changing environment, family
businesses present a number of unique issues and problems (Beckhard & Dyerm Jr.,
1983). As observed by Aronoff (1999) from an ‘evolutionary’ perspective “30 percent
of family businesses make it to the second generation, 10 to 15 percent make it to the
third generation and 3 to 5 percent make it to the fourth generation” it is crucial to
understand the interdependencies between family and business systems, ownership
and management, and the forces that make strategic decisions and their execution
more complex. Family businesses have a complex set of problems that are not
completely addressed by classical management theories (Davis & Stern, 1980). One
such problem is the effect of conflict in family businesses.

Conflict can be treated broadly as a philosophical category denoting the clash of

power against power in the striving of all things to become manifest or conflict can be
seen simply as a distinct category of social behavior--as two parties trying to get
something they both cannot have. Moreover, conflict can be apprehended as a
potentiality or a situation, as a structure or a manifestation, as an event or a process.

In a simple word, conflict may be understood as fight, war, collision or disagreement.

The concept of conflict is multidimensional; it envelops a family of forms. Conflict is
a daily reality for everyone. Some conflicts are relatively minor and easy to handle.
However, others of greater magnitude require a strategy for successful resolution or
else they will create constant tension and lasting enmity in the family or business.

Conflict is pervasive phenomenon and a subject of great interest to the researchers,

academicians, philosophers, psychologists and the society at large. Socrates in the
symposium argued that individual unite with others because of the basic discontent
with the self (Brown et al., 1938), Reik (1941), and Becker (1973, 1975), have
arrived at the universal conclusion that conflict is indigenous to human life, literature
on conflict is vast and its scope encompasses many disciplines, dimensions and
angles. Conflict’s omnipresence and importance of conflict management has been
acknowledged in diverse fields including psychology, communication, organizational
behavior and marketing (Deutsch, 1990; Greenhalgh, 1987; Pondy, 1967; Pruitt &
Rubin, 1986; Putnam & Poole, 1987; Thomas 1976, 1992b; Wall & Callister, 1995).

Conflict is examined in terms of personal and group orientation. Research on conflict

largely comprises interpersonal, intrapersonal, intergroup and intragroup conflict.
Early organization theorists such as Taylor and Weber viewed conflict as a
consequence of poor organizational structures and processes rather than a
phenomenon itself (Rahim, 2001). Social psychologists were the first to view conflict
as a phenomenon, and particularly those involved with Hawthorne experiments in the
1920s and 1930s, saw the beginning of a new way of looking at human behavior
(Mayo,1945). In the later part of the century, research extended to conflict
management, mediation and dispute resolution practices (Pope & Bush, 2000;
Warters, 2000), and it has now expanded to Human Rights (Vorster, 2002), Ethics
(McCabe & Rabil, 2002), and Security and Terrorism (Durant, 2002).

The dominant presence of the family, with the intermingling of business and family
roles, makes family firms a fertile field for conflict (Harvey and Evans 1994).
Whereas some conflict can be beneficial, such as when it increases opportunity
recognition, environmental scanning and the learning necessary for entrepreneurial
behavior (e.g., Corbett 2005; Lumpkin and Lichtenstein 2005; Kellermanns and
EddJeston 2004; Barringer and Bluedorn 1999), other conflict can damage the
harmony and relationships of family members in the family firm (Kellermanns and
Eddleston 2004). Furthermore, conflict is complex in family firms due to the presence
of a generational shadow; that is, the prior generation's excessive involvement in the
family firm can cause social disruptions (Davis and Harveston 1999; Harvey and
Evans 1994) and stifle the modernizing of organizational objectives and strategies
(Handler 1992).

Conflict has often been portrayed as a recurring characteristic that diminishes the
performance of family firms (Harvey and Evans 1994; Levinson 1971), particularly
during growth cycles of family firm development (Harvey and Evans 1994). Family
firms are prone to psychodynamic effects like sibling rivalry, children's desire to
differentiate themselves from their parents, marital discord, identity conflict, and
succession and inheritance problems that nonfamily businesses do not suffer from
(Schulze, Lubatkin, and Dino 2003; Dyer Jr. and Handler 1994; Lansberg 1983). Due
to the interconnection and frequent contact among family members working in the
business with those who are not but may still have an ownership stake, recurring
conflict is highly probably in family firms (Gersick et al. 1997; Harvey and Evans
1994). As such, the existence of the family makes conflict a prominent characteristic
in family firms (Sorenson 1999). Indeed, negative interpersonal conflict, termed
relationship conflict in the literature (Jehn 1997,1995), has been found to negatively
influence family firm performance (Eddleston and Kellermanns 2007).

Conflict is an inherent feature of family relations and business-related activities. It can

be particularly salient during succession because succession involves change, and
change produces uncertainty. How families navigate the choppy waters of successive
deliberations with minimal destructive conflict is a critical determinant of cordial
familial relations. Because business-related functions can continue from one
generation to the next, families may no longer want to share or gather at special
events, family celebrations, and important familial milestones because of overt
destructive actions. On the other hand, family members may minimize conflicts or
avoid them altogether in hopes of keeping congenial relations (or their appearance)
intact. These conflicts may simmer and fester under the surface to erode trust,
aggravate misunderstanding, diminish relationship satisfaction, and exacerbate power
struggles. Individuals have preferred methods of approaching conflict. These stylistic
methods may lend to constructive or destructive outcomes. Individual styles are
manifested through verbal exchanges that produce specific viewpoints of fairness,
trust, and agreement. Therefore, it is necessary that as behaviorists, one should
understand how individual conflict styles are associated with accompanying
appraisals of satisfactory outcomes(Debra A. & Holschuh-Houden, 2008).

Causes of conflicts in Family Business

How does conflict trigger in a family business? Beekhard and Dyer (1983) observed
that when a major change occurs in the family business, the relationships between
family members and family and professional managers get a profound impact. The
entire system becomes unstable, outcomes are unpredictable. The authors examined
“trigger events” and resistances that family- owned businesses experience while
managing change. Several conditions that can trigger events and resistances that
family-owned businesses experience while managing change. Several conditions that
can trigger resistance or conflicting behavior from family members are:

• A decision taken by the founder/leader to step down.

• The entry of a family member (or failure of a family member to enter) into the
firm or a new position.

• A decision to merge or sell the business.

• Significant growth or decline in profitability.

• Poor communications between family members, plus historically low levels of
trust and a general absence of willing collaboration.
• Lack of information about the financial situation and future prospects for the
business and for family members working in, and/or depending on, the
business.
• Unclear or unshared vision and goals for the business and the family. Family
members working in, or relying on the business, have no idea what the future
may bring for the business, for the family or for themselves.
• Inter and intra-generational conflict arising over the perceived need to make
major changes and/or to modernise, professionalise or restructure the business.
• Fear: The death of the founder/ leader or some other significant family
member. If the business has been the owner’s life, then will leaving, or even
slowing down, be their death? What is there for them beyond the business?

• Fear: Owner(s) cannot bring themselves to pass over ownership of the

business, even though they transferred responsibility for managing it years
previously.
• Lack of a workable, or any, Succession Plan.
• Lack of objectivity and realism in the owner(s) of the business as regards its
future prospects and/or current value.
• Unclear roles and responsibilities for family members.
• Unclear or unknown expectations amongst family members.
 • Entrenched, unresolved relationship problems between family members.
• Inability to separate business issues from family issues.
• Inability to separate business needs from family needs.
• Inability to mobilise the family to support the business and vice versa.
• Lack of circuit breaker processes or people to help resolve conflicts between
family members.

Nepotism as a cause of conflict

Family firms has to deal with two (sometimes opposite) tasks: the first one is to find
the proper human resources with required knowledge and experience to ensure
smooth run of the firm; second task is to integrate family members into the firm.
Sometimes it is very difficult to hire relatives and keep in mind that for the company’s
good one need well educated, experienced and skilled employees (and managers).
Very often owners of the family firms employ family members who are not qualified
for the work in the firm and their activities hurt the family firm and destroys the
human relations while other employees may feel discomfort if there is an entry of a
new relative in the family firm which can be a cause of conflict. The situation, when
the employees from family members are “protected” or favouring prior to the “non-
family” employees is called nepotism.

The nepotism may be (under certain circumstances) in family firm a very useful tool
for effective governing of family business, when it uses a rational form of
remuneration of all employees for the success of the firm. The emotional bonds
among the family members may have very positive impact on execution of some
individuals and also on firm’s outcome.

Why do conflicts occur in Family Businesses?

Most family businesses wish for business prosperity and family harmony; however
they often confront with underperforming business units and unresolved family
conflicts. The two greatest threats to the successful continuity of family businesses are
conflict and succession. Conflicts in family businesses are rarely caused by poor
business performance; most conflicts arise because the family owners perceive that
their needs are not met (Amin Nasser,2010).

Ownership conflict and conflict for power are the main factors that have the biggest
negative impact on family businesses. Prasad, Nath & Ramnath (2010) observed that
most family businesses usually fall apart and fail to stay together beyond the third
generation. Most of the family firms in India, especially in or after the third
generation, face problems due to the large number of people involved in the decision
making, competing for power, family politics and so on, which advertently leads to
inability and delays in decision making. This scenario is just a result of poor
succession planning (Giridharadas, 2008).

The differences in the attitude and aspirations of family members are main reason for
conflict in family businesses in India. As new generations join the family business, it
is an enormous challenge to keep the family and business together. Some sacrifice the
business to keep the families together, while others sacrifice the family to keep the
business (Kerala Business Conclave, 2013).

Responsibility Centers

In small family businesses, all members may sense that all tasks need to be
accomplished. Several tasks may require various people to overlap in responsibility.
It is this point that becomes difficult when one thinks that the other person will
accomplish the task and both quit. Unfortunately, the result becomes clear that
nothing was done. The opposite may be true when two people are competing over a
task and disruption occurs. Clear identification of task roles and responsibilities can
eliminate discord. Identification of job descriptions allows for rotating tasks and other
creative ways to make the family business tasks equitable, fair, and fun, while keeping
the responsibility clear. Lines of responsibility give clarity for assessments
concerning increasing or decreasing profits(James G Coe, 2007).
Consequences of Conflict

Very few family firms survive to second (Beckhard & Dyer, Jr, 1983). Therefore,
understanding how different types of conflict affect a family firm’s survival is crucial
in order to help family businesses make a successful transition through multiple
generations (Kellermanns & Eddleston, 2004).

Finch (2005) identifies some of the unique causes and contributing factors of conflict
in family businesses as: rules, roles and dual relationship, differing vision, succession,
jealousy, poor communication, poor conflict management skills, and inequality in
rewards.

Types of Conflict

Conflict theories primarily focuses on disagreements about ends, but conflict can
easily occur about means. The means versus ends distinction provides a framework
for examining different types of conflicts in organization groups(simon,1976; Tyler,
Degoey, & Smith, 1996). As pointed out by Danes et al.(1999), the unique content and
goals of family business conflicts fall into five areas: justice conflict (problems of
compensation and quality of treatment along with allocation of resources), role conflict
(confusion and disorientation among roles when family members work together or around
the inside/outside phenomenon when the family business employs others who are not part
of the family), work/family conflict, identity conflict (gender conflicts, sibling rivalry,
and parent/child interrelationships), and succession conflict.

Relationship Conflict:

Relationship conflict is an awareness of interpersonal incompatibilities, which

includes affective components such as feeling tension and friction. Relationship
conflict involves personal issues such as dislike among group members and feelings
such as annoyance, frustration, irritation, and dislike (Jehn & Mannix, 2001). Cross-
sectional studies (e.g., Jehn, 1995; Shah & Jehn, 1993) have revealed that relationship
conflict is detrimental to individual and group performance, reducing the likelihood
that members of a group will work together in the future.
Each of these types of conflict can occur in varying degrees of frequency and intensity
(De Dreu & Van Vianen, 2001). However, research has shown that the frequency and
intensity of conflict are strongly related. That is, highly intense conflict is associated
with more frequent conflict (De Dreu & Van Vianen, 2001).

India, since the olden days, has been an economy fuelled by a number of family
owned operations. Starting with the traditional agrarian households, family owned and
operated activities have been prevalent in all the sectors. However, most family
businesses have a short life cycle as compared to professionally managed businesses,
largely because of the conflicts that cause a family business to fall apart (Prasad, Nath
& Ramnath, 2010). Faced with a conflict, rather than silencing the younger ones or
trying to avoid facing the problem, businesses should try to address the conflict,
whether it is in family or in business, as it would affect both, in a family business. By
addressing these conflicts, trust and group working spirit is promoted (Ward and
Carlock, 2001). A family business can fail due to various reasons; the main reason is
conflicts between family members.

India has a history of business, trade and commerce since almost 2000 years.
Conflicts are unavoidable in a family, and in a family business. How they are handled
is what differentiates a good family business practice from a bad or failed one. Gita
Piramal, who has studied about family business splits for almost 10 years, says that
despite having a long history of business and trading activities, most Indian family
businesses have never been able to hold on to their businesses for more than a few
generations (Forbes, 2010). She adds that, lately, however, the Indian family business
houses are changing this phenomenon by closely studying structures and mechanisms
that would help plan long term sustenance for the family business.

