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Succession process among africa owned business general 5 Succession process among africa owned business general 5 Document Transcript

  • THE LIFE AND TIMES OF A FAMILY BUSINESS: A CASE STUDY Rudolph B. van Buuren (Ph.D.) Associate Professor – Faculty of Economic and Management Sciences University of the Free State – School of Management P.O. Box 339, Bloemfontein, South Africa, 9300 Telephone: +27-51-401 2460 Fax: +27-51-444 5345 E-mail: vbuurenrb.ekw@mail.ufs.ac.zaABSTRACTThis paper attempts to isolate a number of pitfalls, failures and successes of Kloppers,a medium size family business in South Africa, within the context of the life-cycle ofthe firm. The discussions follow this family business through its 40 years of existenceas it progressed through the various stages in transition from a pure family business,to a family-owned business, to selling of the business and ultimately the re-inventionof the original family business.The family is currently entering its 3rd generation and from a contextual perspectivethis paper focuses predominantly on succession, ownership and management of thefamily businesses as driving forces for success throughout the stages in their life-cycle.The findings form an integrated understanding of critical components of decisionmaking criteria that either support or inhibit sustainable success in family businesses.These decisions had a profound impact on the business and managerial situationfacing the 2nd generation of children, and will impact on the way in which the 3rdgeneration of children is introduced into the Kloppers business.The main objective of this study was therefore to evaluate the history of the firm sinceinception to date with the view to understand the critical aspects that the owners hadto deal with during their transitional phases between the first and second generation ofchildren. The study concludes with an overview of critical areas that require attentionfrom a family business perspective in relation to succession management and strategicbusiness management to ensure sustainability and success. 1
  • 1. INTRODUCTIONTraditional views on the sustainability of family businesses have focused the attentionto the important interrelationship between ownership, succession and management.The success of family businesses rests upon the successful integration of these threeelements (Gersick, et al., 1997; Fletcher 2000).This paper analyses the case of Kloppers, a South African family business through its40 years of existence. What is particularly important about this case study, is that thebusiness evolved through the entire life-cycle (Gersick et al.,1999) from start-up tobeing sold to a corporate group, and then was revived again by the second generationof children.In this context a number of key areas form the basis for the discussions in this paper.The first is to understand the impact of the different stages of the life-cycle on thesustainability of family businesses. The second is to understand how decisions aremade in regard to succession and ownership to support the management of thebusiness. Finally specific managerial business issues and how these were dealt withover the life-cycle are discussed.2. THE IMPORTANCE OF FAMILY BUSINESSESFamily businesses world-wide are contributing increasingly to the economic activityin their perspective countries. Table 1 provides an overview of the economiccontributions and proportions of family businesses to total businesses, world-wide. Asis indicated in Table 1, about 96% of businesses in the USA are family businesses,while in that country these businesses contribute as much as 40% to the GNP(Timmons and Spinelli, 2007).In South Africa it is estimated that more than 80% of all businesses have familyownership involvement, and more than 60% of all listed companies in South Africacomprises family involvement at least during its start-up phase (Dickinson, 2000;Venter, 2002). However, a large proportion of family businesses in South Africa aresmall to medium size enterprises, with nearly 50% employing less than 20 people perbusiness (Maas, 1999). 2
  • Table 1: Worldwide highlights of family businesses (Timmons and Spinelli, 2007) Country % of FBs GNP Brazil 90% 63% Chile 75% 50-70% USA 96% 40% Belgium 70% 55% Finland 80% 40-50% France >60% >60% Germany 60% 55% Italy 93% Netherlands 74% 54% Poland 80% 35% Portugal 70% 60% Spain 79% UK 70% Australia 75% 50% India 65%3. CONTEXTUAL APPROACHES TO BUSINESS LIFE-CYCLESKnowledge of the life-cycle and the specific stage that the business occupies atvarious stages of its life can provide a view of the critical decisions and issues facingfamily businesses. According to Hanks (1990), a life-cycle can provide a time-tablefor structuring the organisation, formalising procedures and systems and revisingpriorities in the business. A body of empirical research exists that explain the conceptof life-cycles as an approach to analysing transitions in organisations (Lester andParnell, 2004; Solymossy and Penna, 2001; Söderling, 1998; Gersick et al, 1997 and1999; Ward, 1991; Hanks, 1990; Tagiuri and Davis, 1982). 3
