Small Business- Chapter V

In a family business, the founder's core values may become part of both the business culture and the family code.

True. Founders leave a deep impression on the family businesses they launch and the distinctive core values that motivate and guide an entrepreneur in the founding of a company become a part of both the business culture and the family code.

A potential advantage of the husband-wife team known as co-preneurs is the opportunity to share more of their lives.

True. One potential advantage of a couples team is the opportunity to work with someone you really trust and to share more of your lives together.

A formal organization in which family members discuss strategic planning and other issues pertaining to the family business is called a family _____.

council

co-preneurs

couples teams who own and manage businesses

A(n) _____ business is a venture that is operated by a founding entrepreneur.

owner-managed

Of all the relationships in a family business, the _____ relationship is the most sensitive and troublesome.

parent-child

A family _____ is a gathering of family members, usually at a remote location, to discuss family business matters.

retreat

If the children of the founder become the owners and managers of the business, that second generation is referred to as a(n)

sibling partnership.

sibling partnership

A business in which children of the founder become owners and managers

The overlap of family concerns and business interest in the family firm simplifies management of the business.

False

Communication.

Parents need to listen and ask questions. Communication can be used to build trust and to convey values. Providing support and feedback are important, but not just in a one-way direction.

Long-term planning

When asking the next generation to develop long-term plans that will prepare them for leadership, the current generation of leaders must simultaneously prepare their own plans. Such plans should take into account future business development, boards of directors and advisers, family councils, and other structures.

Socioemotional

commitment of family members refers to ties that extend beyond the financial rewards of being in the business. They include things like solidarity, identification with the family, and a sense of history.

A statement of principles intended to guide a family firm through times of crisis and change refers to a(n)

family business constitution.

Which of the following is a consideration in the transfer of ownership in the family firm?

tax laws. Considerations in the transfer of ownership include the ownership structure of the firm, legal issues such as tax considerations and government regulations.

family

A group of people bound by a shared history and a commitment to share a future together, while supporting the development and well-being of individual members.

Planning.

Not only should the company's vision be articulated, but also the family's values and even the plan for settling the estate of the current generation. Planning should encompass family members, employees, and owners.

A family retreat

is a meeting of family members held (usually off-premises) to discuss family business matters.

Family business

is an organization in which either the individuals who established or acquired the firm or their descendants significantly influence the strategic decisions and life course of the firm.

The practice of employing relatives is referred to as

nepotism

A pattern of behaviors and beliefs that characterize a particular firm refers to its

organizational culture.

nepotism

the practice of hiring relatives

Cousin Consortium

A business in third and subsequent generations, when children of the siblings take ownership and management positions.

socioemotional wealth

A business in which children of the founder become owners and managers. Socioemotional commitment to the family business indicates an interest in its success that cannot be captured in tangible rewards. It is the deep feeling that one is contributing to something that really matters to the family as a whole.

Organizatonal culture

A pattern of behaviors and beliefs that characterize a particular firm

Family Business Constitution

A statement of principles intended to guide a family firm through times of crisis and change.

owner-managed business

A venture operated by a founding entrepreneur

family retreat

An informal gathering of family members, usually at a remote location, to discuss family business matters

family business

An organization in which either the individuals who established or acquired the firm or their descendants significantly influence the strategic decisions and life course of the firm.

family council

An organized group of family members who gather periodically to discuss family-related business issues.

A family business's primary function relates to the care and nurture of family members

False. The family's primary function is the care and nurturing of family members, while the business is concerned with the production and distribution of goods and/or services.

Research finds that, generally, the process of succession is usually very fast in a family business.

False. The task of preparing family members for careers, leadership, and ownership within the business is difficult and sometimes frustrating. Professional and managerial requirements are intertwined with family feelings and interests and making the process work can take years.

Family Retreats

Family retreats can help people employed by the family business sort out issues away from the everyday distractions of running the business. Sometimes facilitators are used to encourage open and constructive dialogue.

transfer of ownership

Passing ownership of a family business to the next generation.

Which of the following is most likely to result in increased self-confidence in grown children who are thinking about entering the family business?

Succeeding in another firm on one's own. There is only one way to prove you can do it and that is...doing it. Some firms suggest, or even require, that family members get jobs elsewhere before joining the business to show that they can succeed on their own.

Accountability

The current generation engages in roles as both parent and business owner. In each case, there should be investments in and support for the development of the succeeding generation. That means holding the next generation accountable for their actions, especially those that relate to credibility and integrity.

The predator/parasite conflict can best be described as:

The perception by family members who work in the firm that family members who do not work in the firm are benefiting unfairly and the perception by family members who work outside the firm that inside members are benefiting unfairly. Sometimes problems with family businesses arise as much from conflict between family and non-family members as among family members. It can be difficult to manage the perception that family gets preferential treatment.

Family businesses are best described as:

Those in which the strategic direction of the firm is influenced significantly by family members

Recent research findings suggest that companies that are successful in making the transition from one generation to the next are:

Those whose new leaders act on their own, take risks, and support innovation.The same virtues that make founders successful can also work to the advantage of later generations. Firms that get in trouble tend to be those in which the follow-on generations of leaders lack initiative and savvy

Owner development

To prepare the next generation to participate in the governance of the firm, the current generation should be specific about the job structure of an active owner-manager or board member

Which of the following is NOT a characteristic of a family business?

a. A business that passes from one generation to the next b. A large publicly traded company c. Interdependence of management and family relationships d. Ownership and involvement is by a majority of non-members of the family * correct

Problems with nepotism include:

a. Difficulty in disciplining wayward employee/family members. b. The perception by non-family members that family members are treated differently.

Which of the following is NOT considered an advantage of a family business?

a. Family members are loyal to the business even in tough times. b. There is a greater level of trust between family members involved in the business. c. Questions of competency from non-family members of the business. *correct d. Family businesses have a long-range plan for future generations.

Which of the following is NOT a potential problem in the succession of a family business?

a. Reluctant parents b. Ambitious children c. The type of business conducted by the firm (*correct) d. Lack of understanding between parent and child

Members of the succeeding generation in family firms may have emotional resistance to joining the firm which includes all of the following EXCEPT:

a. fear of failure. b. fear of Success. c. fear of Commitment. d. fear of Affluence. *(correct)

Which of the following is NOT a characteristic of a family council?

a. sharing of achievements b. discussion of future direction c. small, select group of employees (*Correct) d. sharing of family history