Category: Family Businesses

Gopher IT is a business owned by a family with different members of the family engaging in running of the business. It is described as a family business because it has the majority of voting power controlled by the family. It comprises one of the worlds dominant types of businesses (Davis 2001).

Roles of the Family Members in the Governance of Gopher IT

The owners hold more than one role in the business. They have different positions as managers and directors. There are also non-family managers who are treated equally as family managers because the company has set up good employment policies for everyone. This has made all employees to be motivated. The management of Gopher IT is strictly under family members.

There is also a board of directors. Membership of board of directors is mostly reserved for the family members although it is given also to non-family members who are trusted. This ensures that most business decisions are made by the family members (Le Van, 1999).

Gopher IT is owned by husband and wife. Laura Welch, who is the wife, is the general manager who oversees the running of the company (Stempler 1998). She handles all purchases, opening and closing of the office every day. Jack Welch, the husband, is the Sales and Marketing Manager. He creates promotional activities, monitors sales and distributes all marketing materials

Chris Welch, their son, is the Financial Manager. He is responsible for finance, payroll, accounting taxes, billing and matters related to budgets. The non-family managers are operation manager and human resource manager. The operation manager is in charge of daily operations. The human resource manager supervises employees and his roles include hiring and firing of new applicants.

There is good governance in Gopher IT so as to instill discipline, prevent conflicts, and the business may continue to grow. To achieve this, the company communicates its vision, rules and regulations and facilitates decision making and sharing of ideas among all members.

The structure of Gopher IT governance has been well documented in a strategic plan. It comprises policies and values of the business. It defines the roles of the key players of the family business (Sahlman 1997) Employees are their in-laws, cousins and non family members who finished school recently.

Gopher IT activities

The family business offers personal services to people and it is located in the downtown of Boston. They saw that peoples schedules were demanding hence the business motive was to increase the leisure time for people. The people living in the downtown have white collar jobs, higher income and would like to have leisure time.

It is time consuming and irritating to run errands after work, during work and before work. People queue, fight traffic, and others skip lunch and hence will benefit from this family business. It offers errand services for professionals. It is located in the second floor, room 101 of Times Tower.

They offer services on foot, riding by bicycle or use public transport. The services include: picking laundry, mail, tickets, shopping, automobile after repair and sometimes making deposits in banks. Charges are hourly (Stempler, 1998). The market is good because there are about 10,000 who pass the office every day when going to work. There is the storage of groceries and gifts.

Strengths and Weaknesses of Gopher IT

As a family business, it performs better than non-family businesses. They make higher profits and sales than their counterparts. This is due to some strength that the other businesses lack which include commitment. The owners of the business show a lot of dedication so that the business may grow and can be inherited by the subsequent generation.

They work hard, plough back profit that they have made to make it long term. Knowledge continuity is another strength factor. Business owners make sure that they pass accumulated experience, knowledge, and skills to their family members so that the company may not fail even in the long term (Davis 2001).

One of the weaknesses of Gopher IT as a family business includes favorism. Family members are employed regardless of whether they are qualified or not. Complexity is another weakness that Gopher IT experience. This is due to employment of different members of the family who run the business.

The family members also add family issues and emotions to the business unlike their counterparts. Lacking discipline is Gophers IT businesss weakness where some family members do not pay attention to strategic areas.

Stages of Growth in Gopher IT

The first stage was called the founders stage. The business was managed and owned by those who founded it. They included the husband and the wife. It was not complicated in governance, because its running was only in the hands of the founders.

There was also good commitment towards the business. The next stage was called the sibling partnership. Although the founders maintained management of the business, it transferred some to their children. The third stage is the cousin confederation. This is where more family members were included in the business like in-laws and cousins (Neuberger and Lank 1998).

Conflicts in Gopher IT

There may arise some conflicts brought about by the family members employed either now or in the future and one of them is succession. Conflicts may arise as to who will be the successor of the wife and husband. Another conflict is the acceptance of roles in the future and agreeing to continue the business.

There is no record that the managers have the right education to hold the managerial positions (Sahlman 1997), There is no record also that they have any experience pertaining to running of the business.

Conclusion

To improve the functioning of the family business, it is important for the owners to set up good employment policies so that family members do not add family issues and emotions. Based on the conflict of succession, it is better for the business to state clearly who will succeed the owners based on their education and experience in the running of the business.

