The chances of the right person for the job at a family firm being of the same family is the same as the likelihood of winning the lottery. Possible but unlikely.
Yet families continue to try to justify the role of their children. Absurd!
While it is their money they can pour it down any drain they want to, including the familial drain, although it may not be good for the country. The problem is when the family decides that they want to attract outside capital but not change control or attitude. That becomes a problem!
Onésimo Alvarez-Moro
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Professional managers could be members of the promoter family or purely employees. However, some very large companies have shown that continuity in the name at the top of the company many times acts as a strong binding force and carries the trust of all the stakeholders. The Tata group of companies is an example. The man at the top is not just a titular head. He gives direction to the group.
At the time of Independence, the Tatas were the largest industrial group in India. Yet, within a few years, the Birlas, with their political investments and using the industrial licensing system, arranged their presence in almost every sector. Tata was a respected name for its value systems, but not for its successes in the market.
Government policy was to discourage “groups” from expanding in their existing operations because of the misconceived idea that they would become too large, even monopolies. Other family groups used relatives and relationships to expand into new areas. The Tatas would not do so. The government’s “group” concept meant that a common name for the group was a liability; investment by one company in another was discouraged (though it did not stop many from doing so, at times under benami names). A “group” was restrained from expanding capacity and had to apply for licenses to make products and in locations far removed from their competence. Moving people between companies could make the companies a “group”. Representation on many boards could bring the companies under the definition of belonging to a “group”.
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