Tuesday, January 19, 2016

Does an MBA help in managing family business?

The legendary Dr. Peter F. Drucker gave a striking insight about the art and science of management when he said "the job of a business enterprise is to serve customers profitably".

The people who make this happen in a business enterprise are the owners (shareholders), the managers and administrators, and the workers.

At a preliminary level, there are three kinds of managers -

  1. Managers who manage others' resources
  2. Managers who are owners of their resources, and do manage, but passively
  3. Managers who are owners of their resources, and actively engage in day-to-day management
FMB MBA IIM NMIMS Manangement Programme CAT XAT PT education
Family is my business.
First of all, you should clearly understand which category you'd fall into. I assume that if you are a young and driven person, then it's probably going to be the third.

Most of the management programmes in India, even of the IIMs, were designed to produce managers of the first type. Starting in the 1960s, that seemed to be the only sensible thing to do, as most of the economy was under a Licence-Quota-Permit-Raj and the only "owners" in the private sector were legacy owners of companies. There really were very few first-generation entrepreneurs or Startups then. What would anyone do by learning the art of management with an ownership mindset, when all you could do is play by the rulebook and manipulate the system enough to get the licences and permits to make shoddy stuff, sell to a desperate population hungry for goods and earn guaranteed profits!

Things changed in the 1990s with the liberalisation programme of Rao government, and India slowly started driving its own free enterprise generation. But the IIMs were slow to change. For many years after 1991, their PGDM courses were mainly structured to teach - through different means - pure management of resources. That's one of the reasons why the MNCs loved Indian B-school graduates from the best schools - they were smart, driven and could be motivated to work even without a share in the ownership of the enterprises. For most, it was a mark of prestige to be an IIM grad, and with that came many other perks of social life. ESOPs and other fancy items came much later.

Very few family scions would have benefitted from such programmes. And hence came a wave of FMB - MBAs starting in the early 2000s. FMB stands for Family Managed Businesses. 

If you belong to a family that runs a business of any significant size, then you should definitely think of going for an MBA programme, if for nothing else, then for the sheer range of learning you'll be exposed to. Perhaps a combination of Finance and HR will be a great one, if you intend to expand and scale up your business in the future. If the business is already mature, and large (say more than Rs 50 - 75 cr in annual revenues), and you wish to be a specialist, then you can also look at specialised MBA streams.

For an FMB scion, the pros of doing a PGDM from a leading IIM today can be :

  1. Exposure to a range of mind-opening ideas
  2. Network building with a lot of very smart people
  3. Ideas for new generation businesses
(I would strongly advise you to not consider some of the newest IIMs as of now, as they will not add any significant value at this stage, given their yet-to-evolve processes, sheer lack of cutting-edge faculty, and the remote locations they're in. It may be better to move abroad for an MBA)

Since the number of startups that IIM (and IIT) grads are creating is steadily on the rise, and since many of them seem to be more than merely fanciful ideas funded by Angels or VCs, I assume that the culture at these IIMs has seen the necessary shift in recent years. 

Other factors that should help you make a decision will be -

  1. Nature of your family owned business - not all businesses need trained MBAs to run. Many highly successful ones are created and run by non-MBAs with tonnes of energy, drive and commonsense
  2. Immediate future plans - Do all owners in your family business have a clear agreement that expansion is the need of the hour? If not, then your education may frustrate you for many years. I've seen this happen with some of my own students.
  3. Is the brand value really important? - There are good FMB MBA programmes from institutes like SP Jain etc. I have taken sessions there, and have seen some really bright people in the batch. Maybe you could consider such places.
And yes, since getting into a leading IIM through the CAT is not easy, do not make the mistake of assuming you're not good if you are not able to. Perhaps you will prove great at running and expanding your business - much more than cracking an entrance test!

So take a decision based on a full analysis of what you want, why you want it and the time and energy you are going to invest in it. For any further help, you can get in touch. All the best!

My site - www.SandeepManudhane.Org


Navdeep said...

Thx a lot!

kothari said...

What a nice post this is !

mehtan said...

Business of business is in itself a business!