They will need also to be familiarized with the roles that they will undertake i.e. the managerial positions. They will also need to have education on the roles they will undertake like Chris who is a financial manager. Finally, it is important that the family has its strategic plan stating its rules and vision.

Some family businesses have little life span and do not make it to the third generation because the third generation do not have the skills and experience to run the business with its large demands. They need to be educated on the roles they will take and familiarize with the business

Reference List

Davis, J, A 2001, The family business, Harvard business Review, vol. 20, no. 19, pp.6

Le Van, G 1999, The Survival Guide for Business Families, London, Routledge.

Neuberger, F, & Lank, A 1998, The Family Business: Its Governance for Sustainability, London, Routledge.

Sahlman, A 1997, How to Sustain a Family Business, Harvard Business Review,vol.75,no. 4,pp.98-108.

Stempler, G, L 1988, A Study of Succession in Family Owned Businesses, Ph.D. Dissertation , Washington, DC, George Washington University.

Introduction

A family business is any setup that has been made by members of a family without the links of an external enterprise. Running a family business is a tough venture for every individual who is indulged in it, and the most difficult aspect of it is to keep it running smoothly after it is initiated.

Approximately 80 percent of the businesses around the world are owned by families, and hardly 65 percent of them manage to survive for long (Survival of a Family Business, 2008). They usually encounter pitfalls, drowning large sums of money without any gains. This may be due to a lack of awareness of how to go about the business and keep it running with the help of adopted strategies. There are a number of things to be kept in mind for achieving success in business, the most essential of which is to make a succession plan.

Succession Plan

No matter how long an individual can lead a family-owned business, there has to come a time when the business will be passed on to the younger generation for it to continue. It is never guaranteed that the coming generation who has taken over will produce good business at the same pace. However, this passing on of the business to other individuals, who are the successors, is a crucial phase in the running of the business.

The succession or exit plan that a person makes for the continuation of the business is named the succession plan. It is an outline of the person, or people who will be held responsible for the carrying on of the business after the preceding leader or leaders are unable to run it any longer (How Do I Develop a Succession Plan?). A succession plan is significant in the transfer of the business, and if a smooth accession is required, then proper planning is the key factor (Finn, H., 2008).

Need for a Succession Plan

Just because the passing on of the business seems to be an act to be undertaken after a number of years, it does not mean that a plan should not be made right at the moment. Every business should have a succession plan because of its impact on long-term profitability.

Family businesses often do not succeed due to disagreement upon the following factors:

• Business requirements.
• Alterations in commitments and expectations of family members.
• Lack of communication.
• Lack of succession planning.

The needs of the business are overlooked in family businesses, as compared to a corporate business. Instead, more attention is paid to the family members needs. Thus it is essential to look at the family member needs as well as the business needs, despite the trouble that is created between siblings and cousins, and there is a dire need for a succession plan to be made as early as possible to avoid future conflicts.

Absence of a Succession Plan

The absence of a succession plan or the delay of one may lead to problems in the future. When the business is being handed over to the second generation, there are still many factors that both generations agree upon, and there is a smoother succession if it has been planned earlier. If there is no plan for implementation, the business will be affected. A good and timely plan ensures future stability of the business and profitability, along with the surety of the company not dissolving (Survival of a Family Business, 2008).

Factors to be Kept in Mind While Creating a Succession Plan

Since succession planning is not an exact science, it is difficult to follow a set of rules for implementation. Generally, the following steps are taken while forming the plan:

1. The successor  the choice of the successor of your running business is a difficult one, as you cannot make it in a short span of time. The successor has to have the knowledge, skills, and ability to enable the business to run as it did earlier, if not better. Therefore, an analysis of the employees has to be made first, to choose the person who will have to shoulder maximum responsibility of the business. Lesser emotion and more objectivity have to be ensured while making this important decision.
2. Training the successor  the most important functions of the company can be identified, and the successor can first be made to work in these areas. His performance can be seen, and he should be allowed to exercise his own ideas in some places. Patience is needed for this, as things may seem strange to you but may benefit the business in the long run. More profits can be gained by the diversity of thoughts and ideas put into the running business.
3. Time table  for the success of the succession, it is important to establish a timetable that enlists who will perform what tasks and the timings of task performance. This timetable may prove advantageous for the successor, motivating him to work when you are not a part of the daily routine activities any longer. The management also needs to be aware of the successors activities.
4. Preparation for Retirement  an early retirement should be planned, giving more responsibility to the successor by the passing days. Taking over these responsibilities will enable you to spend time planning how you will spend your time once you are not in the workplace anymore.
5. Fitting in of the Successor  the successor is the main person held for the responsibilities of the business once you have left. The future of the company is dependent on him, and it is up to him to succeed following your training.

