Designing For a Better Family
Business
Prepared by: Ala’a Istaityeh Aya AburabieBalqees Falah Supervisor: Dr. Ramiz Assaf
Contents
Introduction Introduction
General Background• Family Business: Owned and managed by
family itself; the grandfather, the children and grandchildren. (Androf. (2004).)
• Considered as one of the most important pillars of the Palestinian economy, and basic component in the private sector.
• Offer significant opportunities for future generations.
• Give a chance for boldness and speed in the decision-making process.
Percentages of Family Firms Around the World (Anabtawi,
2012)
Problem Statement• In general, there’s ongoing concern that these
firms don’t withstand for more than the 3rd generation in most than %97 cases of the world.
• Specifically, the reason that make this study an important one, is that since more than 90% of firms in Palestine are family businesses, which have a major role in the economic field.
Survival Rates of Family Firms(Anabtawi, 2012)
Objectives
Literature Literature ReviewReview
Literature Review• Family business is a subject of thorny that
a lot of studies around the world discussed it from different sides.
• Great companies in the world are classified as a family business, such as Mars, Siemens, Motorola, Ford, Samsung, Wal-Mart and others.
Author(s) Definition
(Benard,
1975)
An enterprise which in practice, is
controlled by the members of a single
family. (p 42)
(Babacky,
1987)
Is the kind of small business started by
one or a few individuals who had an idea
worked hard to develop and achieve.
Usually with limited capital, growth
while maintaining majority ownership of
the enterprise. (p25)
(Holland &
Oliver, 1992)
Any business in which decisions
regarding its ownership or management
are influenced by a relationship to a
family or families (p27)
(Andrew,
2009)
The family owns a majority of the voting
shares or effectively controls the
business .
More than one generation is, or will in
future, become involved in the
business.
Family Business
Definitions in Literature
Success Reasons Failure reasons
Family-Work Balance Lack of Respect
Balancing between Owner-
Member InterestsLack of Trust
Trust & Honest Greed
Morals Selfishness
Education & Training Lack of Leadership
Fair TreatmentDisconnection between
Generations
Respect Lack of Communication
Good LeadershipAssuming Next Generation in
Family Business
Little Debts. to be carried Lack of Planning
External Consulting Lack of Decision Making
Commitment of all
MembersNo governance Practices
Diversification in
BusinessesLack of Using Resources
Frugal in Good & Bad
timesLack of Stress Management
Unfamiliar Professional Advisors
with Family Business
Success & Failure
Reasons according to
Literature
Methodology Methodology
Methodology• This study was conducted between February and November
of 2013, on industrial and commercial companies.
• Information needed was quoted from:
The 2nd family businesses conference. (Nov.2012)
Visiting the Chamber of Commerce and Industry in Nablus.
Previous studies.
Interviews.
Cont.. • Sample of 16 different companies in Nablus and Ramallah.
• Standard questions to all family firms.
• Interviews showed the urge of discussing and analyzing one of these companies as a case study
.• Analysis included different stages:
Comparing with literature. Finding success & failure Reasons SWOT Analysis. Creating new tools.
• Continuity index tool.• Radar Chart
Solutions for main problems.
ResultsResults
Success Factors according to Owners
0
2
4
6
8
10
12
14
16
18
Success Factors
#of company
SWOT SWOT AnalysisAnalysis
SWOT for Success Companies
SWOT for Acceptable Companies
SWOT for Failure Companies
Our Work….
Continuity Index Rating Tool
Based on Scoring system.The scoring process is from (0-10) : (0 - 3): Collapsed or in the Way to
Collapse. (4 - 6): Average Status or Medium. (7 - 10): Best Continuity Status.
IndicatorScor
e
Entrepreneur.
Guidance
Experimental Learning
Training
Experimental Exchange
Justice in Delegations
Trust among
family
members
Confidence of other
capabilities
Aligned Objectives
Skip & forgive mistakes of
others
Administratio
n
Existence of Mastermind
Fairness
Optimal Use of Resources
Adoption of updating and
development
Good Morals
Program for Training
Program for Education &
Retraining
Managem
ent
system
Evaluation System Scor
e
Documentation System
Financial System
Clear Strategy
Organizational Structure
Cope with External
Environment
Non-
Family
Member
Job Security
Bonus & Rewards System
Efficient Communication
Appropriate Work
Conditions
Pride of Workmanship
Position - Cash Matrix
Based on Continuity
Index Rating Tool
Radar Chart
• Applying the average scores of categories
on a sample of the interviewed
sample.
