396 Ch. 5

Fran and Bob (who are married) own and manage a cleaning service. A potential advantage of this arrangement is that

it affords the opportunity to share more of their lives and build something together.

To protect the interests of both the family and the business in a family business, the owner should

identify the positions, if any, that are reserved for members of the family.

Bob and his sister Betty are co-owners of their late parents' business. Bob actively manages the business; Betty supplies only capital from her inheritance but does not work in the business. They squabble over the distribution of profits from the business. Bob likely sees his sister as a ___________ while Betty views her brother as a _____________.

parasite, predator

One of the most frequent and stressful roles performed by the spouse who is not active in the business is to:

serve as the mediator between the entrepreneur and the children

Sibling rivalry in a family business

may create disagreements about business policy.

From the children's standpoint, one common reason that they may be reluctant to join the family firm is a desire to

prove their abilities without family assistance.

An issue that may become a problem for a couples-owned business is:

spending too much time together.

Allan opened a hot dog stand in Central Park, New York City. He owns it and operates it six days a week, year round. What kind of business is this?

An owner-managed business

What step is best for parents to decrease succession conflict among children active in the firm and those who are not?

Changing the ownership of the company so common (voting) stock is only given to those active in the company and others receive preferred (nonvoting) stock.

Kinder's Deli has been in business for three generations. A place was found for every Kinder child to work in the shop. The name Kinder meant fine deli meats. This family's commitment is based on:

identification with the firm.

Steve, Harry, and Chris, who own and operate a family auto parts store, are experiencing tough times during a downturn in the local economy. To help the store survive these conditions, the brothers agree to each take a 25 percent reduction in salary for a one-year period. This decision

illustrates an important advantage of a family business.

A founder's core values may become part of the family business culture because

others in the firm absorb traditions and values established by the founder.

In a family business, the interests of the family and the interests of the business are best described as

overlapping.

The close relationship of business factors and family concerns in a family business has been described as

overlapping.

John and his brother Jack started a produce farm 20 years ago and are thinking about retirement. Over time, their children have worked at the farm and so the cousins have started talking about taking over management. At present, this produce farm is an example of ____.

owner-managed business

Jim, the founder of a family business specializing in real estate, is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This action would

potentially hinder the future functioning of the business.

Senior management will be more receptive to the junior generation advancing if the junior generation

proactively shares their preparation for advancement and ask for advice for implementation.

Bret first opened his hardware store in 1946. His sons took over when Bret retired, and now Bret's grandchildren run the store. This type of family business is known as:

a cousin consortium.

Chip and Dale are brothers who have taken over their father's business. This type of family business is known as:

a sibling partnership.

Patricia, a nonfamily employee of a family business, is concerned about competing with family members for future career opportunities. To protect her personal interests, she should

ask that the owner/manager clarify the extent of opportunities considering her skill set.

The family endured great hardships together in the old country but vowed they would always watch out for each other in America. Together they built a thriving business; it was the Muellers against the world. This family's commitment is based on:

binding social ties.

An inherent problem for couples involved in a family business is that

conflicts in the business tend to carry over into family life.

In preparing for succession, the senior generation has certain responsibilities. One of these is that:

the senior generation should hold the next generation accountable for their actions

Bella decided to hire a non-family member as her successor instead of selecting one of her children. What might explain her decision?

Bella wanted to bring in new skills and expertise.

Which statement is true concerning using available family talent in the succession plan?

If the available talent is not sufficient inside the company, the owner must bring in outside leadership even if it is not perceived as a favorable decision by the family at large.

Which statement is the most correct about in-laws and possible complications in a family business?

In-laws will impact the business as they increase the number of persons who are either directly or indirectly involved in the family business.

Jane and Joe are experiencing a strain with their family relationship after running their family business for 5 years. Which issue might be the most likely underlying cause of the tension?

Their difference of opinions about a business matter is spilling over into their family time.

A family retreat is designed to

bring family members together to openly discuss business matters.

In considering the role of younger family members, the best philosophy is to recognize that

children should have a right to choose their own careers.

After college graduation, Terrence was expected to begin working in the family business but instead he continued to lead the playboy life, always postponing his decision about working for his father. Terrence probably has a fear of?

commitment.

A parent might attempt to resolve a transfer of ownership by giving active children in the firm's management _____ stock and giving nonactive children _____ stock.

common, preferred

A common problem for a founder in passing the business on to a daughter or son is

deciding whether the child has the necessary temperament and ability.

The recruiter from IBM made William an offer almost too good to be true. The problem was William's dad, who always expected William to join him in running the family business. William's difficulty in accepting either offer may be based on the fear of:

disappointing his father.

Mayer's philosophy of never using debt to finance operations or expansion was born during the Great Depression and passed on to his sons when they joined the family business. Today the multi-million dollar organization proudly follows Mayer's practice under the leadership of Mayer's great-grandsons and -daughters. This family's commitment is based on:

emotional attachment of family members.

A nonfamily employee of a family business complains that the recent promotion of a family member was unfair. The owner should

enter into a discussion of the roles and opportunities for both family members and outsiders.

Betsy had always had decisions made for her, first by her parents then by her husband. So when her father asked her to take over the family business, she was afraid of:

failure.

A document that states the principles intended to guide a family firm through times of crisis and change, including the succession process is called the

family business constitution

As the only son, Eduardo's father expected to one day turn over management of the business to him despite Eduardo's protests that he wanted no part of it. Following graduation from college, Eduardo realized he did not want his father to let some outsider take over the business. Eduardo's commitment is based on:

family control.

A family business constitution is sometimes labeled a _____.

family creed

A key factor of success in a family business is:

family unity.

Liam's mentor had worked with him for several months to prepare him for the promotion. Now that the offer has been made, Liam is hesitant. His hesitation is likely based on:

fear of disappointing his mentor.

Brandon always came in second-- in birth order, in school and sports, and in his father's heart. When his older brother decided not to take over the family business as expected, Brandon was paralyzed with fear. This paralysis was likely based on:

fear of failure.

A family council is most effective when:

it provides governance to the organization and engages in strategic planning and family succession planning.

To avoid a stifling atmosphere for nonfamily employees in a family business, the owner should

make clear the extent of opportunity for nonfamily members.

Family retreats, which open lines of communication,

may result in formation of a family council to continue discussion

Jan and Jill started a business 20 years. Jill recently stepped down; her daughter Jenny has agreed to start managing the company with Jan's help; and the eventual goal is for Jenny to run the entire company. This process between Jan and Jenny is called ____.

mentoring

Living over the workshop made it easy to involve the children in the daily business decisions. They knew from the time they could write they were expected to work in and eventually manage and own the business. This family's commitment to the business is based on:

renewal of family bonds to the firm through dynastic succession.

A benefit of a strong family relationships is the greater willingness of family members to

sacrifice salaries and dividends when necessary.

"The more you can do, the more is expected of you." Josh already had his hands full managing just one of his father's retail stores. He didn't doubt his ability to do well managing an entire region but still he was reluctant to accept the assignment. He is likely afraid of:

success.

As the spouse of the President of Two Men and a Truck, Neil Bergeron serves the family business in a typical but critical role of

supporting Melanie through the many hours the business requires.