Transcript What Is a Family Business?

What Is a Family Business?
• Family Business
– A company in whose ownership and/or
functioning two or more members of the same
family are directly involved.
– A firm whose ownership passes from one
Smith Family Hardware
generation of a family to another
Est. 1935
Welcome
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Family and Business Overlap
• Family Concerns
– Care and nurturing of
family members
– Employment and
advancement in the
firm
– Loyalty to the family
• Business Concerns
– Production and
distribution of goods
and/or services
– Need for professional
management
– Effective and efficient
operation of the firm
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Advantages of a Family Business
• Strength of family relationships during
challenging periods of business change
• Financial sacrifices that family members make for
the good of the firm
• Operation as a family business distinguishes the
firm from its competitors.
• Higher levels of concern for its community and
non-family employees
• Capability to plan and prepare for the long haul
• Emphasis on quality and value
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Disadvantages of a Family Firm
1. Family problems affect business
operations.
2. Business problems affect family
relationships.
3. Little opportunity within a family business
for non-family members.
4. Succession problems (and related transfer
of ownership challenges).
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The Culture of a Family Business
• Organizational Culture
– Patterns of behaviors and beliefs that
characterized a particular firm
• Cultural Configuration
– The total culture of a family firm, consisting of
the firm’s business, family, and governance
patterns
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Cultural Configuration of a
Family Firm
Governance Pattern
Business Pattern
Paternalistic
Laissez-faire
Participative
Professional
Cultural
Configuration
of the
Family Firm
Paper Board
Rubber-Stamp Board
Advisory Board
Overseer Board
Family Pattern
Patriarchal
Collaborative
Conflicted
Source: Adapted from W. Gibb Dyer, Jr., Cultural Change
in Family Firms (San Francisco: Jossey-Bass, 1986), p. 22.
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Family Roles and Relationships
• Parental Concerns in Passing the Business On:
–Does my child possess the temperament and ability
necessary for business leadership?
–How can I motivate my child to take an interest in the
business?
–What type of education and expertise will be most helpful
in preparing my child for leadership?
–What timetable should I follow in employing and
promoting my child?
–How can I avoid favoritism in managing and developing
my child?
–How can I prevent the business relationship from
damaging/destroying the parent–child relationship?
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Family Roles and Relationships
(cont’d)
• Husband–Wife Teams
–
–
–
–
Opportunity to share more in each other’s lives
Business differences interfere with family life
Work doesn’t leave time for family life
Sharing family responsibilities eases the load
• Sons and Daughters
– Personal preferences different from the business
– Personal qualifications insufficient to assume role in
business
– Desire for personal freedom to choose another career
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Professional Management
of the Family Firm
• “Best Practices” (John L. Ward)
1.
2.
3.
4.
5.
6.
Stimulate new thinking and fresh strategic insights.
Attract and retain excellent managers.
Create a flexible, creative organization.
Create and conserve capital.
Prepare successors for leadership.
Exploit the unique advantages of family ownership.
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Professional Management of the Family
Firm
1.
2.
3.
4.
The need for good management
Non-family employees in a family firm
Family Retreats
Family Councils
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The Process of Leadership
Succession
• Available Family Talent
– Mentoring
• Guiding and supporting the work
and development of a new or lessexperienced organization member.
– Allowing only qualified competent
family members to assume leadership
roles in the firm increases the value of
the firm for all who have an ownership
interest in it.
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Stage III
Stage I
Stage II
Pre-Business
Introductory
Child becomes aware of
facets of firm and/or
industry. Orientation of
child by family member
is informal.
Child is exposed to
business jargon,
employees, and the
business
environment.
Introductory
Functional
Child works as part-time
employee. Work
becomes more difficult.
Includes education and
work for other firms.
Entry of Successor
Stage IV
Stage V
Functional
Advanced Functional
Potential successor begins
work as full-time employee.
. Includes all nonmanagerial
positions.
Potential successor assumes
managerial position. Includes
all management positions prior
. to becoming president.
Transfer of Leadership
Stage VI
A Model
of
Successio
n in a
Family
Business
Stage VII
Early Succession
Mature Succession
Successor assumes presidency.
Includes period in which the
successor becomes dejure head
of company.
Successor becomes defacto
head of company.
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Conditions Favoring Successful
Leadership Succession in a Family
Firm
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A sound, profitable business
Stable, healthy family relationships
Advance planning for leadership succession
Positive family leadership and a team-oriented
management structure
• Presentation of career opportunities without
pressure
• Open communication on family business issues
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