Latent conflict:

Latent conflict exists whenever individuals, groups, organizations or nations have

difference with others. Latent conflict is a conflict in which the factors that could
become a cause of potential conflict exist. These are the divergence of goals, role
conflict and the competition for scarce resources.
Process conflict:

Process conflict is defined as an awareness of controversies about aspects of how task

accomplishment will proceed (Jehn, 1995). More specifically, process conflict
pertains to issues of duty and resource delegation such as who should do what or how
much one should get. For example, when group members disagree about whose
responsibility it is to complete a specific duty, they are experiencing process conflict.
Cosier and Harvey (1998) have proposed that process and task conflicts can be
beneficial because they promote creativity and innovation.

Process conflict is characterized by disagreement on how work should be

accomplished and how members should be utilized (Jehn, 1997b). Therefore, process
conflict is about how to accomplish work, and often deal with what, and how much,
responsibility individuals receive (Jehn, 1997b; Jehn & Mannix, 2001).

Task Conflict:

Two types of conflicts are predominantly studied in the organisations, one is related to
interpersonal relations and the other involves group’s task. The intragroup conflicts
are also termed as affective and substantive (Guetzkow & Gyr, 1954), task related,
cognitive and social-emotional (Priem & Price, 1991); goal-oriented and emotional
(Coser, 1956); task focused and relationship focused (Pinkley, 1990; Jehn, 1992).
Relationship conflict entails problems of personalities or dispositions among the
group members and is found to be detrimental to performance and satisfaction. Task
conflict on the other hand, includes differences of opinions and various view points
about the topic of interest or decisions among group members (Jehn,1997).

Task conflict is about the ends on which tasks should be accomplished. It allows
group members and individuals to identify diverse perspectives and increases the
understanding of tasks at hand (Amason & Schweiger, 1994; Jehn, 1997).

Task conflict is an awareness of differences in viewpoints and opinions pertaining to

the group’s task. It pertains to conflict about ideas and differences of opinion about
the task, similar to cognitive conflict (Amason & Sapienza, 1997). A moderate level
of task conflict has been found to increase group performance in cognitively complex
tasks as it allows groups to benefit from different opinions and avoid group thinking
(Janis, 1982).

Lack of conflict prevention norms:

Indian businesses are more conservative and traditional than their counterparts in Asia
and in the West. In fact many family traditions and customs are the subtle
mechanisms to reduce or prevent conflict among family members.

The Unique Nature of Conflict in Family Business

A primary difference between family businesses and nonfamily businesses is that

family businesses are concerned about both business and family outcomes (Dunn,
1995). They are concerned about a profitable business and, to varying degrees, they
are concerned about family member involvement in and satisfaction with the business.
The inclusion of family in business makes resolving conflict unique in a variety of
ways.

First, family adds complexity to conflict. To maintain relationships in the family,

family businesses must accommodate issues important to the immediate family and,
in some cases, extended kin, especially when family members are involved in some
way in the business as owners, managers, employees, or even non-participating
stockholders (Ritch,1999).

Family-related issues that are non existent in non family businesses may take
precedence over business concerns (Dunn, 1995). For example, a family in business
must address issues such as role carry over between business and family, equal
treatment of family members, triangulation struggles, sibling rivalry, nepotism, work-
family conflict, and succession (Boles, 1996; Correll, 1989; Dumas, 1989; Lansberg
& Astrachan, 1994).

Second, family norms for resolving conflict set the tone for conflict management
norms in the business in two ways (Dyer, 1986). First, the owner of the business
usually establishes norms for interaction in the business (Sonnenfield & Spence,
1989). These norms include how decisions are made and conflicts are resolved (Dyer,
1986; Kets de Vries, 1993). Second, family norms have even more influence when
multiple family members work in the business (Kaye, 1991). A proactive problem-
solving approach to conflict management in the family may provide the basis for a
positive problem-solving orientation in the business (Dunn, 1995) needed for such
things as succession planning and transition between generations (Goldberg, 1996;
Lansberg & Astrachan, 1994; Seymour, 1993). In contrast, contentious conflict
management norms within the family may foster contention within the business.

Third, dynamics of power in family businesses are unique. In most family businesses,
family members have access to key information and retain decision authority (Dyer,
1986). Because of their family connections and access to "insider information," even
family members without high formal position can wield informal power in the
business. Power exerted by family members may overshadow the authority vested in
hierarchical position, thwarting the influence of the chain of command. Moreover,
unlike organizations where the CEO has final decision authority, in family businesses,
multiple family members may exert influence in high-level business decisions.

Fourth, research indicates that family businesses experience more conflict than non
family businesses (Boles, 1996; Lee & Rogoff, 1996). Given the previous discussion,
it is easy to understand why undoubtedly, the relatively high number of issues and
multiple sources of influence contribute to high levels of conflict.

If family businesses obtain desired outcomes for both the business and the family,
they must manage conflict in ways that maintain family relationships, accommodate
multiple issues, and respond to multiple interests in the business and the family.

However, research suggests that most family businesses use conflict management
strategies that cannot handle multiple concerns, that dampen input, and that
accommodate limited interests.
Managing Conflict in a Family Business

Managing conflict is a challenge in any family business setting and yet when
managed correctly, some conflicts can actually be beneficial. But knowing how to
leverage conflict into an advantage is not always so immediately clear and this is
particularly true within family businesses. That's because the dynamics that can
produce conflict within a family simultaneously intersect with the challenges of
owning and operating a business, potentially complicating both (Kent Rhodes, David
Lansky, 2013).

How to save the Family Business

Management literature and programmes deal almost entirely with publicly owned and
professionally managed companies. Yet the majority of businesses everywhere are
owned and run by members of the family. They even include some of the world's
largest companies. If the family-managed business is to survive, it must stringently
observe the following rules.

Formulate Policy Framework and Rules

Policy framework that forms part of a succession plan can be used to clarify many
difficult issues. A succession plan should outline exactly how the transfer of
leadership will occur and should establish the criteria that heirs must meet before
being deemed ready to assume their leadership role. It would be better if the heir
would first get a job/qualification with some other company before assuming a critical
role with the family business. In other words, the heir should first demonstrate his
acumen elsewhere.
 CHAPTER 5
INDIAN FAMILY MANAGED BUSINESS
AND CONFLICT
 CHAPTER 5
Indian Family Business and Conflict

Introduction

India faced wars in 1962, 1965 and 1971; it was only after 1980 that the economic
environment became more business friendly. As a result the period from 1980 to 1995
a large number of family businesses were established and prospered. Many of those
family businesses split over the last few years due to the family differences. There are
some families with large business operations, but the majority are SMEs. Family
businesses have a culture that is often at the same time entrepreneurial, flexible,
paternalistic, agile and frugal. Since the family's name is at stake, they stand for
values, long-term commitment, relationship orientation, and dependability. Indian
family firms are also highly efficient. They often have to work with limited resources
and make the most out of it. A multinational car plant can get free land from the
Indian government and access to finance from capital markets, but for the majority of
family businesses each step is a challenge. Yet, they embrace it with a true
entrepreneurial spirit.

For historical, evolutionary reasons, most countries have family businesses

constituting the largest category in terms of ownership; estimates do vary, but is
above 75 percent in all cases (Duman 1992, Paisner 1999; Watts and Tucker 2004).
About a one third of the companies listed in Fortune 500 are family businesses (Lee
2004). Since they normally do not have short term orientation but are interested in
growing the family wealth with necessary precautions and have a different set of
strategic goals compared to non-family owned private companies (Ward, 1987;
Sharma, Chrisman and Chua, 1997), their long term contribution to economy is
significant. This is true with the Indian economy too.

Family businesses constitute most businesses in India, as anywhere else

(K.Ramchndran, 2011). Though many of the top world companies are run by families,
Indian businesses have the highest percentage. According to a report done by the
National Center for Rural Development, when India’s markets opened to the outside
world, the Indian family businesses took a large hit. Economic liberalisation and rapid
expansion in the industrial base in recent years have not only created growth
opportunities for many but also have tested their resource capabilities to respond to
them; some have chosen to follow the role of a custodian of their existing wealth and
followed the preservation route, while some others have followed more of an
entrepreneurial route of exploiting opportunities with or without relevant resources,
with mixed results. One of the key resources for all of them is their family, and their
prime concern is wealth and welfare of their family. A major dilemma many of them
have faced particularly in the last decade since economic liberalization began is to
choose between combinations of risks and returns of business growth and
conservation of wealth of the family. This, of course, is intertwined with the missions
of their businesses and families.

Indian family-owned businesses have a relatively shorter term vision as against their
global counterparts who are typically more long-term oriented. Indian economy is
racing so fast that the culture of achieving significant wealth over a short period of
time is very strong and the promoters are seeking quick wealth and immediate
success. It is generally true that businesses owned and controlled by family for
generations are far more cautious and thoughtful about their money than those who
are dealing with public money raised from the markets. The popular pressure to grow
big and fast today in India tapping new opportunities is very high and Indian
promoters are often willing to take big bets, sometimes which could be risky(John L
Ward, 2011).

Indian family businesses also have distinct advantages, particularly that of vigilant
ownership. The family owners' commitment and visibility leads to higher productivity
in the business. Their dedication and perseverance enables them to extract
opportunities from complex non-routine problems. In addition, family firms also tend
to be less bureaucratic and can take fast decisions. Their stakes are emotional as well
as economical and they are likely to look for sustained value creation. As a result they
can move faster with unconventional logic, can go counter-cyclical and can reach for
new opportunities.

Most Indian businesses are family-owned. And the assumption is that it is bad, or at
least, worse than professionally run businesses. This assumption is rooted in the
Western discomfort with individualism at the cost of the collective. Ramayana and
Mahabharata, however, approach family issues very differently. The Pandavas and the
Kauravas will never agree on what is fair. Division of property does not necessarily
solve the problem for the epic recognizes that property, more often than not, is an
expression of self-image. The issue is more emotional than material. Emotional issues
manifest in material conflicts. If one sorts out the emotional issues, the material issues
will be sorted out. This approach is missing in the rule-driven prescriptions of the
family office(Devdutt Pattanaik, 2013).

Family-owned businesses form the backbone of the Indian economy. These business
account for almost two-thirds of India’s GDP, many of the companies in the country
are run by families and that these organisations employ approximately half of the
country’s work force, making them key players in the country’s economic
growth(Christophe Bernardv,2013) .

The role of family business in the economy

There is also a need for young leaders to understand the role of their businesses in
the Indian and global economies. According to the CII’s Family Business Network
(India chapter), the gross output of these family-run businesses accounts for 90% of
India’s industrial output, 79% of organised private sector employment, and 27% of
overall employment, superseded only by the government and Public Sector
Undertakings, companies in which the government own the majority of the equity.

The Challenges faced by family businesses in India

Indian family businesses enjoy various advantages due to their inherent characteristics
and a social culture that supports their structures. However, these advantages can be
destroyed if the family is not united; as the family grows, the challenge is to keep a
sense of unity. These are a set of typical challenges that Indian family businesses face
today. Some of the major challenges faced by family-owned businesses that are resulting in
them not acquiring world class status are: Non participative family members, Family
emotions, Family or Business what comes first, Human Resource, Defining Authority, Fair to
all approach, Retaining non family professionals, Speed of excepting change, Succession
Planning (Ritu Bhattacharyya, 2007).
Unique management challenges

Many family businesses in India are prosperous, they face a number of

unique management challenges, including lack of professionalism, nepotism, and
mismanagement. Only 13% of the family businesses survive until the third
generation and only 4% go beyond that, while one third of business families
disintegrate because of generational conflict. However, the close-knit structure
of families, which helps to foster teamwork combined with respect for shared values
and family members, has been the key to the success of many family
businesses(Christophe Bernardv,2013) .

The Next Generation

The greatest challenge concerns the gap between family generations: A business
founder is used to doing everything himself. Thus development of the unique culture
of the present Indian family business: Inward-looking, owner centric, smaller scale,
with a restricted perspective, and conservative mindset is very essential. This culture
eventually becomes a hurdle in absorbing 'outsiders'. The same culture also poses a
serious challenge in absorbing the next generation family members: Different
generations, seeing the world differently are supposed to work together. It can be a
difficult thing as the young generation is often in a hurry and has big ambitions, while
their elders are more conservative(Parimal Merchant, 2013).

The gap keeps on getting wider and wider. When conflict escalates between fathers
and sons it is often the mother, who takes the role of CEO (Chief Emotional Officer).
This is a common story in many Indian family businesses (Parimal Merchant, 2013).

Attracting and Retaining Non-family employees

Another possible challenge is non-family employees joining the family firm: The
culture, which has solidified over time, becomes a barrier for accepting 'outsiders'.
Business owners are often at a loss as to how much authority a non-family employee
should be able to attain. In most Indian family businesses stakes are high: It is not
easy to put their own destiny in the hands of non-family employees. Having founded
the business, the owner is used to having insight into all aspects of his business.
Allowing the same insight to an outsider can be hard. On the other hand non-family
employees may also have difficulties in adjusting to the family business culture. They
are used to structured corporate environments. In family businesses that structure may
be missing (Parimal Merchant, 2013).

It is important that time is bestowed on new professionals so that they can settle.
Many Indian family business owners end up selecting non-family employees based on
their performance in the corporate world without paying much attention to their 'fit'
with their own firm's culture. They forget to spend time in facilitating the settling
down process (Parimal Merchant, 2013).