  • Lester and Parnell (2004), with specific reference to family businesses, suggested afive-stage life-cycle model to analyse transitions in family businesses. At the initialphase (existence phase) they suggested that the focus of the family business is onviability. In that stage the entire management of the business is in the hands of oneperson (the founder) who is responsible for the entire business. At the second phase(survival) the business focuses on growth and generating sufficient revenue to sustainthe business. Management and power is often shared in this phase as more membersof the family (or non-family members) enter the business. The third phase (success) ischaracterized by formalization of the business and its processes and control throughbeaurocracy becomes the norm. During this phase the family business grows anddiversifies using specific growth strategies. Phase four (renewal) is defined as theperiod where the business desires to return to leaner times, as the business strive forgrowth and revival. The final phase (decline) is characterized by the membersbecoming more concerned with personal goals than the goals of the business.Solymossy and Penna (2001) have offered a factorial approach to analysingtransitions in small, medium and micro enterprises, grounded on existing literatureand their own research. These factors can be viewed as conceptual phases oforganisational transition starting with the establishment of written documentationsuch as job analysis, procedures and policies relating to formalisation andstandardisation as two dimensions of initial organisational structure, through phaseswhere the entrepreneur performs multiple functions, including strategy formation. Asthe enterprise grows, the need arises for the introduction of multiple levels ofmanagement as the entrepreneur’s capability to manage alone in such growth areasstarted to become problematic. Once this occurs, the cognitive processes of theentrepreneur undergo change as managerial tasks change and as managerialcapabilities are developed. During this phase the changes in the thought processes ofthe entrepreneur is reflected in behavior that directly relate to organisational structureand strategy.According to the view of Söderling (1998), organisational development can bedescribed on the basis of three interrelated phases, namely formative growth,normative growth and integrative growth. Growth is normally of short duration andhighly conceptual during the formative phase. It is in this phase that the rules are 4
  • established for growth. During the next phase (normative growth), growth can besustained over a number of years. The rules established in the previous phase becomethe norm by which the enterprise is managed. The cycle is dynamic and increasedcomplexity will be realised as growth approaches the integrative phase. It is rarely thecase that an enterprise can make a smooth transition from the normative into theintegrative phase. More often than not, an enterprises energy will be drawn towardsdoing more of the same things better. The old rules will have been superseded withoutthe new rules becoming clear. The transition period from normative to integrativegrowth will be evident when, no matter how many resources are employed within theold paradigm, performance improvements remain stagnant. A new paradigm isrequired to make any significant advancement (Söderling, 1998).Ward (1991) used an approach to evaluate the evolution of family business from theperspectives of ownership and management. Tagiuri and Davis (1982) developed amodel that presents the various interactions that occur in family businesses consistingof three interrelated concepts, namely business, ownership and family as threesubsystems that integrate over time, which they called the Three-Circle model. Thismodel was transformed by Gersick et al. (1999) to formulate their DevelopmentalModel that combines the elements of the Three-Circle model with the various stagesof development in family businesses proposed by them (Gersick et al. 1997). Thismodel (see Figure 1) provides a comprehensive and integrated framework to evaluatethe interaction between the life-cycle of the family business, the family itself, andownership aspects. The model consists of three dimensions: family development,ownership development and business development. Family development comprisesvarious stages of development ranging from the initial stage of the young family tothe next generation starting to enter the business (where the two generations areworking together) to eventually a phase where the founder family member hands thebusiness over completely. The ownership development dimension stages starts wherethe owner is in total control of the business and takes all decisions unilaterally(controlling owner). It then evolves to a phase where siblings enter the business andshares decision making with the founder, (sibling partnership). The final phase is onewhere extended family members and/or private individuals are introduced to themanagement of the firm, and decision making effectively becomes a sharedphenomenon between family and non direct family members (cousin consortium). 5