An additional factor that needs to be kept in mind while making the succession plan is to take the assistance of some advisers like the accountant or insurance professionals for the impact that will be laid from taxes and other investments.

The successor has to face many new challenges after being given authority over the business. Everything in this senior position may seem new, and he may be indecisive regarding many issues. A lot of confidence-building is involved for this position, as well as the ability to gain the respect of family members, taking the history of the business as a learning tool. Another important point is the gain of the respect of customers, in this broad and fast-paced business world.

Conclusion

All these challenges are well worth the effort if you can view your business grow and flourish due to your proper guidance. The succession plan and its execution will be a milestone achieved for the progress of your future generations.

References

Finn, H. SCORE 2008. Web.

How Do I Develop a Succession Plan? 2008. Web.

Survival of a Family Business: Need for a Succession Plan 2008. Web.

Gopher IT is a business owned by a family with different members of the family engaging in running of the business. It is described as a family business because it has the majority of voting power controlled by the family. It comprises one of the world’s dominant types of businesses (Davis 2001).

Roles of the Family Members in the Governance of Gopher IT

The owners hold more than one role in the business. They have different positions as managers and directors. There are also non-family managers who are treated equally as family managers because the company has set up good employment policies for everyone. This has made all employees to be motivated. The management of Gopher IT is strictly under family members.

There is also a board of directors. Membership of board of directors is mostly reserved for the family members although it is given also to non-family members who are trusted. This ensures that most business decisions are made by the family members (Le Van, 1999).

Gopher IT is owned by husband and wife. Laura Welch, who is the wife, is the general manager who oversees the running of the company (Stempler 1998). She handles all purchases, opening and closing of the office every day. Jack Welch, the husband, is the Sales and Marketing Manager. He creates promotional activities, monitors sales and distributes all marketing materials

Chris Welch, their son, is the Financial Manager. He is responsible for finance, payroll, accounting taxes, billing and matters related to budgets. The non-family managers are operation manager and human resource manager. The operation manager is in charge of daily operations. The human resource manager supervises employees and his roles include hiring and firing of new applicants.

There is good governance in Gopher IT so as to instill discipline, prevent conflicts, and the business may continue to grow. To achieve this, the company communicates its vision, rules and regulations and facilitates decision making and sharing of ideas among all members.

The structure of Gopher IT governance has been well documented in a strategic plan. It comprises policies and values of the business. It defines the roles of the key players of the family business (Sahlman 1997) Employees are their in-laws, cousins and non family members who finished school recently.

Gopher IT activities

The family business offers personal services to people and it is located in the downtown of Boston. They saw that people’s schedules were demanding hence the business motive was to increase the leisure time for people. The people living in the downtown have white collar jobs, higher income and would like to have leisure time.

It is time consuming and irritating to run errands after work, during work and before work. People queue, fight traffic, and others skip lunch and hence will benefit from this family business. It offers errand services for professionals. It is located in the second floor, room 101 of Times Tower.

They offer services on foot, riding by bicycle or use public transport. The services include: picking laundry, mail, tickets, shopping, automobile after repair and sometimes making deposits in banks. Charges are hourly (Stempler, 1998). The market is good because there are about 10,000 who pass the office every day when going to work. There is the storage of groceries and gifts.

Strengths and Weaknesses of Gopher IT

As a family business, it performs better than non-family businesses. They make higher profits and sales than their counterparts. This is due to some strength that the other businesses lack which include commitment. The owners of the business show a lot of dedication so that the business may grow and can be inherited by the subsequent generation.

They work hard, plough back profit that they have made to make it long term. Knowledge continuity is another strength factor. Business owners make sure that they pass accumulated experience, knowledge, and skills to their family members so that the company may not fail even in the long term (Davis 2001).

One of the weaknesses of Gopher IT as a family business includes favorism. Family members are employed regardless of whether they are qualified or not. Complexity is another weakness that Gopher IT experience. This is due to employment of different members of the family who run the business.