Women of the Family Joining the Family Business

Indian family businesses are still largely male dominated. The role of women in
business and employing women is largely accepted and encouraged in India.
However, when it comes to hiring women in the family business, there are
reservations. Within the Indian social context of business families, bringing up the
children is considered primarily a responsibility of the mother. Thus, whenever the
issue of women in the family business is raised, it is subject to her ability to balance
between her duties at home and her duties at work. However, as more and more
women are highly educated, they are demanding a say in the family business. The
traditional family model is still disapproving of it, yet increasingly it will have to
respond to these demands. It is only reasonable for family businesses to tap into this
huge source of talent (Parimal Merchant, 2013).

The Realities

The Indian business landscape has started expanding fast. With the involvement of the
older generation alone, such growth is unthinkable. While the parent generation needs
to accept this, the next generation has to learn to appreciate their parents’ wisdom and
understand that there is no substitute for hard work.

The solution to these challenges requires an understanding of the family business

dynamics and a separation of people from problems. Family business members should
learn that no one is wrong but that each generation has a different culture. Once
families learn about these cultures and understand the need to appreciate different
perspectives, whether young or old, they will be able to harmoniously work with
professionals as well as across generations. Thus, if family businesses can manage
these dynamics, they will be better placed to reap the benefits of the great range of
opportunities in the Indian economy and beyond(Parimal Merchant, 2013).

Leadership in Indian Family Businesses

Leadership in family business seems to be undergoing a phenomenal change. While

earlier it was autocratic, now it is gradually becoming participative. The younger
generation is joining the family businesses and increasingly taking up leadership
roles. The senior generation has begun to regard them as capable and well-trained
professionals. Albeit slowly but surely, seniors are giving them freedom in decision-
making. Family business leaders are beginning to evolve a long-term vision and
strategy for their businesses. They are progressively trying to overcome the resistance
to change and are opening up to new business ideas. Family business leadership is
also gradually learning to ‘let go’ their control and are effectively delegating
operational decision-making to focus more on strategy. Some family firms have
adopted radical changes in leadership style whereas at the other extreme of this
continuum there still remain some firms that are being lead in traditional ways (Kavil
Ramachandran & Navneet Bhatnagar, 2012).

Conflict and its impact on Indian Family Business

Conflict is generally viewed as harmful to organisations because conflict breeds

hostility and mistrust among members, interferes with organisational functioning and
in the extreme cases causes a breakdown in the organisations (Ohbuchi & Suzuki,
2003). The entry of younger generation in the family managed business and their wish
to set up green field businesses is a main cause behind that Indian family businesses
do not survive beyond the third generation e.g. example the large and well known
group like the Murugappa group, Dabur group, Wadia group, Godrej group and
Kirloskar group(K Ramchandran, 2011). Also another well known group like
Reliance had not planned for succession, interpersonal family relationship was one of
the main reasons for the legal and public tussle and division in the Bangalore based
BPL group (Indian Management, 2005). One recent reason that Indian family
business conflicts have flared is the increasing influence of the West. As the children
are sent abroad for education, traditional family values change and the authority of
patriarch that is above questioning of any sort too change (Business World, 2007).

Split-an Impact of conflict on Indian Family Business

In India outstanding splits were few and far in between until 1970s. Since 1970s, there
have been more than 50 splits in major business families in India. Small family
businesses were also not less exposed to splits in business. Particularly post
liberalization, India’s business families have started with greater frequency buffeted
by strong winds of competitiveness and internal pressures (Indian Management,
2005). Kolkatta based business families were known for their feuds resulting in
splits, especially Marwari business families including Birlas, Goenkas, Singhanias,
Poddars, Kanorias, Jains, Dalmias, Jalans, Khaitans and Banurs among
others(Mukhopadhyay, 2005). Business houses of other communities were also not
less exposed to feuds such as Mafatlals, Walchands and Ambanis (Gupta et al., 2007).

The BT-Gallup MBA Poll (Piramal 1998) has indicated five threats to Indian
Businesses-splits, succession planning, takeovers, transnational competition and lack
of focus. Splits drive growth but data indicates that groups that have split outperform
those that have not (Piramal, 1998).

Indian family businesses have come a long way over two centuries and have sustained
through several economic, political and social transition. Conflict is inherent in Indian
family businesses and in most cases intense conflict has led to splits and divisions
causing more detrimental effects than the positive. Although Indian family businesses
have mandatorily adopted corporate governance practices, proper succession planning
and professionalizing the business i.e. by introducing good systems and getting better
managers which will help them to reduce triggers of conflicts.
 CHAPTER 6

DATA ANALYSIS AND INTERPRETATION

 CHAPTER 6
Data Analysis and Interpretation

In this chapter the analysis of the primary data collected through questionnaire,
observation and walk through surveys was carried out to understand the nature of
family business, conflicts in family business and its impact in the form of split. The
study probed on various aspects of family business conflicts to gain meaningful
insights. The respondents were studied on the basis of demographic characterization.
Hence In this chapter information collected through questionnaire is classified and
analysis is presented.

Demographics: Sample Respondents

1. Geographic Spread:

Information is collected from five different cities of Western Maharashtra, namely

Pune, Solapur, Sangli, Satara and Kolhapur. Classified information is presented in the
following table. Table shows the geographic spread of the sample family businesses.

Table 2: Geographic Spread

No. of
City Percent
respondents
Pune 50 20.00

Solapur 50 20.00
Satara 50 20.00

Sangli 50 20.00

Kolhapur 50 20.00

Total 250 100.00

2. Type of Business:

Table 3: Type of Business of respondents

No. of
Type of Business Percent
respondents
Construction 12 04.80

Manufacturing 115 46.00

Trading 64 25.60
Service 59 23.60

Total 250 100.00

Above table shows that main types of businesses of the sample respondents. It
indicates that out of total 250 respondents, 5% respondents are from construction
sector, 46% respondents from manufacturing sector, 25% from trading sector and
24% from service sector.

3. Age:

Table 4: Age of Respondents

No. of
Age Percent
respondents
25–35 years 83 33.20

36– 45years 79 31.60

46 – 55 years 62 24.80

Above 55 years 26 10.40

Total 250 100.00

Above table shows that age of the sample respondents. It indicate that out of total 250
respondents, 33% respondents belong to age group of 25 to 35 years, 32%
respondents belong to age group of 36 to 45 years, 25% respondents belong to age
group of 46 to 55 years and 10% respondents are belong to age group of above 55
years.

4. Gender:

Table 5: Gender of Respondents

No. of
Gender Percent
respondents
Male 230 92.00

Female 20 08.00

Total 250 100.00

Above table indicates that out of total 250 respondents, 92% are Male respondents
and remaining 8% are women respondents either daughters or grand daughters as
owner managers in their respective businesses.

5. Qualification of Respondents:

Table 6: Qualification of respondents

No. of
Qualification Percent
respondents
High School 8 03.20

Under graduation 36 14.40

Graduation 130 52.00

Post Graduation 68 27.20

Others 8 03.20

Total 250 100.00

Above table indicate that out of total 250 respondents, maximum 52% respondents are
graduates, 27% respondents are post graduates with engineering and management
qualifications. About 15% respondents are undergraduate. 3% respondents had done
specialisation courses related to their business such as diploma in plastic technology,
diploma in travel and tourism, diploma in fashion design.

6. Work Experience:

Table 7: Work experience of respondents

No. of
No. of years Percent
respondents
5-10 Years 67 26.80
11-15 Years 35 14.00

16-20 Years 64 25.60

21-25Years 36 14.40

26-30 Years 24 09.60

Above 30 Years 24 09.60

Total 250 100.00

Above table indicate that maximum 26% respondents had 16 to 20 years work
experience. About 27% respondents had 5 to 10 years work experience followed by
14% having 11 to 15 years work experience. Collectively 10% respondents had 26 to
30 years and more than 30 years work experience in their family business. As
illustrated in the table the sample respondents are almost equally spread among two
categories of work experience.
7. Designation:

Table 8: Designations of respondents

No. of
Designation Percent
respondents

Director 32 12.80

Chairperson 39 15.60

Chairperson & 64 25.60

Managing Director

Executive Director 36 14.40

Manager/ 20 08.00
Executive/Trainee

Proprietor 59 23.60

Total 250 100.00

The respondents are main decision maker in their respective family business. As
depicted in above table 26% respondents are Chairperson and MD, 16% are
chairperson, 13% are Director, 15% are Executive Director, 8% Manager and Trainee
and 24% respondents are at the proprietor positions in their family business.
8. Involvement in Business:

Table 9: Respondents involvement in business

Involvement in No. of
Business Percent
respondents
Full Time 230 92.00

Part Time 20 08.00

Total 250 100.00

Most of the family members 92% are full time involved in their family business.
Only 8% respondents worked as a part-time.

9. Working Members:

Table 10: Working Members in the sample family business

Working No. of
Members Percent
respondents

Immediate
207 82.80
Relatives

Other Relatives 43 17.20

Total 250 100.00

Number of family members working in the family business is an important criterion

from conflict perspective. Dynamics of the family business changes with the number
of family members working in the business. Above table shows the working
members in the sample family business. About 83% are immediate relatives and 17%
are other relatives working in the sample family business. The family members are
included respondents’ who are immediate family as well as extended family of uncles,
cousins and nephews.

10. Split in Business:

Table 11: Split in Family Business

Split No. of Percent

respondents
Yes 148 59.20
No 102 40.80
Total 250 100.00

The total sample of 250 respondents comprised of two categories: one category of
respondents whose family businesses had gone through splits in the past and another
category of the respondents whose family businesses had never gone through a split in
their business history. About 59% respondents acknowledged the split in their family
businesses and 41% respondents had never gone through a split in their family
business.

11. Number of splits in business:

Table 12: Number of splits in Family Business

No. of
No. Of Splits Percent
Respondents
One 80 32.00
Two 60 24.00
Three 8 03.20
No Split 102 40.80
Total 250 100.00
According to the popular belief and research claims, usually splits in the family
managed businesses take place in the third generation of cousin consortium (ward,
1987). As shown in above table 41% respondents had never gone through a split in
their family businesses, 32% businesses had gone through one split, 24% respondents
acknowledged two splits and only 3% respondents acknowledged three splits in their
family businesses. The analysis indicates that possibilities of split are higher in the
sibling partnership stage, the ownership control is shared by two or more brothers
(and sisters), as also when the members of younger generation of cousins enter the
business. Lower commitment towards business, lack and conflicting styles of running
business are also the reasons leads to split in family managed business. In short
differences in the attitude and aspirations of family members are main reason for
conflict which leads to split in family businesses in Western Maharashtra.

12. Status of business after split:

Table 13: Status of business after split

No. of Percent
respondents

Both the businesses after the

split are doing better than when 112 44.80

they were together

Our business is doing better

than the other 83 33.20

Other business is doing better

than ours 36 14.40

Both the businesses after the

split are doing worse than when 19 7.60
they were together

Total 250 100.00

As shown in above table 45% respondents mentioned that both the businesses are
doing better after the split compared to when they were together. 33% respondents
mentioned that they are doing better than the other businesses after the split. 14%
respondents mentioned that the other split business was doing better than their
business. Only 8% respondents agreed that both the businesses were doing worse
after the split than when they were together.

13. Family Council:

Table 14: Family Council

Family Council No. of Percent

Respondents
Does not exist 234 94.00
Exists 16 6.00
Total 250 100.00

Establishment of a family council is one of the core mechanisms that help in long
term sustenance of family businesses, particularly addressing the issue of succession
and prevention of conflict. As shown in above table almost 94% respondents
mentioned that they did not have a family council to address the issues of the family
and the business. About 6% respondents had family councils in their family
businesses.
Section II:

The respondents were asked their agreement or disagreement on the presence of

conflicts involved in their family businesses. The result of the 5-point Likert scale
from ‘strongly agree’ to ‘strongly disagree’ is depicted in following table for
independent variables as types of conflict which may lead to split in the family
business.

To study conflict which may lead to split in the family businesses, in detail
information is collected through questionnaire. Response to these questions is
recorded as follows:

Table 15: Relationship Conflict

( n =250 )

Sr. Strongly Strongly

Statements agree
Agree Neutral Disagree
disagree
No.

There is an unwanted
influence of non-working
1 76 32 12 75 55
family members / outsiders
on some family members.

Some family members are

dissatisfied with their share
2 100 44 12 59 35
of earnings and profit
from the business.

Some family members lack

3 trust and respect for other 72 24 32 55 67
members.

Some non-working women

family members adversely
influenced business
4 64 12 12 83 79
decision.
 Some family members take
advantage of the family
5 64 36 12 71 67
name and reputation for
their selfish gain.

Some family members are

not transparent to other
6 100 32 24 55 39
members in their business
/financial dealings.

There is given some undue

7 importance to some family 56 32 28 79 55
members.

There is increasing
differences among family
8 92 20 56 55 27
members due to entry of
younger generation.

There is a feeling of
9 competition/rivalry among 100 36 24 59 31
some family members.

There is dissatisfaction
among some family
10 92 48 20 51 39
members on sharing of
power and authority.

There is difference among

family members on
11 84 40 28 63 35
succession and future
leadership of the business.

In our family business,

most of the decisions are
12 108 70 8 24 40
taken by the leader/head of
the family.
 Table 16: Latent Conflict

( n =250 )

Sr. Strongly Strongly

Statements Agree Neutral Disagree
No. agree disagree

There is lack of
13 communication among 88 28 24 59 51
family members.

Some family members

have incompatible
14 60 32 24 87 47
conflicting styles of
running the business.

Some family members

take important decision
15 80 44 8 71 47
without the consent of
other family members.

In our family, some

members do not have
16 faith and confidence in 44 20 24 95 67
the leader / head of the
family.