  • The business development dimension also comprise of three stages namely, start-up,expansion and maturity, which includes elements of a decline phase.Figure 1: Developmental Model (Gersick et al., 1999). Business Development Maturity Expansion Family Development Start-up Young Entering Passing Business The Working The Family Business Together Baton Controlling Owner Sibling Partnership Cousin Consortium Ownership DevelopmentAs the Developmental Model of Gersick et al. (1999) combines the elements of mostof the models discussed above, and it contains a comprehensive view of the intrinsicissues and decision requirements facing family businesses over its life-cycle, we usedthat as basis for discussion of the results from the case study research conducted inthis project.4. RESEARCH METHODOLOGYCase study research can be defined as an empirical inquiry into a contemporary real-life situation in which multiple sources of evidence are used (Yin, 1984). A numberof types of case studies are reported in the literature. Jensen and Rodgers (2001)provided a case study typology defining case studies in a number of ways. Snapshotcase studies are defined as a detailed study of one research entity at one point in time.Longitudinal case studies are a study of a single entity at multiple time points. Pre-post case studies are a number of case studies written on a single business with 6
  • comparative analysis of each case study over time. Patchwork case studies are a set ofmultiple case studies of the same entity using either snapshot, longitudinal or pre-postmethodologies. Comparative case studies are a set of multiple case studies of multiplebusinesses in order to analyse similar situations across various businesses forcomparative reasons.The family business that is the subject of this paper is analysed over its entire life of40 years and therefore a longitudinal cast study method was applied.A qualitative research approach was used in order to understand the impact ofhistorical decisions in the family business on the current and future sustainability ofthe firm. Qualitative research seeks to provide a deeper understanding of socialphenomena (Silverman, 2001). While quantitative research methods are more usefulin hypothesis testing, qualitative research is used successfully in the description oforganisations (Welman and Kruger, 1999). The kinds of data with which qualitativeresearchers are concerned are derived from open-ended interviews that facilitateunderstanding, detail and in particular the meanings which human beings attach towhat they do. This project seeks to form an in-depth understanding of the decisionmaking processes involved in managing the family business over its life-cycle. It isthe socio-organisational phenomena that guide family businesses in their decisionmaking that become important in this study. For that reason a qualitative approachwas deemed more appropriate for this project.The approach was to initially understand the context from a secondary researchperspective. Multiple sources of evidence were used, including documents and reportsfrom the business, printed media reports, and personal interviews. An open endedquestionnaire was constructed and personal interviews with the owners (familymembers) were initiated. (An interview with the founder was unfortunately notpossible due to the fact that he had passed away several years ago).The analysis of the research data was performed using content analysis. Contentanalysis is a systematic observation of open-ended questions and unstructuredinterviews used to report on the essence of such interviews (Welman and Kruger,1999). 7
  • 5. KLOPPERS CASE STUDY FINDINGS5.1 Overview of the businessKloppers is a discount retail family business in Bloemfontein, a city in the centraldistrict of South Africa. The business was started in 1967 by Mr. Willem Klopper andtoday sells a diverse range of products predominantly focusing on electricalappliances, but also including sports apparel, clothing and hardware in their productranges. In many ways this family business is the antithesis of the archetypeindependent retailer: six brothers working together in evident harmony towards acommon goal; customers lending massive support to an obviously successfulbusiness; and even distributors and suppliers (often the harshest of judges of retailers)are unanimous in their praise, admiration and expressions of loyalty. Quite a fewsuppliers confidently admitted that Kloppers is their single biggest customer(including chain stores).The founder had six children (all male) who are all involved in the business. What isremarkable about the children is that they all studied in different areas after finishingschool- yet all of them joined the family business eventually. The eldest son is anaccountant and practiced for a few years before joining the family business. Thesecond son became a lawyer, also practiced for some time, and then joined the familybusiness. The third son became a social worker before he joined the business. Thenext son studied agriculture and farmed for a few years before he joined, and the fifthson became a medical doctor and also practiced for a few years before he joined thebusiness. The youngest son also became a chartered accountant and workedinternationally before he joined the business.A brief discussion of the main issues and lessons learnt through its life-cycle using theDevelopmental Model of Gersick et al. (1999), are as follows.5.2 Start-upAt this stage Kloppers was a young family business where the owner was the onlymember (controlling owner). At the start-up in 1967 suppliers were very resistant tothe idea of the business selling their brands at a discount. This was at a time thatdiscount retailing was a new concept in South Africa. Suppliers effectively refused to 8
