• Good Topic, but may need minor grammatical correction
• Good introduction, which Highlights and provides essential background to the study, but needs proof reading
• The aim of the research good but no objectives were stated. Only research questions
• Extensive literature review, but less application to the proposed research. Identified good gaps to fill in this research.
• The methodology was not very strong, there was no justification of the proposed methodology, no research epistemology, research paradigms and alternative methods or plan B.
• For research look into more companies than the suggested ones.
• Research time scale is good and may be achived.
• Well referenced piece of work
Table of Contents
Project Focus 3
Justification of Research 3
Aims and the Research Questions 4
Preliminary Literature Review 4
Research Gap 9
Theoretical Framework 10
Research Methods 11
Data collection 11
Sampling of Participants 12
Data Analysis 12
Research Plan 13
Bibliography List 16
Leadership Sccussion in an Indian Family Business Context
Family businesses are becoming more common as they are being considered ideal in creating employment for the family members in a highly competitive workforce environment (Rothausen, 2009), where employability is becoming a common concern even for the university graduates (Dacre Pool and Sewell, 2007). Especially in reference to India, with a population of over 1.25 billion people (Mundkur, 2011), family businesses are becoming more commonplace in securing the wealth of the family over the generations. While these ventures strive to create wealth for the family members, a key area for concern is their leadership succession. This is because research points out that only 33% of family-owned businesses successfully transit from the first generation (founders) to the second generation (successors) (Ibrahim et al., 2001). Therefore, the proposed study is an analysis of leadership succession in an Indian family business context to deduce the challenges the businesses experience and profile the entrepreneurial benefits of a successful transition as well. (All the businesses are based in India.) As “a person who does not worry about the future will shortly have worries about the present” (Ancient Chinese Proverb)
Justification of Research
Most of the previous studies into the topic of family businesses are too general. They touch on topics such as governance and management, objectives, interactions and relations with human resources, and only a few of them have focused on leadership succession in family-owned businesses. Even for the studies covering leadership succession, they are too general as their focus is worldwide. Therefore, the studies are lacking a specific context that can help to understand cultural, regional, and cross-border differences in leadership succession of family businesses. Considering that many large-scale family businesses are mushrooming in India, such as the Ambani family operating the Reliance industries, the country is a good context of understanding the leadership succession from a specific context, which is the focus of the proposed study.
Aims and the Research Questions
The aim of the proposed project is to analyze leadership succession in an Indian family business context in comparison with that of other family-owned businesses worldwide. In this regard, the proposed research questions below will guide the project.
? Does the leadership succession of Indian family businesses conform to experts’ views in the literature?
? Does gender of the family members determine their eligibility in leadership succession of the family business?
? What are the training programs available for potential successors in Indian family-owned businesses?
? Does Indian parenting determine the interest of the children in the family business?
Preliminary Literature Review
There exists a large body of literature revolving the operations of family businesses around the world and their succession planning. As such, this field of study is not that terra incognita anymore. In this regard, profiling of the works of previous researchers reveals four categories of knowledge in literature about the operations of family business around the world: governance and management, objectives, interactions and relations with human resources, and their succession planning.
A preliminary review of literature indicated that family businesses are inclined towards some specific objectives in the course of their operations. To begin with, most family businesses operate with long-term objectives of the business running within the hands of the family members, as opposed to short-term objectives of most non-family businesses that are more profit oriented (Harris et al., 1994). According to the authors, the family members are seen as just custodians of family wealth. This is because most family businesses are less likely to diversify their product offering and enter into new entrepreneurial ventures, which are likely to subject the business to risks (Kellermanns et al., 2008). There is the fear that a single mistake can lead to the collapse of the business, and hence the way forward to avoid such risks is to maintain the status quo of how the operations of the family business have been running for years. According to Miller and Le Breton-Miller (2003), most family businesses prefer to have their profitability and turnover growth smaller instead of venturing into new ventures that carry high risks.
There are also postulations that the success criteria of most family business are not based on profitability of running the venture (Berrone et al., 2012). However, other factors are put into consideration, such as providing long-term employment to the family members, ability to successfully pass on the business to their children, social accomplishments of the business like being recognized as charity donors, and preserving the family business name over the generations.
According to Gomez-Mejia et al. (2007), what matters most in a majority of the contemporary family businesses is the ‘socio-emotional wealth’ (SEW) the family members derive from their ventures. In this light, SEW is defined as the non-financial aspects of the businesses that create identity, allow complete control of the business in the hands of the family members, and preservation of family dynasty in the running of the business (Gómez-Mejía et al., 2007, p106). One strong point to note from Gómez-Mejía et al. (2007) is that a venture becomes a family-type of business simply not based on the ownership structure, such as sole proprietorship, but instead when children of the owners show interest in taking succession of the business over time. This means that leadership succession is a key characteristic of family businesses.