In our family, all the

working and non-
17 working family 20 40 16 115 59
members do not meet
regularly /frequently.

Growth / performance
of the business are
18 suffering due to the 92 44 4 83 27
differences among
family members.
 Table 17: Process Conflict
( n =250 )

Sr. Strongly Strongly

Statements Agree Neutral Disagree
No. agree disagree

Some family members

have overlapping roles
19 16 52 48 95 39
and responsibilities in
the business.

Some family members

spend a lot of time in
20 day- to- day operations 48 32 48 87 35
rather than focusing on
business growth.

We do not have
transparent, well-
21 organized processes 52 36 24 95 43
and policies in the
business operations.

Table 18: Task Conflict

( n =250 )

Sr. Strongly Strongly

Statements Agree Neutral Disagree
No. agree disagree

Some family members

are ambitious and
want to grow the
22 128 64 8 35 15
business faster than
the other members
would like.

There are differences

among family
23 members on long term 76 40 20 79 35
goals and future
direction of the
business
 Table 19: Lack of Conflict Prevention Norms
( n =250 )

Sr. Strongly Strongly

Statements Agree Neutral Disagree
No. agree disagree

In our family, it is
important to follow
24 16 48 24 99 63
family traditions and
customs.

In our family, all the

members do not have
25 4 20 32 151 43
equal standard of
living.

In our family business,

the younger members
are not encouraged to
26 28 20 28 115 59
start their independent
ventures to avoid
conflict.

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5

Using rating of these questions, score of conflict is calculated using formula given
below.

In analysis of data following parameters are considered. Mean score for each
parameter is calculated using formula given below:
 Sum of scores of all questions
Mean Score = ------------------------------------------ * 100
Maximum Scores of all questions

Mean score for each parameter are as follows:

Table 20: Mean Score according to types of conflict

Std.
N Minimum Maximum Mean
Deviation
Mean score of
250 25.00 100.00 63.83 21.15
Relationship Conflict
Mean score of Latent
250 20.00 100.00 58.26 21.68
Conflict
Mean score of Process
250 20.00 100.00 55.76 21.40
Conflict
Mean Score of Task
250 20.00 100.00 71.92 24.68
Conflict
Mean score of Lack of
conflict prevention 250 20.00 86.67 46.37 15.24
norms

A comparison of mean and standard deviation of independent variables for split and
no split category is shown in above table. This information is represented using bar
diagram as shown below:
Fig. 3: Mean Score according to types of conflict

80.00 71.92
70.00 63.83
58.27 55.76
60.00 46.37
50.00
40.00
30.00
20.00
10.00
0.00

Relationship Latent Process Task Lack of

Conflict Conflict Conflict Conflict Conflict
Prevention
Norms
Levels of Conflict

To study levels of conflict respondents are classified into three categories high, low
and moderate. These categories are formed using arithmetic mean and standard
deviation which are explained as given below:

Relationship Conflict:

For Relationship Conflict Mean score is 63.83

Standard Deviation is 21.15

Lower Limit = Mean – SD = 42.68

Upper Limit = Mean + SD = 84.98

Low conflict is score 42.68 and below

Moderate Conflict is score between 42.68 and 84.98
High Conflict is score 84.98 and above

Table 21: Level of Relationship Conflict

No. of
Percent
respondents
Low 43 17.20

Moderate 155 62.00

High 52 20.80

Total 250 100.00

Above table indicate that out of 250 family businesses 43 belong to low level of
relationship conflicts, 155 belong to moderate level of relationship conflicts and 52
belong to high level of relationship conflicts.

Most of the respondents from the Kolhapur, Pune and Solapur cities witnessed high
level of relationship conflict as compared to Satara and Sangli. Most of the
Respondents from Satara and Sangli cities witnessed moderate and low level of
relationship conflict.

It was observed that the overt Relationship Conflict includes anger, frustration,
jealousy, feeling of rivalry, nepotism, dissatisfaction on distributive issues of wealth
and power, non transparency in financial dealings, lack of trust and respect among
family members are highly responsible for the high level of relationship conflicts in
the family managed business.

Latent Conflict:

For Latent Conflict Mean score is 58.26

Standard Deviation is 21.68

Lower Limit = Mean – SD = 36.58

Upper Limit = Mean + SD = 79.94

Low conflict is score 36.58 and below

Moderate Conflict is score between 36.58 and 79.94
High Conflict is score 79.94 and above

Table 22: Level of Latent Conflict

No. of
Percent
respondents
Low 35 14.00

Moderate 171 68.40

High 44 17.60

Total 250 100.00

Above table indicates that out of 250 family businesses 35 belong to low level of
Latent conflict, 171 belong to moderate level of Latent conflict and 44 belong to high
level of Latent conflicts.

Most of the respondents from the Kolhapur, Satara and Solapur cities witnessed high
and moderate level of Latent conflict as compared to Sangli and Pune. Most of the
Respondents are from Pune and Sangli cities witnessed moderate and low level of
Latent conflict.

It was observed that the Latent Conflict includes hidden, under-the-surface emotional
conflict with family members perceptions of interpersonal incompatibility, lack of
commitment, tension, suspicion, lack of communication, conflicting styles and
misaligned interests between the family and the business are highly responsible for
high level of Latent conflict in family managed business.

Process Conflict:

For Process Conflict Mean score is 55.76

Standard Deviation is 21.40

Lower Limit = Mean – SD = 34.36

Upper Limit = Mean + SD = 77.16

Low conflict is score 34.36 and below

Moderate Conflict is score between 34.36 and 77.16
High Conflict is score 77.16 and above
 Table 23: Level of Process Conflict

No. of
Percent
respondents
Low 39 15.60

Moderate 171 68.40

High 40 16.00

Total 250 100.00

Above table indicates that out of 250 family businesses 39 belong to low level of
process conflict, 155 belong to moderate level of process conflict and 52 belong to
high level of process conflict.

Most of the respondents from Kolhapur, Pune and Solapur cities witnessed high and
moderate level of Process conflict as compared to Sangli and Satara. Most of the
Respondents are from Satara and Sangli cities witnessed moderate and low level of
Process conflict.

It was observed that the Process Conflict includes overlapping roles and
responsibilities of family members, spending lot of time in day to day operations
rather than focusing on business growth, lack of transparent and well organised
processes and policies in the business operations are highly responsible for high level
of Process Conflict in family managed business.

Task Conflict:

For Task Conflict Mean score is 71.92

Standard Deviation is 24.68

Lower Limit = Mean – SD = 47.24

Upper Limit = Mean + SD = 96.60
Low conflict is score 47.24 and below
Moderate Conflict is score between 47.24 and 96.60
High Conflict is score 96.60 and above

Table 24: Level of Task Conflict

No. of
Percent
respondents
Low 50 20.00

Moderate 136 54.40

High 64 25.60

Total 250 100.00

Above table indicate that out of 250 family businesses 50 respondents belong to low
level of Task conflict, 136 belong to moderate level of Task conflict and 64 belong to
high level of Task conflict.

Most of the respondents from Satara, Solapur and Kolhapur cities witnessed high and
moderate level of Task conflict as compared to Sangli and Pune. Most of the
Respondents are from Pune and Sangli cities witnessed moderate and low level of
Process conflict.

It was observed that the Task Conflict issues are ownership and executive leadership
continuity or change, long term direction and role of the business in the society are
highly responsible for the high level of Task Conflict in family managed business.
 Testing of Hypothesis

The hypotheses for the study are tested below:

Relationship Conflict:

Impact of Relationship Conflict on family managed businesses

Ho1: There is no association between relationship conflict and split in business.

H11: There is an association between relationship conflict and split in business.

To test above hypothesis bivariate frequency table is prepared which is as

shown below:

Table 25: Bivariate frequency table according to split in business

and level of Relationship Conflict

Level of Relationship Conflict Total

Low Moderate High

Yes 4 100 44 148

Split in
Business
No 39 55 8 102

Total 43 155 52 250

The total sample of 250 respondents comprised of two categories: one category of
respondents whose family businesses had gone through splits in the past and another
category of the respondents whose family businesses had never gone through a split in
their business history. Above table indicates that out of 250 family businesses 43
belong to low level of relationship conflict. Out of these 4 firms has split in businesses
but remaining 39 firms has no split in businesses. There are 155 family businesses
belongs to moderate level of relationship conflict. Out of these 100 firms have split in
businesses but remaining 55 firms have no split in businesses. There are 52 family
businesses belong to high level of relationship conflict. Out of these 44 firms has split
in businesses but remaining 8 firms has no split in businesses.
Above information is presented using multiple bar diagram as follows.

Fig. 4: Split in business and level of Relationship Conflict

Chi- square test is used to test association between relationship conflict and split in
business. The results of the test are as follows:

Chi- square test:

Chi square calculated value = 60.045
Degrees of freedom = 2
Chi square tabulated value(5% level of significance) = 5.99
Result of test = Rejected

Conclusion: Since the chi square calculated value (60.045) is greater than chi square
tabulated value (5.99) at 5% level of significance. Hence test is rejected, therefore null
hypothesis (H01) is rejected and alternative hypothesis (H11) is accepted.
Therefore Conclusion is, there is an association between relationship conflict and split
in business.

Level of Relationship Conflict for the survey respondents who witnessed split in the
family managed business is considerable higher than the level of Relationship
Conflict for the respondents who never witnessed a split in the family managed
business.

Relationship Conflict for split and no split firms:

To study significance of mean score of relationship conflicts of split and no split firms
T-test is applied.

Ho1a: There is no significant difference in mean score of relationship conflict of split

firms and no split firms.

H11a: There is a significant difference in mean score of relationship conflict of split

firms and no split firms.

To study above hypothesis mean and standard deviations are calculated for
relationship conflict of split firms and no split firms. Results are as follows:

To test above hypothesis paired t-test is applied and results are as follows:

Differ Calc Tabl

Relationship ence ulate e T-
N Mean SD Significance
conflict of d T- valu
Mean value e
Split Firm 148 74.32 16.52
25.71 11.58 1.96 Significant
No split Firm 102 48.61 17.63

From the above table it is observed that calculated value of T-test (11.58) is greater
than table value of T-test (1.96). Therefore test is rejected and subsequently Null
hypothesis is rejected and Alternate hypothesis is accepted.
Conclusion: There is a significant difference in mean score of relationship conflict of
split firms and no split firms. Finding of the test is, Relationship conflict of split firms
is greater than no split firms.

Therefore Relationship Conflict is significantly higher in the family businesses that

had gone through split compared to no-split family businesses.

Relationship conflict of different cities:

To study significance of mean scores of Relationship conflict of five different cities

mean and SD is calculated given below:

Table 26: Descriptive Statistics Relationship conflicts of different cities

Relationship conflict N Minimum Maximum Mean Std.

score of cities Deviation

Pune Firm RL score 50 25.00 100.00 63.83 19.40

Satara Firm RL score 50 25.00 100.00 59.60 22.07

Sangli Firm RL score 50 40.00 100.00 64.69 14.86

Solapur Firm RL score 50 28.33 100.00 62.66 25.74

Kolhapur Firm RL score 50 30.00 100.00 68.36 22.03

H01b: There is no significant difference between Relationship conflicts of five

different cities.

H11b: There is a significant difference between Relationship conflicts of five different

cities.
To test above hypothesis ANOVA is obtained and F-test is applied. Results of test are
as follows:

F
Sum of Mean calcula F table
df Result
Squares Square ted value
value
Mean Between 2029.222 4 507.306 1.136 2.76 Accepted
score of Groups
Relations
Within 109416.611 245 446.598
hip
Groups
conflict
Total 111445.833 249

Above table indicates that F-calculated (1.136) is less than F-table value(2.76) at 5%
level of confidence. Therefore F-test is accepted and null hypothesis is accepted.

Conclusion: Hence it is concluded that there is no significant difference in

relationship conflicts of five different cities.

Latent Conflict:

Impact of Latent Conflict on family managed businesses

The hypothesis for the study tested

Ho2: There is no association between Latent conflict and split in business.

H12: There is an association between Latent conflict and split in business.

To test above hypothesis bivariate frequency table is prepared which is as shown

below:
 Table 27: Bivariate frequency table according to split in
business and level of Latent Conflict

Level of Latent Conflict Total

Low Moderate High

Yes 4 100 44 148

Split in
Business
No 31 71 0 102

Total 35 171 44 250

Above table indicates that out of 250 family businesses 35 belong to low level of
Latent conflicts. Out of these 4 firms has split in businesses but remaining 31 firms
has no split in businesses. There are 171 family businesses belong to moderate level
of Latent conflict. Out of these 100 firms has split in businesses but remaining 71
firms has no split in businesses. There are 44 family businesses belongs to high level
of Latent conflict. Out of these 44 firms has split in businesses but no firm
acknowledged split in businesses.

Above information is presented using bar diagram as follows.

Fig. 5: Split in business and level of Latent Conflict

120
100
Level of Latent Conflict

100

80 71

60 Low
44
40 31 Moderate
20 High
4 0
0
Yes No
Split in Business
Chi- square test is used to test association between Latent conflict and split in
business. The results of the test are as follows:

Chi- square test:

Chi square calculated value = 63.430

Degrees of freedom = 2
Chi square tabulated value(5% level of significance) = 5.99
Result of test = Rejected

Conclusion: Since the chi square calculated value (63.430) is greater than chi square
tabulated value (5.99) at 5% level of significance. Hence test is rejected, therefore null
hypothesis (H02) is rejected and alternative hypothesis (H12) is accepted.