  • supply the business if they continue to pursue the discount retaining concept. As aresult procurement had to be done via wholesalers which exerted pressure on theprofit margins and sustainability of the business model of discounting for cash.However, as the business grew, customers started to support the concept and thebusiness was soon so successful that suppliers decided to lift the sanctions. As a directresult of this issue, the owner later formed a buying co-operative for independentretailers. This provided him with a substantial amount of buying power.At this stage the business was just started and was controlled and managed by thefounder and his wife. Decisions focused more on the positioning and management ofthe business than on issues concerning succession and family development. It wascritical for the owner to establish a plausible market position early in the life of thisfamily business. The core focus was to establish effective trade and distributionchannels as soon as possible.5.3 ExpansionThe founder’s eldest son joined the business in the late 1970s and by 1985 three of thesix sons were involved in the business. During these early stages of the familybusiness, decision making criteria started to revolve around balancing between familydevelopment and business development. The major family developmental issues atthis phase of the business were based on aspects such as how to involve his sons (hehad no daughters) and eventually their wives into the business.The founder decided that none of his sons will enter the business at senior levels.They were forced to start at the very bottom, driving delivery trucks, merchandisingshelves, etc. The pecking order was based on the age of the sibling (the eldest is themost senior in the business). A decision was also made that none of the wives of hissons will be allowed to become involved in the business. The decision was based onthe fact that, other than their wives, his sons all grew up with him and in a specificcultural domain that made the management of his business easier.In early 1980 the discount retailer chain store concept started to grow in South Africa,and a number of national chain stores opened following the same principles of highvolumes at low prices on a cash basis. Kloppers was now facing fierce competitionfrom these larger chain stores. In order to ensure continued sustainability the owner 9
  • decided to diversify geographically with the view to grow, opening a number ofsmaller stores in the city. However, with the geographical diversity came substantialproblems of control over all the stores as non-family members had to be appointed inthe management of some of the stores. The owner had difficulty in controlling theentire business, and also experienced some fraudulent behavior by some of the non-family managers. This lack of control by the owner forced him to make a decision toreintegrate all of his stores into a single, but bigger store. He eventually started toinvestigate a number of potential sites in the city, and eventually took bought a verylarge department store called Greaterman’s in the central business district of the citywhich was for sale at the time. The purchasing agreement, however, forced Klopper totake over the existing staff and the existing supplier agreements of the Greaterman’sbusiness. Now the business was operating on a single site, but diversified into a mixof both discount and non-discount, related and unrelated, products under the sameroof.During this phase of the life-cycle of the business, the context changed from being a“pure family business” (owned and controlled solely by the family) to a “family-owned” business where managerial decisions were diversified between both familyand non-family members. The management of the business was now the responsibilityof a diverse team including the owner, three of his sons, and some of the members ofthe original management team of the Greaterman’s business. Control became a majorbusiness issue and eventually the take-over of the Greaterman’s store wasinstrumental in the family business’ eventual downfall.5.4 MaturityTowards the end of the 1980s the founder was approaching retirement and he startedto ponder over the future of the business. At the time he also started a small unrelatedbusiness in the city selling motorcycles, where his eldest son became involved in.This business became an instrumental part of the eventual exit strategy of the businessin later years. At the time the family owned business experienced problems withcontrol as well as fraudulent behavior by some non-family members of theirmanagement team. These and other issues started to exert an enormous amount ofpressure on the owner, and he eventually started to internalise various options of howto deal with the future of the business. At that time an offer was received from one of 10