So far, the major downside in family businesses is that they are risk-averse (Kleiman et al., 1996; Gonzalez et al., 2013), which can lead to their stagnation and low levels of innovation (Hiebl, 2012). However, Hiebl (2013) postulates that compared to non-family businesses, the family businesses only prefer to take risks that will bring long-term, rather than short-term, benefits. This tends to associate the non-family businesses with risky short-term investments, which can paralyse a whole organization in case things are to go wrong. This can be interpreted to mean that the governance and management of a majority of family business is rather long-term than short-term oriented.
Another study suggested that the motivation of most owners of a family business is on the family status among other SEWs, but not in the business itself (Wang et al., 2004). As such, family businesses lack external perspectives such as hiring of professional managers. This contributes to lack of professional experience among the owners outside the business. Therefore, generally family businesses are characterized by lack of ability to professionalize and in seeking external advice (Wilson et al., 2013). Moreover, the lack of external shareholders in family businesses means less pressure that is important in challenging how the operations of a business are run (Jeuschede, 1998).
A different research pointed out that compared to other family businesses worldwide, UK has more owner-managed family businesses (Scholes et al., 2010). The result of this is that such businesses end up being poorly managed and less open to new innovation (Schulze et al., 2003b), which then culminates to low profitability and slower growth (Bloom et al., 2012). Especially in reference to in-family succession, recruiting from members of the family narrows down the pool of drawing talented management. Therefore, according to Bacon et al. (2013), the use of best practice in HR is limited in family-owned business.
Although there is lack of professionalization and HR training in most family businesses, these ventures foster better relationships between the junior employees and the upper management (Sundaramurthy and Kreiner, 2008). In addition, family-owned businesses experience low rates of employee turnover, high employees’ satisfaction, and employee loyalty is high (Danes et al., 2009). These positive aspects are attributed to the fact that, in most family-owned business, the upper management and the junior management are members from the same family. Hence, they have high congruence in the goals and objectives of the family business (Zhu et al., 2007). In addition, because most family-owned ventures are more focused on the long-term sustainability of the business, treating the employees well is not an option to avoid high rate of turnover that can result in loss of employees who have accumulated experienced over the years (Kotey and Folker, 2007). Where some employees are sourced externally, research points out that the owners recruit carefully to ensure that the hired employees fit into the team, ethos, and values desirable to keep the family business running.
Research postulates that most family-owned businesses are affected by how they are transferred from one generation to another (Poutziouris, 2001; Sharma et al., 2001; Morris et al., 1997). This is because the transfer process has its own implications on the business, as it determines whether the business will be successful or will fall (Wang et al., 2000). A research by Ibrahim et al. (2001) points out that only about 33% of family-owned businesses successfully transit from the first generation of founders to the second generation. Out of 33% of family businesses that transit successfully from the first generation to the second generation, research points out that only about 33% of them transit successfully to the third generation (Ibrahim et al., 2001). This can be interpreted to mean that only 10.89% of family-owned businesses successfully transit over two generations.
According to Stavrou and Swiercz (1998), the process of leadership succession takes place in three major stages. The first stage is referred to as the pre-entry, whereby the potential successors are subjected to training, orientation, and others forms of preparations meant to “groom” them to take over the business. The second stage is the actual entry, whereby the trained and prepared successors become integrated into the family business so that they can gain and accumulate relevant experience of how they run the business operations. The final stage is the promotion, whereby the more experienced and qualified successors are appointed to senior management positions to spearhead the operations of the family businesses.
According to Nordqvist et al. (2013), there is a major distinction between management transition, whereby the next generation takes control of running the operations of the family business, and ownership transition, whereby the next generation are allowed to buy or receive equity in the family business (Lansberg, 1997). In most cases, the two occur together. However, irrespective of the type of transition, Salvato et al. (2010) and DeTienne and Chirico (2013) opine that the physical transfer of the family business to the next generation is a much less important aspect in succession planning compared to the transfer of the core values of the family business to the successors. This is tandem with an earlier postulation that the one of the major objective of running a family business to safeguard the socio-economic wealth (SEW) of the family members.
There is also another standpoint in literature indicating that leadership succession in family businesses can be seen a process of entrepreneurial exit and entry (DeTienne, 2010) Based on this postulation, the first generation is viewed to have different entrepreneurship skills and talents compared to that of the upcoming generations (Zellweger et al., 2012). Although it is not possible to exactly state which generation’s entrepreneurship skills and talents are effective for the family business (Steier and Miller, 2010), at least succession can be seen as the transition from the old entrepreneurship era (exit) into a new one (entry).
From the preliminary review of literature, it is explicit that a majority of previous studies into the topic of family businesses are too general. They touch on topics such as governance and management, objectives, interactions and relations with human resources, and only a few of them have focused on leadership succession in family-owned businesses. Even for the studies covering leadership succession, they are too general as their focus is worldwide. Therefore, the studies are lacking a specific context that can help to understand cultural, regional, and cross-border differences in the leadership succession of family businesses. Considering that many large-scale family businesses are mushrooming in India, such as the Ambani family operating the Reliance industries, Tata, Birla, and Jindal among others, the lack of adequate literature on such Indian ventures is a huge research gap that is worth investigating. In this light, the country is a good context of understanding the leadership succession between men and women, training programs to develop the leader, and the influence of parenting in successful transition of Indian family businesses.