The family members also add family issues and emotions to the business unlike their counterparts. Lacking discipline is Gophers IT business’s weakness where some family members do not pay attention to strategic areas.

Stages of Growth in Gopher IT

The first stage was called the founder’s stage. The business was managed and owned by those who founded it. They included the husband and the wife. It was not complicated in governance, because its running was only in the hands of the founders.

There was also good commitment towards the business. The next stage was called the sibling partnership. Although the founders maintained management of the business, it transferred some to their children. The third stage is the cousin confederation. This is where more family members were included in the business like in-laws and cousins (Neuberger and Lank 1998).

Conflicts in Gopher IT

There may arise some conflicts brought about by the family members employed either now or in the future and one of them is succession. Conflicts may arise as to who will be the successor of the wife and husband. Another conflict is the acceptance of roles in the future and agreeing to continue the business.

There is no record that the managers have the right education to hold the managerial positions (Sahlman 1997), There is no record also that they have any experience pertaining to running of the business.

Conclusion

To improve the functioning of the family business, it is important for the owners to set up good employment policies so that family members do not add family issues and emotions. Based on the conflict of succession, it is better for the business to state clearly who will succeed the owners based on their education and experience in the running of the business.

They will need also to be familiarized with the roles that they will undertake i.e. the managerial positions. They will also need to have education on the roles they will undertake like Chris who is a financial manager. Finally, it is important that the family has its strategic plan stating its rules and vision.

Some family businesses have little life span and do not make it to the third generation because the third generation do not have the skills and experience to run the business with its large demands. They need to be educated on the roles they will take and familiarize with the business

Reference List

Davis, J, A 2001, The family business, Harvard business Review, vol. 20, no. 19, pp.6

Le Van, G 1999, The Survival Guide for Business Families, London, Routledge.

Neuberger, F, & Lank, A 1998, The Family Business: Its Governance for Sustainability, London, Routledge.

Sahlman, A 1997, How to Sustain a Family Business, Harvard Business Review,vol.75,no. 4,pp.98-108.

Stempler, G, L 1988, A Study of Succession in Family Owned Businesses, Ph.D. Dissertation , Washington, DC, George Washington University.

Analyze in detail the different aspects of the family dynamics challenge in the Izat Raja family. Provide specific examples to illustrate the relationships between various members of the family

As well as every family that sets up a business, Izat Raja’s family had to face a series of family dynamics challenges. First of all, one might point out the problem of the family emotional intelligence that the Izat Raja experienced at a certain point. Whereas the man showed high emotional intelligence capacity in his relations with Waleed, he proved to be relatively incompetent in managing his family feelings towards his son.

Moreover, decision making became rather ineffective when Izat made up his mind to employ his old friend, Rizvi. In this case, he made critical mistakes performing the wrong evaluation of the family needs and the reinvestment for growth (Poza, 2009).

In addition, the principal challenge that Izat faced was that his entrepreneurship was not initially a family business. In the beginning, he did not have any relatives that could assist him in policy-making, which influenced his managerial manner as he got used to relying on his abilities.

Relying on the boundary theory, analyze in detail how Raja Garage Ltd. manages its family – business identities, and identify the type of family business Raja Garage Ltd is

In the framework of the boundary theory, Izat Raja’s family business can be referred to as the type with integrated family business identities. In other words, contractual governance is mainly substituted by relational governance (Poza, 2009). In the meantime, it is critical to note that the only reason why Izat Raja’s business can be called “family” resides in the fact that his nephew, Waleed works for Raja’s company.

All the other employees are not a family member, although Raja treats them as if they were. For example, he takes up the responsibility for their well-being and rejects to cut off the workforce even when the company experiences financial problems. It is evident from the case that Izat prefers to avoid official contracts when possible, which is illustrated by the situation with Rizve when their job relationships were regulated mainly on trusting terms.

Are there any mistakes that Izat Raja made throughout the years of his company existence? Justify your answer

As well as any manager, Izat has made some mistakes in the course of his running the company. His principal drawback might reside in the fact that he refuses to adjust his firm’s services to the changing market demands. As it is seen from the case, his unwillingness to implement innovations does significant harm to the company’s performance.