Therefore Conclusion is, there is an association between Latent Conflict and split in
business.

Level of Latent Conflict for the survey respondents who witnessed split in the family
managed business is considerable higher than the level of Latent Conflict for the
respondents who had never witnessed a split in the family managed business.

Latent Conflict for split and no split firms:

H02a: There is no significant difference in mean score of Latent conflict of split firms
and no split firms.

H12a: There is a significant difference in mean score of Latent conflict of split firms
and no split firms.

To study the above hypothesis mean and standard deviations are calculated for Latent
conflict of split firms and no split firms. Results are as follows:

To test above hypothesis paired t-test is applied and results are as follows:
 Diffe Calc
Table
Latent rence ulate
N Mean SD T- Significance
Conflict of d T-
value
Mean value
Split Firm 148 69.82 17.95
No split 28.32 13.68 1.96 Significant
102 41.50 14.53
Firm

From above table it is observed that calculated value of T-test (13.68) is greater than
table value of T-test (1.96). Therefore test is rejected and subsequently Null
hypothesis is rejected and Alternate hypothesis is accepted.

Conclusion: There is significant difference in mean score of Latent conflict of split

firms and no split firms. Finding of the test is, Latent conflict of split firms is greater
than no split firms.

Therefore Latent Conflict is significantly higher in the family businesses that had
gone through split compared to no-split family businesses.

Latent Conflict of different cities:

To study significance of mean score of Latent conflict of five different cities mean
and SD are calculated as follows:
 Tabel 28: Descriptive Statistics Latent conflicts of different cities

N Minimum Maximum Mean Std.

Deviation

Pune Firm LT score 50 20.00 83.33 57.60 18.27

Satara Firm LT score 50 20.00 100.00 57.33 22.33

Sangli Firm LT score 50 23.33 100.00 59.93 21.61

Solapur Firm LT 24.03

50 20.00 100.00 59.60
score
Kolhapur Firm LT 56.86 22.46
50 20.00 100.00
score

H02b: There is no significant difference between Latent conflicts of five different

cities.

H12b: There is a significant difference between Latent conflicts of five different cities.

To test above hypothesis ANOVA is obtained and F-test is applied. Results of test are
as follows:

F
Sum of Mean calculat F table
Df Result
Squares Square ed value
value
Mean score Between 391.556 4 97.889 0.205 2.76 Accepted
of Latent Groups
conflict
Within 116724.000 245 476.424
Groups
Total 117115.556 249

Above table indicates that F-calculated (0.205) is less than F-table value(2.76) at 5%
level of confidence. Therefore F-test is accepted and null hypothesis is accepted.
Conclusion: Hence it is concluded that there is no significant difference in Latent
conflicts of five different cities.

Process Conflict:

Impact of Process Conflict on family managed businesses

Ho3: There is no association between Process conflict and split in business.

H13: There is an association between Process conflict and split in business.

To test above hypothesis bivariate frequency table is prepared which is as shown

below:

Table 29: Bivariate frequency table according to split

in business and level of Process Conflict

Level of Process Conflict Total

Low Moderate High

Yes 24 92 32 148
Split in
Business
No 15 79 8 102

Total 39 171 40 250

Above table indicates that out of 250 family businesses 39 belongs to low level of
process conflict. Out of these 24 firms have split in businesses but remaining 15 firms
has no split in businesses. There are 171 family businesses belong to moderate level
of process conflict. Out of these 92 firms has split in businesses but remaining 79
firms has no split in businesses. There are 40 family businesses belongs to high level
of process conflict. Out of these 32 firms has split in businesses but remaining 8 firms
has no split in businesses.
Above information is presented using bar diagram as follows.

Fig.6: Split in business and level of Process Conflict

Chi- square test is used to test association between Process conflict and split in
business. The results of the test are as follows:

Chi- square test:

Chi square calculated value = 9.317

Degrees of freedom = 2
Chi square tabulated value (5% level of significance) = 5.99
Result of test = Rejected

Conclusion: Since the chi square calculated value (9.317) is greater than chi square
tabulated value (5.99) at 5% level of significance. Hence test is rejected, therefore null
hypothesis (H03) is rejected and alternative hypothesis (H13) is accepted.

Therefore Conclusion is, there is an association between Process Conflict and split in
business.
Level of Process Conflict for the survey respondents who witnessed split in the family
managed business is considerable higher than the level of Process Conflict for the
respondents who never witnessed a split in the family managed business.

Process Conflict for split and no split firms:

Ho3a: There is no significant difference in mean score of Process conflict of split firms
and no split firms.

H13a: There is a significant difference in mean score of Process conflict of split firms
and no split firms.

To study the above hypothesis mean and standard deviations are calculated for
Process conflict of split firms and no split firms. Results are as follows:

To test above hypothesis paired t-test is applied and results are as follows:

Differ Calc
Table
Process ence ulate
N Mean SD T- Significance
Conflict of d T-
value
Mean value
Split Firm 148 60.35 22.15
11.27 4.36 1.96 Significant
No split Firm 102 49.08 18.40

From above table it is observed that calculated value of T-test (4.36) is greater than
table value of T-test (1.96). Therefore test is rejected and subsequently Null
hypothesis is rejected and Alternate hypothesis is accepted.

Conclusion: There is significant difference in mean score of Process conflict of split

firms and no split firms. Finding of the test is, Process conflict of split firms is greater
than no split firms.

Therefore Process Conflict is significantly higher in the family businesses that had
gone through split compared to no-split family businesses.
Process conflict of five different cities:

To study the significance of mean scores of Process conflict of five different cities
mean and SD are calculated as follows:
Tabel 30: Descriptive Statistics Process conflicts of different cities
N Minimum Maximum Mean Std.
Deviation
Pune Firm PR score 50 20.00 93.33 59.73 21.71
Satara Firm PR score 50 20.00 100.00 53.20 20.97
Sangli Firm PR score 50 40.00 80.00 63.59 10.87
Solapur Firm PR score 50 20.00 73.33 46.13 20.24
Kolhapur Firm PR score 50 20.00 100.00 56.13 26.60

H03b: There is no significant difference between Process conflicts of five different

cities.
H13b: There is a significant difference between Process conflicts of five different
cities.

To test above hypothesis ANOVA is obtained and F-test is applied. Results of test are
as follows:

F
F
Sum of Mean calcula
Df table Result
Squares Square ted
value
value
Mean score Between 8830.933 4 2207.733 5.141 2.76 Rejected
of Process Groups
conflict Within 105208.000 245 429.420
Groups
Total 114038.933 249
The above table indicates that F-calculated (5.141) is greater than F-table value (2.76)
at 5% level of confidence. Therefore F-test is rejected and null hypothesis is rejected.
Alternative hypothesis accepted.

Conclusion: Hence it is concluded that there is significant difference in Process

conflicts of five different cities.

Task Conflict:

Impact of Task Conflict on family managed businesses

Ho4: There is no association between Task conflict and split in business.

H14: There is an association between Task conflict and split in business.

To test above hypothesis bivariate frequency table is prepared which is as shown

below:

Table 31: Bivariate frequency table according to split

in business and level of Task Conflict

Level of Task Conflict Total

Low Moderate High

Yes 12 92 44 148
Split in
Business
No 38 44 20 102

Total 50 136 64 250

Above table indicates that out of 250 family businesses 50 belong to low level of task
conflict. Out of these 12 firms has split in businesses but remaining 38 firms has no
split in businesses. There are 136 family businesses belong to moderate level of task
conflict. Out of these 92 firms has split in businesses but remaining 44 firms has no
split in businesses. There are 64 family businesses belong to high level of task
conflict. Out of these 44 firms has split in businesses but remaining 20 firms has no
split in businesses.

Above information is presented using bar diagram as follows.

Fig. 7: Split in business and level of Task Conflict

Chi- square test is used to test association between Task conflict and split in business.
The results of the test are as follows:

Chi- square test:

Chi square calculated value = 32.083

Degrees of freedom = 2
Chi square tabulated value(5% level of significance) = 5.99
Result of test = Rejected

Conclusion: Since the chi square calculated value (32.083) is greater than chi square
tabulated value (5.99) at 5% level of significance. Hence test is rejected, therefore null
hypothesis (H04) is rejected and alternative hypothesis (H14) is accepted.
Therefore it is concluded that, there is an association between Task Conflict and split
in business.

Level of Task Conflict for the survey respondents who witnessed split in the family
managed business is considerable higher than the level of Task Conflict for the
respondents who never witnessed a split in the family managed business.

Task Conflict for split and no split firms:

Ho4a: There is no significant difference in mean score of Task conflict of split firms
and no split firms.

H14a: There is a significant difference in mean score of Task conflict of split firms and
no split firms.

To study above hypothesis mean and standard deviations are calculated for Task
conflict of split firms and no split firms. Results are as follows:

To test above hypothesis paired t-test is applied and results are as follows:

Diffe Calc
Table
Task N rence ulate
Mean SD T- Significance
Conflict of d T-
value
Mean value
Split
148 78.10 20.84
Firm
15.17 4.75 1.96 Significant
No split
102 62.94 27.05
Firm

From the above table it is observed that calculated value of T-test (4.75) is greater
than table value of T-test (1.96). Therefore test is rejected and subsequently Null
hypothesis is rejected and Alternate hypothesis is accepted.
Conclusion: There is significant difference in mean score of Task conflict of split
firms and no split firms. Finding of the test is, Task conflict of split firms is greater
than no split firms.

Therefore Task Conflict is significantly higher in the family businesses that had gone
through split compared to no-split family businesses.

Task conflict of five different cities:

To study significance of mean scores of Task conflict of five different cities mean and
SD are calculated as follows:

Tabel 32 : Descriptive Statistics of Task Conflict of five different cities

N Minimum Maximum Mean Std.

Deviation
Pune Firm Task score 50 20.00 100.00 68.00 23.56
Satara Firm Task score 50 20.00 100.00 69.00 24.92
Sangli Firm Task score 50 30.00 100.00 79.20 22.48
Solapur Firm Task
50 20.00 100.00 71.00 24.26
score
Kolhapur Firm Task
50 20.00 100.00 72.40 27.29
score

H04b: There is no significant difference between Task conflicts of five different cities.
H14b: There is a significant difference between Task conflicts of five different cities.

To test above hypothesis ANOVA is obtained and F-test is applied. Results of test are
as follows:
 F
Sum of Mean calcula F table
Df Result
Squares Square ted value
value
Mean Between 3898.400 4 974.600 1.616 2.76 Accepted
score of Groups
Task
Within 147780.000 245 603.184
conflict Groups

Total 151678.400 249

Above table indicate that F-calculated (1.616) is less than F-table value(2.76) at 5%
level of confidence. Therefore F-test is accepted and null hypothesis is accepted.

Conclusion: Hence it is concluded that there is no significant difference in Task

conflicts of five different cities.

Therefore Task Conflict is significantly higher in the family businesses that had gone
through split compared to no-split family businesses.

Lack of Conflict Prevention Norms:

Impact of Lack of conflict prevention norms on family managed businesses

Ho5: There is no association between Lack of conflict prevention norms and split in
business.

H15: There is an association between Lack of conflict prevention norms and split in
business.

To test above hypothesis bivariate frequency table is prepared which is as shown

below:
 Table 33: Bivariate frequency table according to split in business
and level of Conflict prevention norms

Level Lack of Conflict Total

prevention norms
Low Moderate High

Yes 16 104 28 148

Split in
Business
No 19 79 4 102

Total 35 183 32 250

Above table indicates that out of 250 family businesses 35 belong to low level of
Lack of conflict prevention norms. Out of these 16 firms has split in businesses due to
lack of conflict prevention norms but remaining 19 firms has no split in businesses.
There are 183 family businesses belongs to moderate level of Lack of conflict
prevention norms. Out of these 104 firms has split in businesses due to lack of conflict
prevention norms but remaining 79 firms has no split in businesses. There are 32
family businesses belongs to high level of Lack of conflict prevention norms. Out of
these 28 firms has split in businesses due to lack of conflict prevention norms but
remaining 20 firms has no split in businesses.

Above information is presented using bar diagram as follows.

Fig. 25 : Split in business and level of Conflict Prevention norms
Chi- square test is used to test association between Lack of conflict prevention norms
and split in business. The results of the test are as follows:

Chi- square test:

Chi square calculated value = 13.671

Degrees of freedom = 2
Chi square tabulated value(5% level of significance) = 5.99
Result of test = Rejected

Conclusion: Since the chi square calculated value (13.671) is greater than chi square
tabulated value (5.99) at 5% level of significance. Hence test is rejected, therefore null
hypothesis (H05) is rejected and alternative hypothesis (H15) is accepted.

Therefore Conclusion is, there is an association between Lack of Conflict Prevention

norms and split in business.

The analysis revealed that Lack of conflict prevention norms is highly responsible for
the split in family managed business.

Lack of conflict Prevention norms for split and no split firms:

H05a: There is no significant difference in mean score of lack of conflict prevention

norms of split firms and no split firms.

H15a: There is a significant difference in mean score of lack of conflict prevention

norms of split firms and no split firms.

To study above hypothesis mean and standard deviations are calculated for Task
conflict of split firms and no split firms. Results are as follows:

To test above hypothesis paired t-test is applied and results are as follows:
 Lack of Differ
Calcul Table
conflict ence Significanc
N Mean SD ated T- T-
prevention of e
value value
norms Mean
Split Firm 148 49.00 15.41
No split 6.46 3.40 1.96 Significant
102 42.54 14.22
Firm

From the above table it is observed that calculated value of T-test (3.40) is greater
than table value of T-test (1.96). Therefore test is rejected and subsequently Null
hypothesis is rejected and Alternate hypothesis is accepted.