  • the largest diversified corporate retail groups in South Africa, the PepCor group(which also started in the late 1950s as a family business) who was seekingappropriate expansion options in the city, to purchase the Kloppers store as a runningconcern. This meant that Kloppers would become part of the Pepcor group. Afterdeliberating with his sons, the owner decided to accept the offer, and sold the familybusiness. This decision effectively ended an era of one of South Africa’s mostsuccessful family businesses. Although the trade name of “Kloppers” remained, thebusiness was now a privately-owned company with no involvement in the business byany of the Kloppers family members.The negotiation of the sales agreement included the following: 1) Kloppers would be sold to the PepCor group as a going concern. 2) All the current staff members of Kloppers would be transferred on a guaranteed continuation of employment principle. 3) The founder (Willem Klopper) and his sons would not be part of the management of the new Kloppers. 4) Kloppers would become a wholly-owned subsidiary of the PepCor group of companies. 5) The founder had to sign a restraint of trade agreement, restraining him from trading in opposition to Kloppers (in PepCor) for a period of at least ten years, and within a radius of a significant amount of square kilometers from the existing store.5.5 Restarting the cycle – the second waveAfter the sale of the family business to the PepCor group, some of the Kloppers sonswho had at that stage been involved in the business reverted back to their professions,while others continued to operate the small unrelated motorcycle store that theystarted a few years earlier. The founder, in the mean time, retired from business to acoastal town in South Africa.However, after a year the sons decided to start a new discount retail store, which theycalled “Juniors”. This store was run on exactly the same principles as Kloppers. As aresult a fierce battle evolved between the PepCor Group and the Kloppers brothers 11
  • who operated as “Juniors”. Initially the battle was ensued in court, citing the restraintof trade agreement, but was lost by PepCor on a technical aspect (the restraint of tradewas an agreement between PepCor and the initial founder (Mr. Willem Klopper)specifically and excluded his children).Following the unsuccessful lawsuit, the PepCor group decided to initiate a fiercemarketing battle in order to oust the Klopper brothers from the market, based on anexpensive marketing campaign. The PepCor group eventually lost this marketingbattle due to the substantial customer loyalty that existed towards the Klopperbrothers. The loyalty of the customers that was built over time therefore resulted in asubstantial erosion of business away from the PepCor group store towards the“Juniors” store. Eventually in 1991, this pressure resulted in the PepCor groupoffering the original Kloppers store for sale back to the Klopper brothers at anegligible price.The Klopper brother purchased the original family business back from the Pepcorgroup, and introducing many of the lessons learnt by the family business over theyears, managed the business back to its original level of success.After buying Kloppers back from the PepCor group the Klopper brothers, who at thetime was still trading under the name “Juniors” bought a building in the main street ofthe city which was occupied by a grocery retailer. They subsequently closed all thebranches of Juniors, and started to do business under the original trade name ofKloppers again. Four years later, Kloppers took over a large competitor in the citywho sold hardware and paint, which was incorporated into Kloppers. They then tradedon the two sites (the original building in the CBD, and at the newly acquiredproperty). In 2000, Kloppers decided to expand their operations further and opened anadditional store in the city in an area situated on the boundaries of the central businessdistrict.During 2002, a new shopping mall concept was built in the city and at the timeKloppers had to make a decision whether to expand their operations and move intothis shopping mall. The shop space available to them at the new site was in excess of7500 m², which made it possible for the business to close all their branches in the cityand to operate their entire business under one roof. 12
  • Today Kloppers again is a pure family business which are owned and managed solelyby the six Klopper brothers. The store has more than three times the number ofdepartments that they had in 1984 and is deemed to be one of the most successfulfamily businesses in South Africa.The success of Kloppers as a family business is built around a number of key successfactors. The principles of the managing hierarchy are simply based on age. Thepecking order is based on the age of the brothers and the business is operated on theprinciples of their family values, in an ethical and trustworthy manner. The basicprinciples that was the foundation of the family business since its inception over 40years ago, are still guiding the decision making criteria of the business today.Currently the business is approaching the second maturity phase and a number ofissues are facing the 2nd generation. The most common of these revolve aroundplanning the business for the future, and developing methodologies to accommodatethe 3rd generation of children. The current methodology is to treat the 3rd generation ofchildren in exactly the same manner as how the current owners (the 2nd generation)was treated when they entered the business. Again children will start in juniorpositions, learning the business before they will be allowed into managerial positions.However, it is clear that not all of the children will enter the family business, and thisare creating a substantial challenge for the family. It is evident that eventually thebusiness will have to reconsider the current format of their management model andstart to investigate various options of expansion with the resultant potentialintroduction of non-family members in managerial positions.6. CONCLUSIONSThis study has attempted to isolate the issues that a family business encounters duringthe many phases of its life-cycle. Against the background of the objectives of thisstudy, attention has been given to evaluate the history of the firm since inception todate with the view to understand the critical aspects that the owners had to deal withduring their transitional phases between the first and second generation of children.The following is an overview of a number of specific aspects that was concluded fromthis study that may assist family business owners and their siblings in managing their 13