The proposed study will adopt a descriptive research design to aid in the understanding of the leadership succession in an Indian family context “as it is” when the study is being conducted (Bordens and Abbott, 2002). According to Goddard and Melville (2004), a descriptive research design answers the questions of who, what, where, when, and how about the research topic, but without ascertaining the answers of why. Using a descriptive research design, both primary and secondary data will be gathered to help in answering the proposed research questions (Mitchell and Jolley, 2012). Secondary data will be collected from empirical research project such as journals (Heaton, 2008), pertaining to leadership succession in family businesses that are not from an Indian context. This information will be helpful in comparing leadership succession in an Indian family context with that of other countries worldwide. On the other hand, primary data will be collected directly from respondents (Bowen, 2009), who in this case operate family businesses in India, advisors and researchers, so that they can inform the researcher about how they go about leadership succession. The following are other considerations under research design.
Primary data for the proposed project will be gathered using semi-structured interviews. This is because information about family businesses is very sensitive and not many respondents (family members) would be willing to provide the researcher with accurate information. As such, using semi-structured interviews will help the researchers to assess the validity of statements provided by the research respondents by observing their non-verbal indicators (Horton et al., 2004), such as facial expressions and body language. In addition, using semi-structured interview will ensure the researcher deals with one family member at a time, such that no respondent receives assistance from the other about the interview questions (Opdenakker, 2006). Hence, information collected will be representative of the diverse opinions about leadership succession in Indian family business.
Sampling of Participants
Using semi-structured interviews requires a few research participants (Seidman, 2013). This is because they are usually in-depth and hence a theoretical saturation of leadership succession in an Indian culture can be reached quickly (Geertz, 1979). Based on this understanding, the proposed study will rely on information pertaining to 10 family businesses operating in India. This information will be collected directly from the members of the family. Because the nature of data required for this project is very sensitive, due to competition issues that may make the researcher appear as a spy of family operations, snowball sampling will be used (Penrod et al., 2003). This means that the researchers will only identify one family business, which will be cooperative to the researcher’s request for information, from which the members of the family will recommend the researcher to their friends who run family businesses as well. From each family business, the researcher will collect at least the opinions of two family members. In total, the research will target 20 participants, but the number will be reduced by the researcher when a theoretical saturation is reached. A theoretical saturation can be explained as the point at which analysis of more interviews does not bring new information to the researcher (Guest et al, 2006). The interviews will be recorded with the permission of the respondents.
Qualitative data analysis will be employed as opposed to quantitative analysis (Bernard, 2011). The interviews will be transcribed from the audiotape and will then be analyzed thematically (Thomas and Harden, 2008. The use of thematic analysis will help the researcher to summarize the major themes and their corresponding sub-themes on major issues relating to leadership succession in the context of Indian family business. These themes will then be discussed in relation to the research questions and in comparison with leadership succession of other family businesses worldwide from secondary data (literature review).
The proposed project will follow the plan shown in the Gantt chart below.
D Proposal Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun -16 Jul-16 Aug-16 Sept-16
Formulation of working title
Preliminary literature review
D Final Literature Review
Secondary Data collection
Primary Data collection
Discussions and conclusions
Introduction and summary
Intended sampaling mix:
The research will try to cover a wide range of business that have both failed and succeeded along with firms that are in the process of leadership succession. Some firms that provide a complete perspective are:
• Reliance (Mukesh Ambani’s division)
Most of the business can be reached for interviews, therefore here will be Primary research conducted on them and if they cant be reached for some reason or the information provided is not substantial enough then secondary research will be conducted to give the research an holistic approach. Due to the Snowballing sample there would be enough participants that can be reached in the short time available. Based on the time available mostly only large and medium sized firms will be researched with only a few small and very small firms included.
Apart from Family business their advisors and researchers in this field will be interviewed for a deeper understanding and provide a different insight into the topic. Some of them are:
• MR. Ram Charan
• Mr. Tatwamasi Dixt
• Mr. Peter Leach
Already existing reports from these various firms can be obtained for the research. Those sources are:
• Boston Consulting Group
• Ernst & Young
• Parampara Family Business Institute
If the statistics are to be believed, only 12-15% of family-run businesses survive through to the third generation and only 4-5% go on to the fourth generation. (Ibrahim, A. B., Soufani, K., and Lam, J. 2001) Additionally, one third of the business families disintegrate because of generational conflict at the leadership issues. (Berrone, P., Cruz, C., and Gomez-Mejia, L. R. 2012). Traditionally, Indian family-run businesses focused on dividing the silver among the next generation rather than grooming the right person to take up the job. (Vedpuriswar 2001)
However, with changing times, Indian family-run businesses need to ensure that the chosen successor has necessary education and skills to lead the business. Therefore leadership sucession planning is important for Family Business in India. The lack of a lot of studies in existence provides a good opertunity for this research.
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