Conclusion: There is a significant difference in mean score of Lack of conflict

prevention norms of split firms and no split firms. Finding of the test is, conflicts in
split firms are greater than no split firms due to lack of conflict prevention norms.

Therefore Conflicts in split firms are greater than no split firms due to lack of conflict
prevention norms.

Lack of Conflict prevention norms of five different cities:

To study significance of mean scores of Lack of conflict prevention norms of five

different cities mean and SD are calculated as follows:
Tabel 34: Descriptive Statistics lack of conflict prevention norms of five
different cities
N Minimum Maximum Mean Std.
Deviation
Pune Firm LCPN
50 20.00 80.00 46.66 23.56
score
Satara Firm LCPN
score 50 20.00 66.67 46.93 24.92

Sangli Firm LCPN

score 50 26.67 73.33 54.66 22.48

Solapur Firm LCPN

50 20.00 53.33 40.93 24.26
score
Kolhapur Firm
LCPN score 50 20.00 86.67 42.66 27.29
H05b: There is no significant difference between Lacks of conflict prevention norms
of five different cities.

H15b: There is a significant difference between Lacks of conflict prevention norms of

five different cities.

To test above hypothesis ANOVA is obtained and F-test is applied. Results of test are
as follows:

F F
Sum of Mean
Df calculate table Result
Squares Square
d value value
Mean Between 5625.600 4 1406.400 6.593 2.76 Rejected
score of Groups
Lack of Within 52264.000 245 213.322
Conflict
Groups
prevention
Norms Total 57889.600 249

Above table indicates that F-calculated (6.593) is greater than F-table value (2.76) at
5% level of confidence. Therefore F-test is rejected and null hypothesis is rejected.
Alternative hypothesis accepted.

Conclusion: Hence it is concluded that there is significant difference in Lack of

conflict prevention norms of five different cities.
 CHAPTER 7

MAJOR FINDINGS AND CONCLUSION

 CHAPTER 7

MAJOR FINDINGS AND CONCLUSION

Explicit findings about family managed businesses appeared, which gave significant
insight into the demographics and characteristics of family managed businesses.
These findings are given below:

Demographics of the respondents

1. Type of business

The analysis revealed that family managed businesses involvement according to type
of business skewed towards manufacturing sector. Almost 46 % Family managed
business involved in various manufacturing activities.

2. Participation women family members in business

The analysis revealed that only 8% women are involved in family managed business.
Women respondents are either daughters or granddaughters as owner managers in
their respective businesses. Family business is a male dominated field not only in
India but all over the world. A Finding shows that male gender dominance is still in
owning and managing family businesses. Succession rights are passed on to the male
members in most cases and only in few or exceptional cases, women, either wives or
daughters are made successors and given ownership rights.

3. Involvement in Business

The analysis revealed that most of the family members 92% are full time involved in
their family business. Only 8% respondents worked as a part-time. One of the
characteristics of the family business is that it can be an employment platform for the
family members. Many a times, some family members are legally shown to be
employed in the business but do not participate in the business or at times, family
members work part-time in the business, especially the youngest or the oldest
members.

4. Working members

The analysis revealed that about 83% are immediate relatives and 17% are other
relatives working in the family business. The family members included respondents’
immediate family as well as extended family of uncles, cousins and nephews. Number
of family members working in the family business is an important criterion from
conflict perspective. Dynamics of the family business changes with the number of
family members working in the business.

5. Status of business after split

The analysis revealed that 45% respondents mentioned that both the businesses are
doing better after the split compared to when they were together. Therefore split
could be a strategic tool for the family businesses to exploit growth opportunities in
the business and becomes a new ownership structure with different business.

6. Family Council

The analysis revealed that almost 94% respondents mentioned that they did not have a
family council or any other mechanism to address the issues of the family and the
business. Only 6% respondents had family councils in their family businesses.
Establishment of a family council is one of the core mechanisms that help in long
term sustenance of family businesses, particularly addressing the issue of succession
and prevention of conflict.

Causes of Conflict

1. Succession Planning

Analysis reveals that succession planning is given low importance in family managed
businesses. Difference on succession and future leadership are prominent causes of
conflict, classified under Relationship Conflict. Respondents, who had not gone
through a split in their family businesses, disagreed that they had problems of
succession and future leadership.

2. Younger Generations Entry

Analysis reveals that respondents from split and no-split family businesses strongly
agreed that entry of younger generations in their family business cause an increase in
conflict. During generational transition, differences arising among two or multiple
generation members on business decisions, operational issues, long term strategies
etc.

3. Lack of Conflict prevention Norms

Analysis reveals that respondents from split and no-split family businesses strongly
agreed that Lack of conflict prevention norms had caused or increased conflict. Also,
in family businesses, emotions are sometime quite high which makes it difficult to
resolve issues in an effective way. The inferences can be drawn from this finding that,
there are certain practices followed by family businesses to keep their cohesion intact
and manage conflict.

Impact of conflict: Split

The total sample of 250 respondents comprised two categories: one category of
respondents whose family businesses had gone through splits in the past and another
category of the respondents whose family businesses had never gone through a split in
their business history. About 148 (59%) respondents acknowledged the split in their
family businesses and 102 (41%) respondents had never gone through a split in their
family business.

The primary purpose of the study was to understand the impact of conflict in family
managed businesses in the form of split.
As per the analysis there are five causes of conflict in family managed business that
exhibited a significant relationship to family conflict and split in family managed
businesses are: Relationship conflict, Latent conflict, Process conflict, Task conflict
and lack of conflict prevention norms. The analysis revealed that these causes are
present in all the sample family managed businesses. However, respondents of two
categories i.e. split and no-split family managed businesses differed in their opinions
about the intensity of these causes.

1. The analysis revealed that the overt Relationship Conflict includes anger,
frustration, jealousy, feeling of rivalry, nepotism, dissatisfaction on distributive issues
of wealth and power, non transparency in financial dealings, lack of trust and respect
among family members are highly responsible for the split in family managed
business.

Level of Relationship Conflict for the survey respondents who had witnessed split in
the family managed business is considerable higher than the level of Relationship
Conflict for the respondents who had never witnessed a split in the family managed
business.

Therefore Relationship Conflict is significantly higher in the family businesses that

had gone through split compared to no-split family businesses.

2. The analysis revealed that the Latent Conflict includes hidden, under-the-surface
emotional conflict with family members perceptions of interpersonal incompatibility,
lack of commitment, tension, suspicion, lack of communication, conflicting styles and
misaligned interests between the family and the business are highly responsible for
the split in family managed business.

Level of Latent Conflict for the survey respondents who had witnessed split in the
family managed business is considerable higher than the level of Latent Conflict for
the respondents who had never witnessed a split in the family managed business.

Therefore Latent Conflict is significantly higher in the family businesses that had
gone through split compared to no-split family businesses.
3. The analysis revealed that the Process Conflict includes overlapping roles and
responsibilities of family members, spending lot of time in day to day operations
rather than focusing on business growth, lack of transparent and well organised
processes and policies in the business operations are highly responsible for the split in
family managed business.

Level of Process Conflict for the survey respondents who had witnessed split in the
family managed business is considerable higher than the level of Process Conflict for
the respondents who had never witnessed a split in the family managed business.

Therefore Process Conflict is significantly higher in the family businesses that had
gone through split compared to no-split family businesses.

4. The analysis revealed that the Task Conflict issues are ownership and executive
leadership continuity or change, long term direction and role of the business in the
society are highly responsible for the split in family managed business.

Level of Task Conflict for the survey respondents who had witnessed split in the
family managed business is considerable higher than the level of Task Conflict for the
respondents who had never witnessed a split in the family managed business.

Therefore Task Conflict is significantly higher in the family businesses that had gone
through split compared to no-split family businesses.

5. The analysis revealed that Lack of conflict prevention norms is highly responsible
for the split in family managed business.

Therefore Conflicts in split firms are greater than no split firms due to lack of conflict
prevention norms.

6. Most of the respondents from the Kolhapur, Pune and Solapur cities witnessed high
level of relationship conflict as compared to Satara and Sangli. Most of the
Respondents from Satara and Sangli cities witnessed moderate and low level of
relationship conflict.

Most of the respondents from Kolhapur, Satara and Solapur cities witnessed high and
moderate level of Latent conflict as compared to Sangli and Pune. Most of the
Respondents from Pune and Sangli cities witnessed moderate and low level of Latent
conflict.

Most of the respondents from Kolhapur, Pune and Solapur cities witnessed high and
moderate level of Process conflict as compared to Sangli and Satara. Most of the
Respondents from Satara and Sangli cities witnessed moderate and low level of
Process conflict.

Most of the respondents from Satara, Solapur and Kolhapur cities witnessed high and
moderate level of Task conflict as compared to Sangli and Pune. Most of the
Respondents from Pune and Sangli cities witnessed moderate and low level of Process
conflict.

The analysis revealed that there is no significant difference in relationship conflicts,

Latent conflict and Task conflict of five different cities. Scenario of these conflicts is
same in family managed businesses in five different cities. But there is significant
difference in Process conflicts and lack of conflict prevention norms of five different
cities. Importance of family traditions and customs, unequal standard of living is a
current scenario in family managed business of five different cities.
Conclusion:

Family businesses have grown overall and in spite of global competition, have
contributed positively to India’s GDP and economic growth. Family businesses are
dominant in all sectors of industry, family members as employees are prominent in
family businesses

Conflicts are natural occurrence in family businesses. Strategies that work for a
family to resolve conflicts include arbitration, compromise and creative resolution.
The results show that relationship, latent, task, process conflict in a family managed
business positively influence conflict and make it intensive to the extent of splitting
the family business. Lack of conflict prevention norms is also one of the reason
behind conflict in family managed business.

Thus, family managed businesses that obtain desired outcomes for the business and
the family focus on working together as a team to address both business and
individual concerns. Within the larger effort to obtain business and family success,
family managed business can evaluate their conflict status, split possibilities, and
effective conflict resolve strategy to handle impact of conflict and maintain harmony
and enhance competence and performance of the business.
 CHAPTER 8

RECOMMENDATIONS
 CHAPTER 8

Recommendations

The findings of the study noticed that some family owned businesses in Western
Maharashtra have a long-term history of consistent profitability and growth. Others,
however, have a similarly long-term history of weak performance and low growth and
the reason behind this is severe impact of conflicts. Based on the researchers result
and preceding discussions following are the ssuggestions/remedial measures for
change to be brought in family managed business.

1. Inclusion of Younger generation

Separating younger members amicably from the main family business and allowing
them to take an independent path of career is a practical solution for preventing the
possibilities of sourness of relationships and severe conflict in future. However,
managing these differences by inducting younger generation in a planned manner or
using other conflict management mechanisms can be proactive steps in reducing the
chances of aggravated conflict which leads to split.

2. Family Agreement

Family Agreement is a flexible, possibly legally binding document designed to record

and commits the family to the decisions. Such agreement builds trust and
understanding among family members. Hence generating such a written Family
Agreement will help to prevent possibilities of conflict which leads to split.

3. Family Councils

Family Councils are regular, structured forums (meetings) of family members who are
involved in, or have an interest in, a family business. They are treated as retreats to
help families maintain a reasonable level of communication amongst themselves over
important issues that affect them and their family business.
Family Councils addresses the issues/grievances of the working and non-working
family members. Family Councils help to avoid conflicts by ensuring that family
members have a regular opportunity to hear and to be heard about all matters affecting
the family business. Establishing such family councils in family managed business
will help to prevent possibilities of conflict which leads to split.

4. Separation of Ownership from Management Control

Incompetent family members at the top of many businesses is a main reason of

conflict in many family managed businesses. There should be professionalism in a
family business to reduce such conflicts which means the family must make the
mental leap and distinguish between the families interest and the company’s interest
by separating ownership from management control.

Therefore separation of ownership of the business from managing it is a prudent step.

However, such a step is beneficial to avoid and reduce conflict which leads to split in
family managed businesses.

5. Creation of a balanced portfolio of business

In a family managed businesses family values and cultures, including the trusteeship
role provide a strong building block for the future generations to perpetuate and grow
the business. There are systems, processes, practices and rituals to instill them. Of
course, there are conservative families and the relatively aggressive families trying to
perpetuate their families and businesses. Hence Creation of balanced portfolio of
business will be beneficial to avoid and reduce conflict which leads to split in a family
managed businesses.

6. Succession Planning

Succession plan is necessary for the future existence of the firm and it is very
important part of family firm human resource management. Proper succession
planning helps to keep the business, individuals and the families together and also
create an environment where it is possible to celebrate the successes of the past that
make the planned transition both possible and worth. Hence family managed
businesses must plan for future succession planning to avoid conflict.

7. Conflict prevention Norms

Family managed businesses should have formal conflict resolution mechanisms for
dealing with disputes between family members which provide a forum where the
family members in dispute can air their differences and resolve the issues in proper
way. Families should set up conflict resolution committees which include the
involvement of an outsider, a person who is trusted and well respected by the family,
who offers an independent voice. The role of the independent outsider is extremely
important as they bring in objectivity when they are called to help resolve the family
conflicts.