  • transition over the life-cycle, with specific reference to family and business relatedaspects.6.1 Family related conclusions6.1.1 SuccessionSuccession can be defined as the process through which the leadership of the businessis transferred from the outgoing generation to the successor generation, which caneither be a family member or a non-family member (Nieman, 2006). Family businessowners need to ensure that they include the succession aspects into their earlybusiness modeling of the family business. Early identification of succession is animportant element of sustaining the family business over time. Related to this is thecritical decision of timing. When should the next generation be introduced into thebusiness, and when should the founder family members retire, are critical questionsthat need to be planned for early in the life-cycle of the family business.The Kloppers case explains that seniority is only based on the age of the sibling.Although this approach worked well for them to date, it may become a fatal flaw thatpotentially can harm the sustainability of this business if continued into the era of the3rd generation. The issue is that then the business will be dealing with all of thechildren of the second generation siblings, and age can therefore not be the criteria forsuccession. The question arises as to what to decide in the case where the sibling ofthe youngest of the current generation is older than the sibling of the eldest (currentmanaging director). In the case of this business, it is clear that if age is to be the onlycriteria for seniority, the business can expect a vast amount of third generation siblingrivalry. Skills and ability should therefore replace the policy of age as the only criteriafor seniority in the business.6.1.2 Business skillsKnowledge and experience in business management aspects are critical componentsof sustainability of family businesses. In this regard, family members should act asmentors to siblings in order to create a practical understanding of businessmanagement concepts. This is over and above any potential formal training that thesibling may have undergone. A specific area that is important is the establishment of 14
  • financial prudence early in the experience curve of the sibling as well as to instillstrong cultural values in making business decisions.6.1.3 ExperienceIt is important that siblings who may have potential for positions within the familybusiness are identified early. Apart from ensuring that the correct type of skills areobtained from a formal training perspective, family businesses also need to ensurethat these siblings obtain early operational experience in the business to shape theirdecision making abilities in a related manner once they do enter.6.1.4 Dealing with uncertaintyAs siblings develop there may be a time when they may view entry into the familybusiness as a risky encounter. Specific attention need to be given in dealing withuncertainty in succession management. Family businesses need to ensure that an openand transparent process is in place to make siblings aware of the core elements of thebusiness and its associated risks at an early time. This should create some higher levelof understanding of the real impact of risk on the future of the business, and maycontribute to alleviate any potential feelings of uncertainty amongst siblings.6.2 Strategic related conclusions6.2.1 Understanding the impact of the business environmentOne strategic aspect that family businesses need to deal with early in their existence isto understand the impact of the environment on their sustainability. These businessesneed to establish a plausible market position early and then pursue a successfulpathway to sustain that position. The Kloppers business was very successful after thedecision to move the entire business away from the Central Business District to thearea on the perimeters of the city. They realised in time that the Central BusinessDistrict of the city is facing changes that could result in the erosion of customers andbusiness alike. Realising this, they decided in time to move their business in line withfuture market expectations.6.2.2 Building networks of supportDecisions that were made early in the life of the Kloppers family business haveproved to be important drivers of the longer-term success of the business. Referring to 15