Another weakness of Izat’s policy is his poor management of financial issues. According to his nephew, Izat tends to be rather careless about the income and the expenses. The relevant attitude towards accounting was seen from the very beginning when it was described that Izat did not have a record book, but would write all the accounts on a piece of paper. It might be, consequently, assumed, that Izat should employ a qualified specialist that will be in charge of this business aspect.

What do you think of Kamran’s ‘bunch of fresh ideas’ concerning the future development of the family business? Do you have other ideas for saving the company?

The “fresh” ideas of Izat’s son Kamran seem to be rather reasonable and are likely to improve the general performance of the company. For example, his suggestion to reduce the number of workers, dismissing those employees that are less skilled, is rational. In the meantime, his assumption that Waleed’s service branch should be eliminated seems to be ungrounded. According to the case, Waleed’s service helps the company to gain considerable profit – getting rid of this option will mean losing a significant percentage of customers (Spraggon, Bodolica & Manoussifar, 2012). On the whole, it might be suggested that Izat should alter his managerial style.

Reference List

Poza, E.J. (2009). Family Business. Mason, Ohio: Cengage Learning.

Spraggon, M., Bodolica, V., & Manoussifar, M., (2012). Succession Management Challenges: The Case of a Family Business in UAE. Asian Journal of Management Cases, 9(2), 115-126.

Executive Summary

The report explores the contemporary context of running a family business with the aim of the identification of threats concerning the integrity relationships between the family members involved in the same business. The paper starts with an introduction to the problem’s background with the following identification of the main goals of the report. The description of the meta-analysis approach and its results are presented in the methods and findings sections. The paper ultimately concludes by summarising points and three main recommendations aimed at minimization of family disintegration. The purpose of the study is to analyze the existing literature on the topic of family relationships and a family business, estimate the potential threat such relationships might impose, and introduce relevant recommendations for future use.

Introduction

The history of family business research presents a variety of case studies that investigate the issues of relationships between family members. Many works examine the problems of children-parents relationships within the succession paradigm, sibling conflicts, generation gaps, and the moral side of the controversy between family well-being and wealth (Ayranchi 2014; Chalus-Sauvannet, Deschamps & Cisneros 2016; Helin & Jabri 2015; Leppäaho, Plakoyiannaki & Dimitratos 2016). Despite the broad scope of academic attention to the problem, there are still gaps that need to be filled, including the lack of accurate analysis of the reasons for negative outcomes of such relationships, as well as recommendations for properly addressing the shortcomings. The relevance of the topic is great due to the overall popularity of family businesses all over the world and the frequent occurrence of conflicts and challenges between different family members that obstruct the flow of inside business affairs and the financial performance of an enterprise. The purpose of the report is to collect and analyze existing literature that examines the discussed problem to use the former experience and carry out the proper strategy to eliminate threats and foster healthy relationships inside a family firm.

Aims

The purpose of the report might be achieved by clear identification and following several specific aims. Firstly, they include a thorough investigation of the problems imposing family disintegration as a result of the common work of several family members inside one firm. Secondly, it is essential to contrast the positive and negative outcomes of being involved in a family business as portrayed in the analyzed research studies. Finally, the report aims at developing a sufficient number of recommendations which would amplify positive predispositions of a family business for the interpersonal connections between family members, as well as introduce some strategies to eliminate the flaws of such a type of business.

Methods

Meta-analysis was utilized to examine the general characteristics of family business marked with family subordination and particular issues frequently occurring in a family business and obstructing family integration. The statistical data show that family business embraces approximately 90% of “the business in the worldwide free economy” and employs 75% of the workforce in the world (Dana & Ramadani 2015, p. 10). Thus, it is vital to pay close attention to the issues concerning this sphere. Ten literary sources were found and analyzed to collect the necessary information. The literature used for the analysis is dated from 2015 till 2019, which makes the findings up-to-date and relevant for the recommendation presentation and the ultimate use of the results of the work.

Findings

The research on family business-related issues is growing rapidly. The majority of studies concern multiple dimensions in which family-owned firms perform and the challenges the family members experience (Payne, Pearson & Carr 2017). The overall findings in the field of a family business and relationships imply the collision of several aspects characterizing family involvement in common business work. These aspects are shown in Figure 1, which is developed on the basis of the information retrieved from Neubauer and Lank (2016, p. 39-41).