8. Family Governance

Family businesses should implement reasonable governance procedures to deal with

the business dimension. Families should set up formal governance structures for the
family and owners dimensions which develop a common platform of communication
through family council and specify rules and norms. Collective consensus on family
governance norms is essential for cohesion and harmony in the families of the family
managed businesses.
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ANNEXURES
 ANNEXURE – I

Questionnaire

A Study of Conflict and its impact on Family Managed Business in

the form of Split: with Special Reference to major cities in Western
Maharashtra

Section I:

This section deals with the general information about you.

1. Your Business Organisation’s Name and Address :

2. How old is your family business (or year of inception):

3. What is the type of your business/industry :

O Manufacturing O Trading O Service

4. Your age(years):

O 25 - 30 years O 31 – 40 years O 41 – 50 years

O 51 – 60 years O Above 60 years

5. Your gender : O Male O Female

6. Your education qualification (highest):

O Illiterate O Primary school O High school

O Under graduation O Graduation O Post graduation
O Others (please specify)____________

7. No. of years of work experience in the family business:

O 5 - 10 years O 11 – 15 years O 16 – 20 years

O 21 – 25 years O 26-30 years O Above 30 years

8. Your designation in the business:

O Chairperson O Chairperson & MD Managing Director

 O Executive Director O Director

O Manager Executive/Trainee O Other ___________

9. Your involvement in the business:

O Full time O Part time O Advisory

10. No. of family members working in the business as :

O Your immediate relatives (e.g. parents, children, brothers-sisters, spouse):

O Other relatives (e.g. uncles, aunts, cousins, nephews):

11. Has your family business gone through any division/split in past?

O Yes O No

If Yes, how many splits have taken place since the business was found?

O One O Two O Three O More

12. Please check one of the statements given below in context to the division/split
that you have mentioned above:

O Both the businesses after the split are doing better than when they were
together
O Our business is doing better than the other
O Other business is doing better than outs
O Both the businesses after the split are doing worse than when they were
together
O Any other situation (Pl. Specify) _________________________

13. Do you have a ‘Family Council’ or a formal system to addresses the issues /
grievances of the working and non- working family members?
O Yes O No
Section II
Given below are some situations that may be present currently in your family
business/ that may have been present at the time of division / split in your family
business. Please read the statements carefully and tell us to what extent you agree
/disagree with their presence.

Please put a [√] mark to indicate your preference.

Score 5 4 3 2 1
Strongly Strongly
No. Statements Agree Neutral Disagree
agree disagree
Relationship
Conflict

There is an unwanted
influence of non-
working family
1
members / outsiders
on some family
members.

Some family
members are
dissatisfied with
2
their share of
earnings and profit
from the business.

Some family
members lack trust
3
and respect for other
members.

Some non-working
women family
members adversely
4 influenced business
decision.
 Some family
members take
advantage of the
5
family name and
reputation for their
selfish gain.

Some family
members are not
transparent to other
6
members in their
business /financial
dealings.

There is given some

undue importance to
7
some family
members.

There is increasing
differences among
8 family members due
to entry of younger
generation.

There is a feeling of
competition/rivalry
9
among some family
members.

There is
dissatisfaction
among some family
10
members on sharing
of power and
authority.

There is difference
among family
11 members on
succession and
future leadership of
the business.
 In our family
business, most of the
12 decisions are taken
by the leader/head of
the family.

Latent Conflict

There is lack of
communication
13
among family
members.

Some family
members have
14 incompatible
conflicting styles of
running the business.

Some family
members take
important decision
15
without the consent
of other family
members.

In our family, some

members do not have
16 faith and confidence
in the leader / head
of the family.

In our family, all the

working and non-
working family
members do not
17
meet regularly
/frequently.
 Growth /
performance of the
business are
18
suffering due to the
differences among
family members.

Process Conflict

Some family
members have
19 overlapping roles
and responsibilities
in the business.

Some family
members spend a lot
of time in day- to-
20
day operations rather
than focusing on
business growth.

We do not have
transparent, well-
21 organized processes
and policies in the
business operations.

Task Conflict

Some family
members are
ambitious and want
to grow the business
22
faster than the other
members would like.
 There are differences
among family
members on long
23
term goals and future
direction of the
business.

Lack of Conflict
Prevention Norms

In our family, it is
important to follow
24
family traditions and
customs.

In our family, all the

members do not have
25
equal standard of
living.

In our family
business, the
younger members
26 are not encouraged
to start their
independent ventures
to avoid conflict.

THANK YOU VERY MUCH FOR YOUR VALUABLE TIME,

COOPERATION, PATIENCE & INFORMATION.
 ANNEXURE - II
WESTERN MAHARASHTRA DISTRICT DETAILS

Paschim Maharashtra is a region of India's western Maharashtra state, which includes

districts of Pune, Solapur, Satara, Sangli, Kolhapur. This prosperous belt is famous

for its sugar factories. Farmers in the region are economically well off due to fertile

land, good irrigation.

1. Pune district is located between 17 degrees 54' and 10 degrees 24' North latitude

and 73 degrees 19' and 75 degrees 10' East longitude. It is the second largest district in

the state and covers 5.10% of the total geographical area of the state. The landscape of

Pune district is distributed triangularly in western Maharashtra at the foothills of the

Sahyadri Mountains and is divided into three parts: "Ghatmatha", "Maval" and

"Desh". It is well known on the world map because of its educational, research and

development institutions. The district also has an importance for its military base.

Pune district is bound by Ahmadnagar district on North East, Solapur district on the

South East, Satara district on South, Raigad district on the West and Thane district on

the North West. It is the second largest district and covers 5.10% of the total

geographical area of the state. The western region of Pune district has talukas of

Junnar, Ambegaon, Khed, Maval, Mulshi and Velhal and the eastern part consists of

talukas Shirur, Daund, Baramati and Indapur, Bhor, Haveli, Poona City, Purandar.

Pune exemplifies an indigenous Marathi culture and ethos, in which education, arts

and crafts, and theatres are given due prominence. It is cultural capital of the

Maharashtra.

2. Solapur district is located in the Western part of Maharashtra. The presiding deity

of Maharashtra, Lord Vitthal is at Pandharpur in this district. Solapur is famous as a

textile town, especially owing to its talented weavers’ community. A melting pot with

a confluence of Marathi, Telugu and Kannada languages, Solapur district leads in

beedi production. Its great strides in the fields of education, literature and culture as

well as rural prosperity brought in by the cooperation movement have made Solapur

district an important segment of modern Maharashtra. The supreme sacrifice by the

revolutionaries of Solapur has made it immortal. Kundalsangam, Karmala and Barshi

have adopted the path of development through industry and education.

3. Satara District, the seat of Chhatrapati dynasty of Maharashtra, is the highest

sugar--producing district in the State, catering to the 12 cooperative sugar factories

functioning in its jurisdiction. The district has taken a quantum leap in dairy

production and development. The massive Koyna hydroelectric project or the dams at

Dhom, Kanheri, Urmodi and Tarali have made the district fertile though some talukas

are still awaiting irrigation. Satara is called the District of Power due to a chain of

windmills, which dot its mountain ranges. It has won laurels at the national level for

attaining high adult literacy. Sugar industry is one of the important industries in this

district.Mahableshwar is a hill station that is still unparalleled owing to its pristine

beauty and restorative weather. No wonder, this is the first choice of tourists.

Maharashtra’s doyen Y.B.Chavan made this district well known.

4. Sangli District is the birthplace of modern Marathi theatre, especially the

musicals. The land of milk, fruits, temples, wrestlers and warriors, Sangli district is

among the most advanced in India. Asia’s largest cooperative sugar factory

established by Maharashtra’s undisputed leader Vasant Dada Patil is a social and

political magnet. Battis-Shirala is famous around the world for Nagpanchmi

celebrations when thousands of cobras are worshipped freely by people.

Pomegranates and grapes produced in this district have invaded foreign markets,
especially in the West. Progressive steps taken for adopting the latest technology

by this district for modernising agricultural and farm research are remarkable.

Wine production will soon begin on a largescale, adding to India’s foreign

exchange earnings. Miraj, another major town of the district, is famous for

manufacturing winged musical instruments.

5. Kolhapur district is a leading district in dairy farming; it boasts of milk-

production with huge exports of milk and milk-products. The setting up of dairies

Gokul, Warana, Mayur, Sphurti, Yalgud, Shahu has been a landmark in economic

development of the district, especially Gokul Milk Co-operative which is one of the

biggest dairies in India. Kolhapur is situated on the banks of the river Panchganga.

Goddess Ambabai (Mahalaxmi) of Kolhapur is found in almost every Maharashtrian

household. Pioneer social reformer, Chhatrapati Shahu Maharaj, ruled with the object

of uplifting the downtrodden. There 12 talukas in Kolhapur they are Karveer, Kagal,

Panhala, Shahuwadi, Hatkalangale, Shirol, Radhanagri, Bhudargad, Gadhinglaj,

Gaganbawda, Aajra, Chandangad. There are many small scale and cottage industries,

like hand-loom-weaving, silver and gold smithy, oil crushing brick and tile making,

carpentry, leather working and tanning, fibre working and blacksmithy etc., in the

district. The main crops of Kolhapur include Sugar cane, rice, Soyabean, ground nut.

Places like Panhala, Jyotibha, Vishalgad, Nrusinhwadi and Bahubali attract tourists

from all corners of India. Warna, the first Wired Village in India, is a distinctive

feature of this district. Wrestlers of Kolhapur were legends once upon a time. Home to

fine arts like music, painting and cinema, Kolhapur has remained in the vanguard of

industrial innovations even today.

Source : Maharashtra Gazetter and respective Dist. Gazetter, Government of

Maharashtra.
 ANNEXURE – III

GLOBAL SCENARIO OF FAMILY BUSINESS

North America

Canada

Around half of the Canadian workforce is employed by a family business, creating

nearly 45% of Canadian GDP. About 1/3 of Canadian family entrepreneurs are
planning to hand over the company within the near future; 90% of them expect to
hand it over to a family member. While many Canadian family firms see themselves
as competitive in their current market(s), 84.2% do not want to invest in global
expansion. (The PricewaterhouseCoopers Family Business Survey, 2007-08.)

United States

The greatest part of America’s wealth lies with family-owned businesses. Family
firms comprise 80% to 90% of all business enterprises in North America (J.H.
Astrachan and M.C. Shanker, 2003). IFOBs contribute 64% of the GDP or $5,907
billion ($5+ trillion) and employ 62% of the U.S. workforce. (J.H. Astrachan and
M.C. Shanker, 2003). More than 30% of all family-owned businesses survive into the
second generation. Twelve percent will still be viable into the third generation, with
3% of all family businesses operating at the fourth-generation level and beyond.
(Joseph Astrachan,2003) . The leadership of 39% of family-owned businesses will
have changed hands in the next five years (Raymond Institute/MassMutual, American
Family Business Survey, 2003).

34% of family firms expect the next CEO to be a woman; 52% of participants hire at
least one female family member full time, while 10% employ two female family
members of the same status. Of CEOs due to retire within five years aged 61 or older,
55% have not yet chosen their replacement(Raymond Institute/MassMutual,
American Family Business Survey, 2003). 19% of family business participants have
not completed any estate planning other than writing a will; only 37% have written a
strategic plan; and over 60% are very positive about their company’s future
(Raymond Institute/MassMutual, American Family Business Survey, 2003). 85% of
family-owned firms that have identified a successor say it will be a family member.
(Raymond Institute/MassMutual, American Family Business Survey, 2003)

Latin America

Brazil:

The majority of Brazilian businesses are family owned. In 1999, there were
approximately four million registered family-owned businesses in Brazil. Brazil is
home to 20 century-old family-owned firms now in their fourth and fifth generations.
Family-owned firms represent 70% of the largest Brazilian business groups. Family
farming is a key sector of the Brazilian economy. In Brazil, it is estimated that there
are roughly 4.1 million family-owned farming enterprises. Brazilian family-owned
farming enterprises employ 77% of the rural workforce and comprise 84% of the rural
enterprises in the country (Latin Focus Consensus Forecast, 2003).

Chile:

Family businesses in Chile perform fairly well when it comes to corporate

governance, conforming to 65% of the OECD’s Good Practice Standards. Family-
controlled businesses on the Chilean stock market outperform their non-family
controlled counterparts(Jon I. Martinez, Bernardo F. Quiroga & Bernhard S. Stöhr,
June 2007). It is estimated that anywhere from 75% to 90% of all the firms in Chile
are family owned and controlled. Roughly 65% of the medium-to-large-size
enterprises in Chile are family owned. Chile’s family-owned businesses are typically
well-organized corporate entities with decentralized command structures and little
day-to-day control by individual shareholders.

Europe

Austria:

80% of all Austrian businesses are family controlled, employing between 70% and
75% of all employed Austrians. Issuance of non-voting stock is permitted for family
firms only, to enable the option of outside financing without relinquishing
management control. The inheritance tax on generational transfer in family businesses
was abolished by the central government in 2008. Austrian family businesses require
a lower return on equity compared to widely-held firms, which indicates an
orientation towards future survival more than short-term performance.
(European Commission, Enterprise and Industry Directorate-General, 2008).

Belgium:

About 83% of businesses (with at least 5 employees) in the Flemish speaking part of
Belgium are considered a family business in terms of one family possessing majority
of ownership and perceiving the business as a family business( Jorissen, A., Laveren,
E. Martens, R. and Reheul, A.M., 2005). Before 2017, a quarter of Belgian family
businesses will transfer leadership but only 43% knows to whom leadership will be
transferred (Lambrecht and Naudts, 2007). The preference for a familial successor
persists (66%). The leadership landscape of Belgian family businesses will remain
male-dominated with 77% of the businesses selecting a male relative as a future (co)-
leader and 32% a female relative as future (co)-leader (Arijs, 2009).