  • the retail industry specifically, it was important for the owner to build good supplierrelationships early and to maintain these relationships over the life of the business.Relationships with related retailing organizations eventually lead to the establishmentof a purchasing group that is currently growing extensively. The benefits includebetter control over their input costs (something that is especially crucial for thesustainability of their business model of selling on a cash basis at a discount).6.2.3 Diversification during growthAs the family business starts to grow the need arise to diversify the business, eithergeographically or through their product offerings. This aspect need to be managedvery sensitively and sensibly. Being bigger does not always mean to be moresuccessful, and as was found in this study, can lead to substantial problems withcontrol and management of the business. The results from this project indicate that thebusiness started to grow successfully only after they decided to close all the differentstores that were operated, and combine the entire family business in a single store.7. RECOMMENDATIONSThe main recommendations from this case study are the following:7.1 From a succession and family perspective 1) It is not always feasible for all of the children to be involved in the management of the business. The fact that they are siblings does not automatically make them good future managers. Identify the children who will participate in the future business early, and ensure that they are properly trained and receive proper skills development. 2) In the event that suitable qualified off-springs are not available in time, family businesses could develop and implement a seat-warmer succession strategy where the family appoints one of the family members in a specific position with the view to develop the offspring for the future in that specific position. 3) A thorough understanding of the entire business environment facing the family business is required by siblings who wish to enter the business. Do not 16
  • promote them into senior levels until such knowledge of the business is gained. 4) Investment is needed in the continuous development of the people and skills of the enterprise in order to effectively deal with current global business issues.7.2 From a business perspective 1) Family businesses need to establish a plausible market position early, and should build effective trading and distribution channels right from the start. 2) Build effective trading and distribution channels as soon after the start-up as possible. 3) Geographical diversification decisions should be managed with extreme caution as such expansion creates control and management problems. 4) Develop an adaptive stance and a preparedness to react to unexpected and unanticipated events. 5) Guard against diversifying too quickly with a view to grow the business. Bigger does not necessarily mean more success for family businesses. 6) Stick to the business model that worked early in the life of the business, but tweak the model in the face of important environmental changes. 7) Map out the cause and effects of early decisions and learn how these will affected the future of the business.8. FUTURE RESEARCHAn important aspect that may require further research is to focus on the managementdilemma facing family businesses that cease to exist. In this context, exit managementstrategies need to be developed to effectively enhance the pathways for familymembers to pursue their futures without the support of the family business. 17
  • REFERENCESDickinson, T.M. (2000). Critical Success Factors for Succession Planning in Family Businesses. Unpublished MBA dissertation, University of Witwatersrand, Johannesburg. Cited in Adendorff, M. (2005). The Development of a Cultural Family Business Model of Good Governance for Greek family Businesses in South Africa. Ph.D. Thesis, Rhodes University.Fletcher, D.E. (2000). Family and Enterprise. Chapter in Carter, S. and Evans-Jones, D. Enterprise and Small Business: Principles, Practice and Policy. Harlow: Addison Wesley Longman.Gersick, K.E., Lansberg, I., Desjardins, M. and Dunn, B. (1999). Stages and Transitions: Managing Change in the Family Business. Family Business Review 12 (4).Gersick, K.E., Davis, J.A., McCollom Hampton, M.E. and Lansberg, I. (1997). Generation to Generation: Lifecycles of Family Business. Boston, MA: Harvard Business School Press.Hanks, S. (1990). An Empirical Examination of the Organisation Life-Cycle in High Technology Organizations, Ann Arbor, MI: UMI Dissertation Services. Cited in Lester, D. and Parnell, J. (2004). The Complete Life Cycle of a Family Business. Association for Small Business and Entrepreneurship. Proceedings from the Albuquerque meeting.Lester, D. and Parnell, J. (2004). The Complete Life Cycle of a Family Business. Association for Small Business and Entrepreneurship. Proceedings from the Albuquerque meeting.Maas,G. (1999). Family Business in South Africa: A Development Model. Paper presented at the Saesba Conference. Cited in Adendorff, M. (2005). The Development of a Cultural Family Business Model of Good Governance for Greek Family Businesses in South Africa. Ph.D. Thesis, Rhodes University.Nieman, G. (editor). (2006). Small Business Management: A South African Approach. Van Schaik Publishers.Silverman, L.L. (2000). Using Real-time Strategic Change for Strategy Implementation. Partners for Progress.Söderling, R.A. (1998). Limiting Growth in Different Phases of Firm Development - a Systems Theory Approach. Paper prepared for the 10th Nordic Conference on Small Business Research, Växjö. (June 14-16).Solymossy, E. and Penna, A.A. (2001). Sustainable Growth for the Small Business: A Theory of Organisational Transition. USASBE/SBIDA Annual National Conference, Orlando, Florida. 18
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