Change Management in Family Owned Businesses versus Professionally Run Companies

Is it easier to drive through change in family owned businesses or professionally run companies? This is a question that is uppermost on most management experts’ minds as change in any organization is hard to achieve and if there are barriers that are institutional or structural then it becomes harder to drive through change.

For instance, many family-owned businesses like the TATA and the Reliance Group often have charismatic and visionary leaders who are drawn from the family that has a controlling stake.

On the other hand, professionally managed companies like Unilever and P&G are run by managers who need to answer all the stakeholders apart from those who have a majority stake in the company.

So, the point is that it is easier for a leader who has to answer to fewer stakeholders to drive through change as opposed to a manager who has to take into account the needs of many stakeholders.

This is the reason that Reliance has been hugely successful in implementing visionary and unique change programs over the course of the last few decades whereas other companies have had moderate successes in driving through organizational change.

Of course, Infosys is the exception as the company runs on an owner-manager basis where the major stakeholders run the company professionally instead of like family business manner. This accounts for the phenomenal growth of the company over the years where its visionary leaders were able to carry all the stakeholders with their business acumen and entrepreneurial spirit.

On the other hand, companies like Unilever and P&G often take their time to drive organizational change because of lack of commitment from the managerial class or due to the absence of a motivational leader who holds a stake as well.

The point here is that when the combination of a visionary leader with substantial stake arises, and then there is the double whammy of vision and votes on the board which make it easier for the organization to drive through change.

Of course, the flip side is that the change program might fail because it is not well rounded or comprehensive and just relies solely on the leaders’ abilities.

On the other hand, it is common to find companies like Unilever and P&G institute organizational change that is lasting and comprehensive mainly because of the various levels the change management program goes through before acceptance.

It is clear that for effective change to be institutionalized, the change management program must have a blend of vision and nuts and bolts depth which comes if the leader can also succeed in getting the change program vetted by all the stakeholders.

Hence, companies like Infosys and to a certain extent the TATA group have managed to drive through change that is both cutting edge and has sufficient depth. However, this is not to say that either family businesses or professionally run companies have a grip over change management. Just that in the case of the former, it is easier to get buy in whereas in the case of the latter, the change management program has to go through several layers of approval.

In conclusion, companies that have visionaries who can carry large sections of the organization along with them often succeed in driving through change better than companies that are bureaucratic or whose organizational arteries have become clogged due to inertia and slowness to adapt to the marketplace.