Family Business: Challanges and Opportunities

Topics: Business, Small business, Family Pages: 8 (2671 words) Published: October 26, 2008

A family business is an enterprise owned, managed, and operated by members of one or several families. Many companies, which were established as family businesses, are now publicly held. Numerous family businesses have non-family members as workforce, but, predominantly in smaller companies, the top positions are frequently allocated to family members. Family partaking in a business can reinforce the business because family members are very reliable and devoted to the family enterprise. On the other hand managing a family business, and especially succession planning, can cause some unique problems. Frequently family interests clash with business interests, for instance hiring a family member who is less skilled than a non-family member or keeping a family member who performs less successfully in a position when their achievement is hurting the company. Psychologists are repeatedly consulted to assist families effectively manage issues that have an effect on both the family and the business. Some of the examples of family businesses are: * Cargill

* Ford Motor Company
* Hilton Hotels Corp.
* SC Johnson Company
* Tetra Pak
Small businesses are very important to industrially developed nations as they make a significant contribution to the growth of the socio-economic and political infrastructure. Considerably, both in Britain and in the USA, family firms operating in conventional manufacturing and service sectors comprise a large percentage of the small business population as a whole.


Being a small business owner, of almost any sort, is undoubtedly different from being an employee or from being a shareholder in a large business. On the contrary of large businesses, small firm owners have more inner certainty than large firm managers but more external uncertainty. Denise Fletcher argues that the addition of family, leads to added ‘tensions and contradictions’ because of the ‘social and emotional relations’. Family ties can bring about friction when ownership and management are not dealt with independently. When family members are treated preferentially, non-family employees may become frustrated or quit. Family members sense of ‘ownership’ can be a strong, positive motivator in building the business and leading to greater cooperation, and opposite can also be true, however. Conflicts can occur because each relative looks at the business from a different perspective. Relatives who are silent partners, stockholders, or directors may see only dollar signs when judging capital expenditures, growth and other important matters. On the other hand, relatives involved in daily operations may judge those matters from the viewpoint of marketing, operations, and personnel necessary to make the firm successful. A related problem can be the incapability of the family members to make objective decisions about one another’s skills and abilities. Unfortunately, their quarrels and ill feeling may spread to include non-family employees. One possible solution is to convince family members, as well as non-family employees, that a profitable leadership serves their interests. Another problem comes from the fact that family managers may feel it is necessary to clear routine matters with the top family member. Also, holdups that work against efficient operations can be caused by personality clashes and emotional reactions. Therefore, lines of authority and responsibility in the company must be clear and separated from those in the family. This is an important distinction because a person’s age often determines the lines of authority in a family, while ability must be the primary guide in a business. As stated by the Small Business Services Global Entrepreneurship Monitor, almost half of all small businesses will change ownership in the next decade. Amongst them will be many that are passing a family company from one generation to the next - a change loaded with emotional and financial...
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