Family businesses in components-of-involvement terms suffer from ineffective

leadership (less person- and motivation oriented) compared to family businesses in
essence terms (Arijs, 2009). Non-family business leaders typically use a more
effective transformational leadership style than family businesses in components
terms. The difference in leadership style between non-family business leaders and
essence family business leaders is less pronounced (Arijs, 2009).

One fifth of the Belgian family businesses will face a transfer of ownership within ten
years with a 70% preference to keep the business in family hands (Lambrecht, J. and
Naudts, W., 2007). The transfer of ownership will be more gender balanced in the
near future than the transfer of leadership. Among the family businesses having
selected a relative as future owner, 68% selected a male (co)-owner compared to 46%
selecting a female (co)-owner (Arijs, 2009).
Croatia:

Approximately half of Croatia’s employment is created by family businesses, 77% of

which are managed by the owning families without outside involvement (European
Commission, Enterprise and Industry Directorate-General, 2008).

Czech Republic:

80% to 95% of all businesses operating in the country can be classified as family
businesses (European Commission, Enterprise and Industry Directorate-General,
2008).

Denmark:

Depending on how wide or narrow it is defined; family firms comprise 35% to 95%
of all Danish businesses (European Commission, Enterprise and Industry Directorate-
General, 2008).

Estonia:

90% of all Estonian companies are family-owned, creating about half of the country’s
employment. There is no inheritance tax for the generational transfer of family
business ownership (European Commission, Enterprise and Industry Directorate-
General, 2008).

Finland:

More than 90% of all Finnish businesses can be categorized as a family business,
employing more than 40% of the country’s active workforce. (Ministry of Trade and
Industry, July 2006).

France:

Almost two-thirds of family companies are managed by a member of the owning

family. French family firms are generally less affected than non-family companies
during crises due to lower employee wages. Family firm compensation ranges
(manager to base employees) are lower, indicating that family managers do not
reward themselves on a similar scale to widely-held firms (European Commission,
Enterprise and Industry Directorate-General, 2008).

Hungary:

Approximately 70% of all Hungarian businesses are family controlled, contributing to

more than half of the country’s employment (European Commission, Enterprise and
Industry Directorate-General, 2008).

Iceland:

Between 70% and 80% of all Icelandic businesses are counted as family companies,
employing about the same percentage of the national workforce and creating 60% to
70% of national turnover (European Commission, Enterprise and Industry
Directorate-General, 2008).

Ireland:

Almost half of all Irish businesses are family companies, providing 39% of all
employment and producing nearly 30% of national turnover. 33% of Irish capital
acquisitions in the service sector were made by family businesses in 2005 (Central
Statistics Office, Government of Ireland, 2008).

Italy:

73% of all Italian businesses are family-controlled, employing more than half of all
employed Italians. Italy has the highest number of members in the Hénokiens
association, family companies older than 200 years that are still managed and largely
owned by the founding family (European Commission, Enterprise and Industry
Directorate-General, 2008). Dominant shareholders are quite common in Italy. On
average, the largest owner holds more than 50% stake, while the next biggest stake
amounts to an average of between 8% and 10%. This equity is not held by financial
institutions, since those tend to act as lenders, not as shareholders (Garen Markarian,
Lorenzo Pozza, Annalisa Prencipe, 2008).
Latvia:

Almost 70% of the post-Communist Latvian economy is comprised of family

businesses. Family successors of family businesses are not required to pay inheritance
taxes on their companies (European Commission, Enterprise and Industry Directorate-
General, 2008).

Lithuania:

Family businesses have regained their proportion of all Lithuanian businesses - about
38% - in the 20 years since the end of Communism in the country. These firms now
contribute nearly 15% of national value. Lithuanian family businesses hedge against
the instability of their national market by forming close ties with foreign partners on
the demand and supply side (Overview of Family Business Relevant Issues, European
Commission, Enterprise and Industry Directorate-General, 2008).

Lithuanian family entrepreneurs finance their businesses by approaching family and

friends as well as tapping their own resources. Family firms remain the primary
source for employment, despite the country’s well-developed market for skilled labor.
(W. Gibb Dyer & Svetlana Panicheva Mortensen, 2005).

Luxemburg:

Family firms comprise 70% of all businesses in Luxemburg. Only about half of
Luxemburg’s family enterprises have skill/experience requirements for succeeding
family members. Successors in family businesses are taxed at a lower rate than for
other inherited property (Overview of Family Business Relevant Issues, European
Commission, Enterprise and Industry Directorate-General, 2008).

Norway:

Family businesses constitute about 66% of Norwegian private enterprise, creating

around 40% of employment and approximately half of Norwegian national value. In
most cases, the oldest son still inherits the family business despite gender equality in
inheritance having been a legal concept for 150 years (Overview of Family Business
Relevant Issues, European Commission, Enterprise and Industry Directorate-General,
2008). Worker unionization is lower in family firms than in owner-managed
companies (Trygve Gulbrandsen, March 2005).

Poland:

61% of Polish family entrepreneurs have earned a degree in higher education, a figure
that is above the average for other business structures in the country. The typical
sources of capital in Polish family businesses are family savings (44%) and bank
loans (56%) (Overview of Family Business Relevant Issues, European Commission,
Enterprise and Industry Directorate-General, 2008).

Portugal:

70% to 80% of all Portuguese businesses are family controlled, accounting for about
half of the country’s employment and creating 66% of national turnover. To facilitate
generational transfer the Portuguese government has abolished death taxes on family
firms but has levied other taxes on non-family transfers (Overview of Family
Business Relevant Issues, European Commission, Enterprise and Industry
Directorate-General, 2008).

Romania:

Approximately 25% of Romania’s employment is created by family businesses

(Overview of Family Business Relevant Issues, European Commission, Enterprise
and Industry Directorate-General, 2008).

Slovakia:

80% to 95% of all Slovak businesses can be classified as family controlled. Most
Slovakian family firms have very low leverage, having been founded with only family
equity due to the underdeveloped banking system before the late 1990s. There are no
inheritance duties and the government does not tax donations of family companies to
relatives (Overview of Family Business Relevant Issues, European Commission,
Enterprise and Industry Directorate-General, 2008).

Slovenia:
60% to 80% of all Slovenian businesses are family owned, employing 26% of the
active workforce and creating more than 20% of Slovenia’s national value. In about
three-quarters of Slovenian family businesses the oldest child is expected to inherit
the company, regardless of gender (Overview of Family Business Relevant Issues,
European Commission, Enterprise and Industry Directorate-General, 2008).

Spain:

85% of Spanish businesses are categorized as family-owned, and they contribute 70%
of Spain's GDP. An exception in Spanish legal code allows for non-voting stock to
be held in family firms so that they may benefit from outside funds without loss of
control. Inheritance taxes for family firms have been limited and in some regions even
abolished (Overview of Family Business Relevant Issues, European Commission,
Enterprise and Industry Directorate-General, 2008). Spain’s traded companies usually
have a dominant shareholder: 65% of the country’s large companies and 100% of
medium-sized firms. The combined share of the three largest shareholders amounts to
half of the company on average, compared to about one-fifth in the US, Japan and the
UK (Silvia Gomez-Anson & Maria Sacristan-Navarro 2007).

Sweden:

Almost 80% of all Swedish businesses can be classified as family owned, employing
more than 60% of the active workforce and creating about 30% of national turnover.
More than 90% of Swedish family businesses have a family member as CEO. The
government has abolished taxes on inheriting or receiving a family firm as a gift from
a relative (Overview of Family Business Relevant Issues, European Commission,
Enterprise and Industry Directorate-General, 2008).

Switzerland:

Only 36% of Swiss family firms believe that they hold a competitive position in their
market. Of the 30% of Swiss family companies that will be transferred over the next
few years, only 22% are expected to remain with the current family; 28% are likely to
be sold to private equity investors (The PricewaterhouseCoopers Family Business
Survey, 2007-2008.)
Netherlands:

Slightly less than 33% of the Dutch active workforce is employed by family
businesses, which constitute 61% of all Dutch businesses. Dutch government has
enacted special taxation provisions to facilitate succession in family companies
(Overview of Family Business Relevant Issues, European Commission, Enterprise
and Industry Directorate-General, 2008).

United Kingdom:

Almost one-third of UK employees work in family-owned enterprises, which account

for 65% of all UK businesses and contribute nearly 41% of GDP. Around 10% of
total UK tax revenue is generated by family businesses. British family firms fare
better in gender equality than their nonfamily counterparts: The CEO of a family firm
is more likely to be a woman than in nonfamily businesses (Scottish Family Business
Association). Of the family firms that face succession over the next 5 years, 44% are
expected retain control by the current owner-family (The PricewaterhouseCoopers
Family Business Survey, 2007-2008.)

Africa

South Africa:

Within the next five years, 39% of South African family enterprises will experience a
generational transfer; 32% of them expect to pass the business on to the next
generation in the family. Compared to the global average of 39%, South African
family firms are remarkably less concerned about competition (28%). Concern about
strategic issues affecting their company is also lower than the global average
(The PricewaterhouseCoopers Family Business Survey, 2007-2008).

Mid-East

Cyprus:

85% to 90% of all businesses in the divided island state are family firms. They create
around half of the country’s employment and share of national turnover. 63% of
Cypriot family firms expect a qualifying degree in order to assume a leadership
position. Family firms can be passed on to the next generation without inheritance
duties (Overview of Family Business Relevant Issues, European Commission,
Enterprise and Industry Directorate-General, 2008).

Greece:

Families control around 80% of all Greek businesses. Greek family-owned companies
tend to offer lower-level career opportunities to non-family employees. The Greek
government has lowered inheritance and transfer taxes to facilitate business
succession (Overview of Family Business Relevant Issues, European Commission,
Enterprise and Industry Directorate-General, 2008).

Israel:

Among Israel’s large traded firms, those managed by outsiders perform better than
family-managed firms in net income creation (Salvatore Sciascia & Pietro Mazzola,
December 2008.)

Middle East:

Around 75% of the Middle East’s private economy is controlled by 5,000 high-net
worth families, with their companies creating 70% of the region’s employment.
Family businesses control over 90% of commercial activity (Tharawat Magazine). In
the region, it is estimated that family businesses worth more than $1 trillion will be
handed down to the next generation within the next five to ten years (Tharawat
Magazine). With charity being a requirement of Islam, business families in the
Muslim-Arab world have begun to structure their charitable endeavors to improve
their support of the poor (Barclays Wealth & The Economist Intelligence Unit,
Barclays Wealth Insights, 2009.)

All but about 2% of Gulf companies are family controlled; management styles differ
widely among them and depend largely on owner religious affiliation. The array of
Islam’s sectarian groups fosters different management styles, from authoritarian to
consultative (Peter Raven & Dianne H.B. Welsh, 2006).
Turkey:

90% of Turkish businesses constitute family firms. Turkish family companies are
generally reluctant to accept any outsider involvement; slightly more than half think
that outside consulting is unnecessary (Overview of Family Business Relevant Issues,
European Commission, Enterprise and Industry Directorate-General, 2008).

Australia:

67% of Australian companies are family businesses (KPMG 2008 Family Business
Survey). 90% of Australian family businesses employ less than 200 people and are
categorized as "small ( Jill Thomas, Family Business Review, September 2006).
About one-third of Australian family firms are expected to change CEOs over the
next few years, and while 53% are sure that the successor will be a family member,
83% do not have a succession plan. In 60% of Australian family-owned companies,
the owning families are directly involved. A 1997 survey indicated that accountants,
not lawyers, were the primary source of succession planning advice for family
businesses of all generations. However, a 2003 survey showed that 29% of first
generation family businesses use accountants for succession planning and 29% use
lawyers (Kosmas Smyrnios, Australian Family and Private Business Survey, 2003).

China:

Chinese family companies control a proportion of Asia’s economic wealth that is

larger than their relative share in population (Jean Lee, 2006). Confucianism and its
morals remain with Chinese business families when they immigrate around the world.
Studies indicate these values have a positive influence on business performance and
family climate (Ritch L. Sorenson & Jun Yan, 2006).

Indonesia:

The 3% of ethnic Chinese in Indonesia own approximately 70% of the country’s

businesses, controlling around 80% of the biggest companies in Indonesia (Michael
Carney, 2007).
Japan:

Currently the oldest family business in the world (Houshi Onsen) is operating in
Japan and is managed by the 46th generation of the founding family. (Barclays
Wealth & The Economist Intelligence Unit, 2009.) The longevity of Japanese family
companies may be attributed to the practice of turning sons-in-law into true family
insiders, thereby broadening the pool for successors and talented managers without
involving non-family members (Britta Boyd, Alannah Rafferty, Suzanne Royer &
Roland Simons, 2008). Family businesses tend to outperform nonfamily companies in
most Japanese industries (21 of 33 commonly used Japanese industry categories).
Only in 7 categories were family firms found to perform less successfully (José
Allouche, Bruno Amann, Jacques Jaussaud & Toshiki Kurashina, December 2008).

Singapore:

Family businesses tend to be small and medium-sized, and are well represented
among the publicly-traded companies. On average, family firms in Singapore employ
only between 10 and 100 people but make up 80% to 90% of industrial companies
( Jean Lee, 2006).