differentiate between professional management and family management
Answers
Answer:
1. Family Management:
(Pic- Rajiv Bajaj (Son of Rahul Bajaj) – Managing Director of Bajaj Auto)
The family managed businesses are those companies who are managed/controlled by their owners. Generally, the chairman or the CEO is the member of the controlling family. Further, the board of the directors are either members of that family or their associates.
The family led businesses are been major contributors to the growth of Indian economy. A bigger portion of the companies in India are under the control of family personnel like Reliance, Tata group, Infosys, Bharti Airtel and Bajaj, who stands as some of the well-known examples.
Here are few major characteristics of the family managed businesses:
All the major policies of the company are determined by the controlling family (which may or may not be in the favor of shareholders).
They are loyal towards their own company. You’ll rarely find any case where the CEO of a family managed business moved to take a job as CEO of another company just because they were offering a higher salary.
Also read: Shareholding Pattern- Things that you need to know.
2. Professional Management:
Tata Motors MD - Guenter Butschek
(Pic – Tata Motors Managing director – Guenter Butschek)
Professionally managed companies are run by the professionals who are also an employee of the company (not the owner). These professionals may or may not have any significant stake in the company.
Here are few of the major characteristics of the professionally managed businesses:
The professionals are in their position of chairman/CEO only as long as they are able to complete their responsibilities.
These professional managers can easily be fired by the board of the directors if they do not meet the required company target. (One of the popular examples is the Tata Son’s board of directors firing Cyrus Mistry as its Chairman because of his issue with Mr. Ratan Tata.)
These professionals focus on performance and consistency.
The biggest disadvantage of professional management is that they can readily leave the company for a better pay or perquisites offered by another company.
Few best examples of professionally managed companies in India are ITC, HDFC, HUL, L&T etc