As the figure implies, the conflicts in different spheres might overlap and cause family disintegration, as well as a business failure. Indeed, the long-lasting traditions concerning management style and owns shares of family companies with long history might become a root of the conflict. The generation gap can bring disparity of views that different family members have about business management (Hamilton, Cruz & Jack 2017). The intertwined relationship styles characteristic of family and business need a specific approach to be successfully regulated throughout the working process.

As Neubauer and Lank (2016) state, good governance of a family-owned firm guarantees its financial growth, strategic succession planning, and competitive performance. However, often, different family members experience the collision of the three abovementioned primary interests that leads to conflicts and family disintegration. Succession as the way of ensuring the longevity of a business is one of the most beneficial and, at the same time, most difficult issues when it comes to the family business (Dana & Ramadani 2015; Chalus-Sauvannet, Deschamps & Cisneros 2016; Ward 2016). Effective succession is impossible without proper maintaining the interests of the family, management, and ownership.

Functional communication is the core of the effectiveness of family business performance in its short- and long-term perspectives. According to Helin and Jabri (2015), failure to communicate important issues in an unbiased manner might cause problems with firm performance. For example, the case of Brunsalla Ltd shows how communication impairment threatens business growth (Helin & Jabri 2015). The tenth generation of the family that has long been in charge of Brunsalla Ltd consists of several cousins whose relationships are marked with conflict. On the one hand, the successors are proud of the work of their ancestors. On the other hand, the conflict between several cousins and their disability to communicate the issues effectively not only threatens the future of the firm but also paralyzes any attempts to resolve the issue.

Conclusions

In summary, a family business is a crucial constituent of the worldwide economy that implies its great importance in the modern economic environment. It is obvious that the effectiveness of research in this field might ensure the improvement in performance and keep families integrated despite business-related conflicts. The majority of issues threatening the unity of a family are related to communication difficulties connected with the discussion of succession or management style. Therefore, it is vital to eliminate the adverse outcomes of the conflict between family, management, and ownership by implementing several techniques articulated in the recommendations section.

Recommendations

Functional communication practice is essential for a family business to succeed and to protect a family from disintegration. Thus, the first recommendation is to engage in multi-voiced conversations during the meetings to ensure effective listening and flexibility in strategic decisions. Such a technique will affirm the inclusion of each family member in the decision-making process and foster conflict resolution in its early stages. Secondly, an effective way to eliminate family disintegration as a result of family business conflicts is by writing a constitution (Kets de Vries 2017). An official document in which the rules and laws of business relationships are written could be a beneficial tool in managing possible disputes. Finally, constant orientation on the future with great attention to moral priorities could be articulated as a company’s vision to guarantee respectful cooperation between family members through the years of successive management.

Reference List

Ayranchi, E 2014, ‘A study on the influence of family on family business and its relationship to satisfaction with financial performance, Business Administration and Management, vol. XVII, no. 2, pp. 87-105.

Chalus-Sauvannet, MC, Deschamps, B & Cisneros, L 2016, ‘Unexpected succession: when children return to take over the family business, Journal of Small Business Management, vol. 54, no. 2, pp. 714-731.

Dana, LP & Ramadani V (eds.) 2015, Family businesses in transition economies: management, succession, and internationalization, Springer, New York, NY.

Hamilton, E, Cruz, AD & Jack, S 2017, ‘Re-framing the status of narrative in family business research: towards an understanding of families in business, Journal of Family Business Strategy, vol. 8, no. 1, pp. 3-12.

Helin, J & Jabri, M 2015, ‘Family business succession in dialogue: the case of differing backgrounds and views,’ International Small Business Journal, vol. 34, no. 4, pp. 487-505.

Kets de Vries, MFR 2017, ‘Saving a family business from emotional dysfunction’,Harvard Business Review, Web.

Leppäaho, T, Plakoyiannaki, E & Dimitratos, P 2016, ‘The case study in family business: an analysis of current research practices and recommendations’, Family Business Review, vol. 29, no. 2, pp. 159-173.

Neubauer, F & Lank, AG 2016, The family business: its governance for sustainability, Springer, New York, NY.

Payne, GT, Pearson, AW & Carr, JC 2017, ‘Process and variance modeling: linking research questions to methods in family business research’, Family Business Review, vol. 30, no. 1, pp. 11-18.

Ward, J 2016, Keeping the family business healthy: how to plan for continuing growth, profitability, and family leadership, Palgrave Macmillan, New York, NY.

