Chapter 5: Small Business Management

Cousin Consortium

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

sibling partnership

A business in which children of the founder become owners and managers. (2nd generation)

a

A family _____ is a gathering of family members, usually at a remote location, to discuss family business matters. a. retreat b. council c. business d. picnic

b

A family business's primary function relates to the care and nurture of family members. a. True b. False

b

A formal organization in which family members discuss strategic planning and other issues pertaining to the family business is called a family _____. a. retreat b. council c. consortium d. enclave

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

a

A pattern of behaviors and beliefs that characterize a particular firm refers to its a. organizational culture. b. family council. c. family-based commitment. d. nepotism.

a

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

c

A statement of principles intended to guide a family firm through times of crisis and change refers to a(n) a. organizational culture. b. cousin consortium. c. family business constitution. d. transfer of ownership.

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

a

A(n) _____ business is a venture that is operated by a founding entrepreneur. a. owner-managed b. sibling partnership c. cousin consortium d. family council

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.

c

Family businesses are best described as: a. Businesses that cater to families. b. Companies that sell products and services appropriate for all ages. c. Those in which the strategic direction of the firm is influenced significantly by family members. d. Businesses that hire only family members

b

If the children of the founder become the owners and managers of the business, that second generation is referred to as a(n) a. owner-managed venture. b. sibling partnership. c. cousin consortium. d. family council

a

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

b

Is a lack of loyalty to the firm by family members not directly involved in the business a positive or a negative of a family business? a. Positive b. Negative

a

Is close communication among family members a positive or a negative of a family business? a. Positive b. Negative

a

Is trust among family members a positive or a negative of a family business? a. positive b. negative

d

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

socioemotional wealth

Nonfinancial factors in a family firm that affect the commitment of family members to the business

d

Of all the relationships in a family business, the _____ relationship is the most sensitive and troublesome. a. husband-wife b. in-law c. son-daughter d. parent-child

transfer of ownership

Passing ownership of a family business to the next generation.

d

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. c. The fact that it is illegal in most states. d. A and B

c

Recent research findings suggest that companies that are successful in making the transition from one generation to the next are: a. Those that instill a sense in succeeding generations that the founders' way of doing business is sacrosanct. b. Run by intricate operational guidelines that specify every detail of day-to-day work. c. Those whose new leaders act on their own, take risks, and support innovation. d. Those in which the culture keeps "creative" members in line

b

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

d

The definition of a family used in the context of this chapter is: a. People who share the same bloodline. b. Any set of people who live together. c. Biological relatives living in the same house. d. People bound by a shared history who are committed to a future together

b

The overlap of family concerns and business interest in the family firm simplifies management of the business. a. True b. False

nepotism

The practice of employing relatives

b

The practice of employing relatives is referred to as a. a family council. b. nepotism. c. co-preneurs. d. a transfer of ownership

c

The predator/parasite conflict can best be described as: a. The perception that nonfamily members have less say in business decisions. b. Marketing tactics to which some family members object. c. The perception by family members who work in the firm that family members who do not work in the firm are benefitting unfairly and the perception by family members who work outside the firm that inside members are benefiting unfairly. d. Tension between family business owners and big companies that want to buy the smaller firm.

d

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

c

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 d. sharing of family history

c

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 d. Lack of understanding between parent and child

c

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. d. Family businesses have a long-range plan for future generations

a

Which of the following is a consideration in the transfer of ownership in the family firm? a. tax laws b. fair treatment of community members c. delay of transfer of ownership until the death of the founder d. planning and discussion of taking the firm public

b

Which of the following is most likely to result in increased self-confidence in grown children who are thinking about entering the family business? a. Looking in the mirror and saying, "You can do it!" b. Succeeding in another firm on one's own. c. Reading self-help books. d. Taking the advice of the previous generation in all business matters.

organizational culture

a pattern of behaviors and beliefs that characterize a particular firm

co-preneurs

couples teams who own and manage businesses