Family Businesses Continuation
Name: Harshil Mahesh Patel
Student Number: 10811278
Word Count: 2627
Module: CA381 – Small Business & Entrepreneurship
Module Tutor: Clifford Conway
In the 21st century where our societies are highly developed, technology advancements and trade have lead to business growth all around the world. Within this vast business industry there are all types of players, one significantly powerful group that is not often mentioned are family businesses. Ranging with all sizes they contribute highly to both their countries and the world economy. However even though through entrepreneurship and dedication these businesses are built and grown, very rarely do they experience continuation from generation to generation. This paper aims to determine the factors contributing to lower continuation as newer generations come into power. This investigation is going to be conducted using passed written literature sources from articles, journals and institutional publications. With this information and analysis, recommendations will be presented which aid to achieve greater continuation within family businesses.
Family businesses have been around for many years and range from small-specialized enterprise to large worldwide conglomerates. Family businesses often start off with one or more family members who are driven by entrepreneurship and goals. One or more of these individuals then manages these businesses, eventually with the aim of growth and family continuance through generations. Family businesses contribute significantly to both their businesses and the economy. In 2010, there where over 3 million family businesses in the UK, which accounted for 35.3% of private sector revenue and 23.8% of total GDP (Cable, 2011). Furthermore in the UK family enterprises employ over 9.2 million people, this not only accounts for GDP but also creates a positive multiplier effect with increased employment, wealth creation and equality (Cable, 2011). However they add complexities of family life to business challenges, It is estimated that 33% and 15% of family businesses will survive though to their second and third generations respectively (Le-Breton Miller et al. 2003). With a lack of communication, commitment and positive succession planning family businesses would find it very difficult to achieve greater continuation. This study aims to outline the key factors that lead to family business failure and provide recommendations.
Unlike non-family companies, families are actively involved in management and decision-making functions of their businesses (Mandl, 2008). General family business characteristics include:
1. One of the most significant features within a family business structure is that there is a greater family influence and involvement within the business (Mandl, 2008). This means that family involvement is likely to influence most of the firm’s management and business decision-making processes. Furthermore these firms are established and managed to promote succession by generation within the family rather then externally. 2. Family businesses require high loyalty and trust to prosper. If various family members are involved in different parts of management, high dedication and trustworthiness helps achieve targets collectively, furthermore the harmony helps build motivation amongst the family (Scotland, 2010). 3. They also all pose characteristics of having quite unique family morns, values and traditions within their businesses often started by the founder. These values and traditions reflect on the company and its image.
Family businesses generally start up with the intention for long-term sustainability. This long-term sustainability is what drives family firms and their leaders to think of themselves as temporary caretakers within the wider functions of the company,...