Introduction

A family business is rather difficult to run due to the unique relationships between its employees. Specifically, the relationships of family members and the regular staff that is not related to the owner directly may involve tension due to the possibility of unfairness and biased judgment on the side of managers. Applying the theories of needs to the described scenario suggests that the creation of a family business in which independent employees are hired along with relatives will need a rigid system of ethical standards and an unbiased approach toward assessing each employee’s input in order to reduce the threat of conflicts.

Needs-Related Theory

In order to embrace the challenges that different types of employees face in the context of a family business, one will have to apply a needs-related theory. By utilizing Maslow’s Hierarchy of Needs, one will realize that in the environment of a family business, employees that are not related to the owner are typically satisfied only when it comes to the first two levels of needs (physiological and safety-related ones) (Vargas-Hernandez & Arreola-Enriquez, 2017). Opportunities for self-actualization are typically thwarted by nepotism in the family business, hence the inability to satisfy esteem-associated needs. The need for love and belonging is also unlikely to be addressed since family members will receive more emotional support than the rest of the staff.

In a similar vein, Herzberg’s Theory of Motivation shows that one is unlikely to have their needs satisfied in a family business context. Approaching the subject matter from the perspective of Herzberg’s theory, one will notice that the factors linked to motivation, such as achievement, recognition, advancement, and growth are unlikely to emerge in a family business setting for an outside staff member. Instead, family members are more likely to be offered additional career opportunities, which will create a sense of unfairness and reduce the levels of motivation among other employees (Andersson, 2017). For example, other employees may receive less recognition and positive feedback for their accomplishments than family members do, which will reduce their motivation. Moreover, family members are more likely to be recognized for their achievements than outside ones. The described outcome will lead to higher dissatisfaction rates among staff members. As far as the hygiene factors are concerned, the process of supervision is also likely to be slightly unfair. For example, advancing the careers of family members even if they show lower performance rates compared to other employees will cause a rise in dissatisfaction levels. Finally, job security levels may also suffer for other staff members if family members remain the focus of the HR managers’ efforts.

However, while the supervision issue can be managed with the introduction of strong values and ethical standards, the damage to workplace relationships as a critical factor according to Herzberg’s theory will be irreparable. Once knowing that family members hold an unfair advantage to them as employees, the rest of the staff is highly likely to develop suspicion toward the employees that are related to a company owner. Thus, the efficacy of outside employees’ performance will drop. The salary and security of the latter also may be reduced extensively compared to the staff represented by family members. Thus, the introduction of side staff members into the context of a family business without reconsidering corporate standards is doomed to be unsuccessful.

Conclusion

Due to the high probability of conflicts caused by the unfair distribution of tasks and rewards among family members and the rest of the staff, family businesses need to incorporate rigid ethical standards and adhere to the principles of clarity and visibility to ensure that the needs of every employee are met. To address the issues found in the course of the analysis, one will have to establish the ethical standards that will allow treating every staff member, in the same manner, disregarding their relationship to the business owner. For this purpose, the principles of openness and clarity must be integrated into the organizational setting. Moreover, uniform standards for quality performance must be introduced, with each staff member being evaluated based on these criteria. Thus, the threat of unequal treatment will be minimized..

Reference List

Andersson, S 2017, ‘Assessing job satisfaction using Herzberg’s Two-Factor Theory: a qualitative study between US and Japanese insurance employees’, IAFOR Journal of Business & Management, vol. 2, no. 1, pp. 22-35.

Vargas-Hernandez, JG & Arreola-Enriquez, JA 2017, ‘The motivation of collaborators in family micro companies: cybercafé’, Revista de Administração Mackenzie, vol. 18, no. 6, pp. 149-176.

A unique feature of family business is its inherent multiple and interdependent roles. The uniqueness of family business is that members of family are affected by an overlap of family, business, and ownership subsystems, with owners playing simultaneous roles among these three subsystems. These roles can be complementary, but they can also lead to confusion and create role conflict owing to differences in values between the family and business subsystems. Moreover, overlap between family and business can impede effective role performance and decision-making because of difficulties separating business decisions from family objectives.

