The Family Business

What are the different reasons a leader of a family owner enterprise might bring in a non family member as an executive with the firm?

-Bridge gap between generations -Set new directions for the firm -Deal with change -Provide new skills and expertise

What are the advantages of family enterprises?

-Family business culture & values -Commitment -Knowledge -Long range thinking -A stable culture -Speedy decisions -Reliability & pride

What are the three different types of family businesses?

1. Owner-management business 2. Sibling Partnership 3. Cousin Consortium

In the US, family business generate a large % of all enterprises and GDP. What is the %?

49%

What is the definition of a 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

___________ is a business in third and subsequent generations when children of the siblings take ownership and management positions

Cousin Consortium

T/F When a parent retires completely and turns the firm over to a son or daughter, the firm ceases to be a family business.

False-- A firm remains a family business when it passes from one generation to the next

T/F The process of preparing a family member to take over a family business typically takes about one year.

False-- This process usually takes a number of years, and in some cases decades

________ is the practice of employing relatives in the family firm

Nepotism

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

Overlapping

__________ is a venture operated by a founding entrepreneur

Owner-managed business

__________ is a business in which children of the founder become owners and managers

Sibling Partnerships

T/F A company run by the great grandchildren of the founder would be considered to be managed by a cousin consortium.

True

T/F A family business involving two or more children may experience either sibling cooperation or sibling rivalry.

True

T/F An advantage of a family business is that family members may have company knowledge that leads to better decisions.

True

T/F Family businesses will be more involved in the community

True

T/F Family retreats are best handled by an outside facilitator, who can help develop an agenda and establish ground rules for discussion

True

T/F It is the want aspect of a family business that makes it attractive

True

T/F One sibling dilemma in a family business has been labeled the predator/parasite conflict.

True

T/F If you were to know founder outside the business and you went into the business you can very easily identify in the culture of the business the attributes of the founds

True-- Attributes of a founder will pass into the business culture

A(n) _____ commitment may motivate a person to go "beyond the call of duty" to protect or extend personal financial interests in the company

a. Need-based b. Obligation-based c. Cost-based d. Strategy-based C

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

a. adopt new operating methods when needed. b. act generously in compensating nonfamily employees. c. sacrifice salaries and dividends when necessary. d. emphasize short-run profits. C

Which family characteristic may be in conflict with a business?

a. competition is valued b. taking advantage of opportunities c. perpetuate traditions d. All of the above may be in conflict. C

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

a. conflicts in the business tend to carry over into family life. b. hours of work may become longer for one person. c. uneven division of labor i.e. one person is only responsible for the menial tasks. d. some husbands find their masculinity threatened when their wives are better managers A

A family member who feels he/she ought to pursue a career in the family business is expressing a(n) ______ commitment.

a. desire-based b. obligation-based c. cost-based d. need-based B

Family members who join the business because of a concern that they may not be able to reach career success on their own display a(n) _____ commitment.

a. desire-based b. obligation-based c. need-based d. cost-based C

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

a. introducing the child to outsiders such as bankers. b. finding a suitable position for the son or daughter within the business. c. arranging the transition from part-time to full-time employment. d. deciding whether the child has the necessary temperament and ability. D

Those with a(n) _______ commitment are the most likely to work hard because of their passion for the business.

a. need-based b. strategy-based c. cost-based d. desire-based D

Which item is not an advantage of a family-owned business?

a. shared culture b. focus on the long-run c. reduced cost of control d. commitment C