APPLYING OUR TOOLS ON CASE STUDY
Comparing between F & BF
F’s Main Company’s Scores
IndicatorScor
e
Entrepre
n.
Guidance 3
Experimental
Learning
8
Training 4
Experimental
Exchange
7
Justice in
Delegations
1
BF’s Company’s Scores
IndicatorScor
e
Entrepre
n.
Experimental Learning9
Training10
Experimental Exchange8
Justice in Delegations7
IndicatorScor
e
Administrati
on
Existence of Mastermind 2
Fairness 1
Optimal Use of Resources 2
Adoption of updating and
development
1
Good Morals 5
Program for Training 1
Program for Education &
Retraining
1
IndicatorScor
e
Administrati
on
Fairness 8
Optimal Use of
Resources9
Adoption of updating
and development10
Good Morals 9
Program for Training 8
Program for Education
& Retraining4
F’s Main Company’s Scores BF’s Company’s Scores
Cont..
IndicatorScor
e
Mgmt.
system
Evaluation System 9
Documentation System 8
Financial System 10
Clear Strategy 9
Organizational Structure 10
Cope with External
Environment7
IndicatorScor
e
Mgmt. system
Documentation System 1
Financial System 1
Clear Strategy 2
Organizational Structure 0
Cope with External
Environment2
F’s Main Company’s Scores BF’s Company’s Scores
Cont..
IndicatorScor
e
Non-Family Member
Bonus & Rewards
System1
Efficient
Communication1
Appropriate Work
Conditions3
pride of workmanship 1
Indicator Score
Non-Family Membe
r
Bonus & Rewards
System8
Efficient
Communication9
Appropriate Work
Conditions8
pride of workmanship 7
F’s Main Company’s Scores BF’s Company’s Scores
Cont..
Radar Chart for F & BF Company
Successful Family Enterprise
Management SystemClear organizational structureDivide company into quotas
Clear action planClear financial, documentation system
Clear family constitution Clear Recruitment System
Education, Training and Retraining Programs
Trust among family memberSeparation between family and work life
Determine rights and dutiesPeriodically meeting
Mechanism to resolve disputes
EntrepreneurshipExperimental Learning Justice in Delegations
Experimental Exchange
Non family members
Job Security Bonus &
Rewards System Efficient
Communication Appropriate Work Conditions
Pride of workmanship
Solutions for Main Family
Business Problems
Conclusion & Recommendations
Conclusion
• Finally, this is not all about family business and nothing can summarize its whole status.
• In this presentation we took a step to help & support family firms.
• This step is the first step where other researchers can start from.
Conclusion
Recommendations
Cont..
Recommendations from Successful Family Business
Owners
Cont..
Questions were asked to the family business owners:
• What is the scope of your company?• Who’s the founder of the company?• Can you tell us the foundation story of the firm?• What was the motivation?• How did it start?• What was the future vision of the company?• Is the company registered in a formal registration? If not, how is
the distribution of quotas?• Was there a distribution mechanism accoutrements authority
between individuals?• Is there a constitution family includes (responsibilities system,
distribution of profits, and audit within the company)?• Is there a special salary system for working family members?
Cont..• Was there previous generation training?• Was the function of each individual suits his qualification?• Is there any orientation for the next generation to specialize in
special fields relate to the business?• Is there a periodic meeting between company’s family
members?• Is there a separation between private and company’s fund?• What’s the company organizational structure?• Is there any separation between ownership and management?• In your opinion, what are the main conflicts in family business?• In case of quarrels, what is the main reason of conflict?• How did you solve the conflict?
Cont..• In your opinion, do family companies need external
interpose (laws, governmental interfere, chamber of industrial and commerce)?
• How do you satisfy the non-family members? Do they take into consideration their opinions?
• Is there any special way to deal with them in order to increase their loyalty to the family firms?
• As an owner of family member, do you accept to have a qualified person in a management position of non-family members?
• Do you believe in the role of reform committees?
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