In general, family business is defined as a company (business enterprise) managed and controlled by one family. For instance, in the United States, family firms are less likely to be engaged in manufacturing and business services. A larger proportion of service businesses are family companies in the United Kingdom. More recently, family businesses are more likely to be over-represented in such industries as agriculture, distribution, hotels and catering. Family’s businesses are, however, under-represented in the banking, financing, insurance and business services sectors (Irving and Sharma, 2005). Because of their numerical importance, the performance of family businesses is of critical importance to the development of an economy. The key difference is that, in the family business all stages of the process are likely to be influenced by family values, goals and relations. Moreover, the close inter-relationship between family and business often leads to a mix up of issues from the different contexts (Longenecker et al, 2006). The remarkable feature of family business is that it joins three elements: the family, the ownership and the business. “The combination of patient financial capital, social networks, and human capital provided by these members increases the probability of survival of new ventures and helps to sustain the business during poor economic times” (Irving and Sharma, 2005, p. 13).

The main advantages of family business involve common values and traditions, strong commitment and loyalty, stability and decreased costs. Family values remain extremely important in the small family business, where a working family life seems to be a condition for business creation and development. The creation and development of a family business is one of major motivators for entrepreneurs (beside the need to create and compete). In the family business, family concerns blend with entrepreneurial forces and managerial technologies. Research into family business also recognizes the tensions between family life and business life, entrepreneurship, management, and family concerns are all aspects of organized (economic) life and therefore important to every family business (Longenecker et al, 2006). Their co-existence becomes especially obvious in medium-sized firms that have experienced an inter-generational succession. The interfaces between the three systems ‘family’, ‘ownership’, and ‘management’ determine the outcome of the succession. Entrepreneurship again is left out and use of the notion of ‘system’ signals a functionalist/consensus approach with little concern for recognizing, let alone nurturing, the tensions between proposed aspects of the family business (Irving and Sharma, 2005).

The main disadvantages of family business are family conflicts and lack of business skills and strategic vision, need to be better than non-family employees, difficult to raise liquidity, “In some family companies, daily operations are hampered by conflict; in others, the challenge is a high turnover rate among nonfamily employees” (Challenges of Managing Family Businesses, n.d.). Conflicts between the family system and the business system typically are considered to be dysfunctional from the point of view of the firm. The family system weaknesses are ‘inward-looking’ and ‘minimizing change’. Stagnant micro-firms pay a high price for independence declining both entrepreneurship and management. Many family businesses, though, import needed management technology through their hired accountants and absorb ideas about renewal through peer exchange (Longenecker et al, 2006).

To succeed and remain competitive, family business should have a clear vision of its strategic developments and “a clear mission, a statement of purpose and goals” (Challenges of Managing Family Businesses, n.d.). Successful medium-sized family businesses materialize continued entrepreneurship. The organizations all turned out to simultaneously accommodate each of the three ideologies. The ability to actively exploit tensions between different strategies may be identified as the unique quality needed to energies entrepreneurial processes also under the pressure of institutionalization and a fading original entrepreneurial spirit in the multi-generation family business. Also, family members should recognize that “rights and responsibilities are different at home and at work” (Challenges of Managing Family Businesses, n.d.). A living democracy is constituted by multiple and contrasting ideologies. In this case, “the leader of the family business must not take sides with any member of the family” Challenges of Managing Family Businesses, n.d.). Owners of family businesses face challenges not only from operational business areas such as competitive markets, planning, financing, and marketing, but also from issues associated with ownership and family. Given these systems, it has been argued that family business owners require special characteristics and experiences to maintain an appropriate balance between business interests and those of the family. Family members should avoid ‘the status quo’ position which prevents business growth and profitability. In order to avoid dissatisfaction and complaints, the leader should introduce equity in distribution of resources and fair pay (benefits, salaries, fringe benefits).

In sum, family business represents a complex business enterprise influenced by strong personal values and traditions of the family. Family enterprises often involve multiple and interdependent roles, and owners in these businesses can be susceptible to greater inter-role conflict than non-family business owners.

References

1. Challenges of Managing Family Businesses. (n.d.). U.S. Small Business Administration. Web.
2. Irving, G., Sharma, P. (2005). Four Bases of Family Business Successor Commitment: Antecedents and Consequences. Entrepreneurship: Theory and Practice, 29 (1), 13.
3. Longenecker, J., Moore, C., Petty, J. Palich, L. (2006) Small Business Management: An Entrepreneurial Emphasis, 13th Edition, Ohio: Thomson/South-Western.