Family businesses must discuss what they would rather not: How to institutionalize leadership

Dhirubhai Ambani built one of India’s greatest business empires but died in 2002 without a clear succession plan. What followed is now business folklore. His elder son, Mukesh Ambani, turned his part of the inheritance into a global enterprise worth over $117 billion.

The younger one, Anil Ambani, eventually declared bankruptcy before a UK court.The difference was not intelligence or vision. It was structure. One instituted governance systems and raised leaders able to question decisions.

The other’s businesses struggled under debt and concentrated authority; and when markets turned, that absence of institutionally delegated authority became a crisis. Yet, this is a conversation many Indian family businesses still avoid.Family-owned firms generate over 75% of India’s GDP, among the highest anywhere, according to McKinsey & Company. Business families are preparing to transfer roughly $1.5 trillion in assets to the next generation.

Yet, 36% have no succession plan and 52% cite resistance from the senior generation as the biggest barrier to a transition. The patriarch, in other words, is often the obstacle, not the market, economy or the next generation’s capability.The one who cannot be questioned: Most Indian family businesses have a central authority figure. Often called the ‘lala,’ he is usually the founder or patriarch who built the enterprise from scratch, took risks that others avoided, and took the business ahead through difficult years.

His authority is earned and deeply respected. Over time, that respect can result in unquestioned authority. The business begins to follow the instincts and preferences of one individual.

Instinct becomes policy. Preference becomes strategy. Discomfort with a new idea becomes the