The elegant Godrej split: A blueprint for India Inc?

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Bosch (Bosch family). In Sweden, the Wallenbergs control significant shareholding in its mega corporations like ABB, Volvo, Erickson, Electrolux and others, with their management left in professional hands. It is similar with other European businesses like H&M (Persson family).

They all illustrate how family ownership can work with professional management. The driving force for this governance mechanism has been the size and complexity of these corporations, as their ambitions were of global scale. Majority shareholder families have become incredibly wealthy in due course, while being relieved of management responsibilities.

For these arrangements to work, families in many cases must acknowledge their lack of expertise in management. In Japan, the approach to family-owned businesses with professional management varies from Western models to some degree. While family-owned businesses are still common, they display unique characteristics in how they operate.

Japan is known for its Keiretsu system of interlinked businesses, with companies within the same group holding cross-equity in each other. While these groups may have family ownership at their core, they often have professional management teams overseeing day-to-day operations. Hence, succession planning for family-owned Japanese businesses is crucial.

It involves meticulous grooming of family members to be ready for the mantle of leadership. Mitsubishi, Matsushita and Sumitomo fall in this category. However, professional managers are sometimes brought in from outside the family to ensure continuity in case an heir apparent does not have the desired skill set.