THE FOCUS OF THIS POWERPOINT IS TO BRING OWNING A FAMILY BUSINESS TO LIGHT.

What is a family?

FAMILY

A group who shares a similar history, and who supports the development and well-being of its individual members.

Now imagine that family owning a business…

FAMILY

BUSINESS

The individuals who establish a firm, or their descendants, & operate the strategic decisions and life course of the firm

3 TYPES OF FAMILY BUSINESSES

ONE Owner-managed

TWO Sibling partnership

THREE Cousin consortium

Family Concerns

Business Concerns

Family care Production/distributionEmployment/advancement Professional mgmt.

Family loyalty Effective operations

Family business culture and values

Knowledge

A stable culture

Reliability and pride; quality and value

Commitment

Long-range thinking

Speedy decisions

Family support

Financial sacrifices

Differentiation from competitors

Social responsibility and concern for workers

Long term planning and preparation

Family Business Advantages

Disadvantages

Risk (consequences of failure) of launching business

Nepotism and competency and merit differences btw. family members

Family traditions vs. business innovation

Unity and cooperation vs. diversity and competition

Family loyalty vs. non-family employee opportunities

Most founders will incorporate their own personal beliefs, value, and culture to imprint the culture of their business.

The founder’s core cultural values include:Mutual respect

Integrity

Efficient resources

Responsibility

“Fun”

THE FEARS OF OWNING A FAMILY BUSINESS

Fear of FAILURE

Fear of SUCCESS …or increased future expectations

Fear of COMMITMENT

Fear of DISAPPOINTING PARENTS

Fear of DISAPPOINTING OTHERS …or losing relationships

Commitment Through Unity

F a m i l y u n i t y i s t h e o n e n e s s o f m i n d , f e e l i n g , a n d a c t i o n b e t w e e n f a m i l y m e m b e r s .

Factors critical to success:

Family members feeling unified as an ownership group

Significant association with past growth/expectations for future growth

Makes owners likely to share their values

Family Roles and RelationshipsCo-Preneurs (Husband–wife)

Opportunity to share more in each other’s lives

Differences interfere with family life

Work limits time for family life

Sharing family responsibilities eases the load

Sons and Daughters

Personal preferences vary

Personal qualifications are insufficient to assume role

Limits personal freedom to choose a career

Parental Concerns

Child’s possession of necessary temperament & ability

Avoiding favoritism in management and development

Prevention of damage to parent–child relationship

Leadership education and expertise

Motivation and interest

Timetable

Avoiding sibling rivalry

Sibling Cooperation, Sibling Rivalry

Best case: work as a team, contributing services according to abilities

Worst case: compete as rivals and disagree about business roles

Best Practices for Family BusinessPromote learning to stimulate new thinking/strategic insights

Solicit input from outsiders to keep things in perspective

Establish channels for constructive communication

Build a culture that accepts change

Promote family members by skill levels

Attract and retain excellent non-family managers

Ensure fair compensation for all employees

Establish a solid leadership succession plan

Exploit the unique advantages of family ownership

The Need for Good Governance

HazardsCompetition for advancementGetting caught in the crossfire/politics of family

competition Solutions

Identify family-only reserved positions in advanceTreat employees fairly

Family RetreatsA retreat at a remote location to discuss family business matters; an outside facilitator may be necessary

Guidelines

1. Be clear about the purpose of the retreat

2. Set small, attainable goals

3. Use an agenda and stick to it

4. Give everyone a chance to participate

5. Know difference between consensus and agreement.

Family CouncilsAn organized group of family members who gather periodically to discuss business issues

Represent the family to board of directors

Useful in developing family harmony

Increases understanding of family traditions and interest

Family Business ConstitutionA statement of principles intended to guide a family firm through times of crisis and change

The core values family members should follow

The decision making process

The benefits family members may receive

The introduction of business governance structures

The dispute resolution procedure

The philanthropic ambitions of the family

Process of Leadership Succession

MentoringGuiding/supporting work and development of a less experienced member

CompetencyGiving only qualified, competent members the leadership roles in the firm will increases the

firms value for those having some ownership interest

Senior Responsibilities

Junior Responsibilities

Communication Be open to communication

Planning Develop personal action plan

Accountability Implement plan

Owner development Prepare for ownership

Long-term planning Design life plans

Successful Leadership SuccessionA sound, profitable business

Stable, healthy family relationships

Advanced planning for leadership succession

Positive family leadership and team-oriented management structure

Career opportunities without pressure

Open communication on business issues

Transfer of Ownership

Who will inherit the family firm? And when?

Should each heir receive an equal share?

Should ownership be transferred gradually?

How are tax considerations to be handled?

What should happen to the founder’s other assets?