Family Business Management

Topics: Strategic management, Management, Strategic planning Pages: 28 (7757 words) Published: February 19, 2009



What is a Family Business?
Issues in the Family Business
Who Are the Actors?


Business Strategic Planning
Family Strategic Planning
The Family Retreat


Letting Go
Board of Directors
Making Succession Work


Transfer Tax Deferral Techniques
Transfer Tax Exclusion Techniques




A. Family Business Assessment Inventory
B. Strategic Plan Checklist
C. Pre-Retreat Planning
D. Assessment of Candidates
E. Information Resources


Family-owned businesses are the foundation of a stable economy, yet they experience unique problems. Their troubles range from complex legal and tax estate planning issues, to family conflicts, trials and tribulations from the progression of families and businesses through evolutionary but not compatible stages of development, and last but not least, lack of succession planning. Research has clearly shown that approximately 30% of family firms succeed in making a successful transition into the second generation, while as little as thirteen percent of family businesses pass the torch to the third generation. Intergenerational family business management education is vital for business students and for family businesses in the community in order to successfully make the transition into the next generation, and successfully continue to remain in family hands.

The family business is a vital force in the Indian economy. About 80 percent of all Indian businesses are family owned or controlled. They range in size from the traditional small business to a few of the Fortune 500 firms. It is estimated that family businesses generate about half of the country's Gross National Product and half of the total wages paid. The Indian economy depends heavily on the continuity and success of the family business. It is unfortunate, even alarming, that such a vital force has such a poor survival rate. Less than one third of family businesses survive the transition from first to second generation ownership. Of those that do, about half do not survive the transition from second to third generation ownership.


Let us explore the nature of the family business as a dual operating system, and identify issues of greatest concern to family business owners, as identified by family business owners across the world. As you review these issues, you will see that, although you and your family are unique, the challenges you face are not, because almost every family business shares the same problems. After reading this section, you and your family should complete the Family Business Assessment Inventory in Appendix A.

What Is a Family Business?

Defined simply, a family business is any business in which a majority of the ownership or control lies within a family, and in which two or more family members are directly involved. It is also a complex, dual system consisting of the family and the business; family members involved in the business are part of a task system (the business) and part of a family system. This is where conflict may occur because each system has its own rules, roles and requirements. For example, the family system is an emotional one, stressing relationships and rewarding loyalty with love and with care. Entry into this system is by birth, and membership is permanent. The role you have in the family -- husband/father, wife/mother, child/brother/sister -- carries with it certain responsibilities and expectations. In addition, families have their own style of communicating and resolving conflicts, which they have spent years perfecting. These styles may be good for family situations but may not be the best ways to resolve business conflicts.

Conversely, the business system is unemotional and...

References: Benson, B., E.T. Crego, and R.H. Drucker. Your Family Business. Homewood, IL: Dow Jones-Irwin, 1990.
Bowman-Upton, N. Family Business Succession. Waco, TX: Institute for Family Business, Baylor University, 1987.
Danco, L.A. and D.J. Jonovic. Outside Directors in the Family Owned Business. Cleveland, OH: The University Press Inc., 1981.
Landsberg, I. The Succession Conspiracy, Family Business Review. 1(1981): 119144.
Ward, J.L. Keeping the Family Business Healthy. San Francisco: Jossey-Bass Publishers, 1988.
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