Succession Planning

Topics: Business, Business school, Management Pages: 16 (4674 words) Published: October 29, 2010
Succession Planning of Indian Family Owned Businesses
with special reference to Coimbatore

Succession Planning

The significance of succession planning to the success and continuity of business firms (Miller, 1993; Ocasio, 1999; Pitcher, Cherim, & Kisfalvi, 2000) more so for family businesses (Lee, Lim & Lim, 2003) is well known and therefore has been a thrust area of research. (Ramachandran, 2005)

Succession planning is all about finding the next leadership for the organization. The research on family owned enterprises found that the fundamental problem of family owned and run businesses is their ability to ensure competent family leadership across generations. (Le Breton-Miller, Miller, & Steier, 2004) The rate of survival of family businesses into the second and third generation has been about 30% and 10 to 15% respectively. (Birley,1986; Ward, 1987) The reasons attributed for the same are the smaller talent pool, complicating emotional factors between the incumbent and successor and complex social ties with the family. (Dyer, 1986; Lansberg, 1999; Miller, Steier, & Le Breton-Miller, 2003) The rate of survival and the reasons for successful survival of Indian family businesses is still a least deliberated topic. (Ramachandran, 2005)

Succession Planning appears to be one of the “Ten Commandments of Family Business” of Ramachandran (2005). The sustenance and growth of family owned businesses beyond two or three generations is not all that easy. Still many make it (Ramachandran, 2005) specifically, in the Indian context. Except for a few cases of failures, many Indian family businesses have seen more than two or three generations and more so in the case of Coimbatore region.

The Coimbatore Region

The geographical unit of Kongu Nadu of olden times comprised of present day, Periyar, Salem and parts of Madurai and Trichy districts. This part of the country was ruled mostly by tribal chieftains. The well known among them was an Irula, Kovan who lived in Kovan Puthur with his people. The name of the place got anglicised into Coimbatore during the British rule.

The early settlers of Kongu Nadu were the Velala Gounders, basically a farming community. This community was vested with irrigated land by the then rulers and they quickly improvised the land, by trying and adopting new farming practices. Then came the Kammavar Naidus, fleeing Muslim invasion from what is now Andhra Pradesh. As they were latecomers they got only the dry, rainfall-deficient and largely unused land. With sheer hard work, they Naidus developed an effective well-irrigation system, and tilled the land with little water available. Even today the entrepreneurs of Coimbatore attribute the reason for their success to the innovative spirit that was transferred to generations from their forefathers.

Today Coimbatore District consists of Mettupalayam, Avianshi, Tirupur, Coimabtore (North), Coimbatore (South), Pollachi, Udumalpet and Valparai taluks. The population of Coimbatore is over 3.5 million. It has people from all over Tamil Nadu, and neighbouring states of Andhra Pradesh, Kerala, and Karnataka as well as Gujarat and Rajasthan living here, speaking six different languages, viz., Tamil, Telugu, Malayalam, Kannada, Hindi and English. The district being a major seat of learning in the south, has three universities, about 25 engineering colleges, 28 polytechnics, 43 arts and science colleges, one air force administration college, two medical colleges apart from paramedical institutions, it is and institutions for research and development. More than half of these institutions were built by the various industrial groups of the region.

Business History

The farmers of Naidu community that had created “thottam” out of the dry lands also discovered that the best crop for the largely black soil region was cotton and started cultivating it, which by itself became the important cause for the industrialisation of...

References: Birley, S., 1986, Succession in the family firm: The inheritor’s view, Journal of Small Buisness Management, 24: (3), 36-43.
Dyer, W.G., Jr., 1986, Cultural change in family firms: Anticipating and managing business and family transitions, San Francisco: Jossey-Bass.
Lansberg, I., 1999, Succeeding generations: Realizing the dream of families in business, Boston: Harvard Business School Press.
Le Breton-Miller, I., Miller, D., & Steier, P. L., 2004, Toward an Integrative Model of Effective FOB Succession, Entrepreneurship Theory & Practice, 1042-2587: 305-328.
Lee, S. Khai., Lim, H. Guan., & Lim, S. Wei., 2003, Family business succession: Appropriate risk and choice of successor, Academy of Management Review, 28: 657-666.
Mahadevan, Raman. 1999, The Southern Region in Footprints of Indian Business Through Ages, FICCI, Oxford University Press, Delhi, 113-133.
Mahadevan, Raman. 1984, Entrepreneurship and Business Communities in Colonial Madras 1900-1929 Some Preliminary Observations, Tripathi, D. (Ed), Business Communities In Indai, Manohar Publications, New Delhi.
Miller, D. 1993, Some organizational consequences of CEO succession, Academy of Management Journal, 36: 644-659.
Miller, D., Steier, L., & Le Breton-Miller, I., 2003, Lost in time: Intergenerational succession, change and failure in family, Journal of Business Venturing, 18(4), 513-531.
Ocasio, W. 1999, Institutionalized action and corporate governance: The reliance on rules of CEO succession, Administrative Science Quarterly, 44: 384-416.
Pitcher, P., Cherim, S., & Kisfalvi, V. 2000, CEO succession research: Methodological bridges over troubled waters, Strategic Management Journal, 21: 625-648.
Ramachandran, K., 2005, Indian Family Businesses: Their Survival Beyond Three Generations, Working Paper Series, Indian School of Business, Hyderabdad.
Ward, J.L., 1987, Keeping the family business healthy: How to plan for continuing growth, profitability and family leadership, San Francisco: Jossey-Bass.
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