Professionalization of Family Business: Managing Process and Governance Challenges

Family businesses have been known to play an important role in most major economies all across the world. Majority of family businesses fail to survive beyond three generations, one of the major reasons being lack of professionalization. Family firms face a number of impediments to professionalize and have been repeatedly advised in extant literature to professionalize their businesses. After reviewing the relevant literature, Stewart & Hitt (2012) have concluded that we need more insights into the process of professionalization of such firms. For instance, we need answers to questions such as: - what processes do family firms follow to professionalise? Why do only some of those approaches work? What are these approaches? In essence, there is a knowledge gap in extant literature about the effective processes of professionalization. This paper attempts to fill this gap by studying in depth the processes of professionalization in two Indian family controlled businesses that were at the threshold of professionalization and organizational change. The paper studies the challenges that professionalization process poses to the leadership, the business and the family. We discuss the forces at play in the process of professionalization, and posit that a zone of managerial ambiguity that we call “No Man’s Land” is often created in this process, where there is lack of clarity about the roles of family business leader and professional manager. Quality of family governance is found to be an important factor that influences the quality and process of professionalization. The paper discusses and generates propositions on the processes and governance mechanisms to be followed for professionalization.