REASONS OF FAMILY BUSINESS’ FAILURES

Family Business ‘‘ Give him a living, but never discuss the Family business with him." Don Vito Corleone to Tom

‘‘ Give him a living, but never discuss the Family business with him."

Don Vito Corleone to Tom

Outline What is the importance of family businesses? Why do family businesses fail? What are the main reasons?

What is the importance of family businesses?

Why do family businesses fail?

What are the main reasons?

Family Businesses According to researches; 65-80% of businesses around the world are family business.

According to researches; 65-80% of businesses around the world are family business.

Family Businesses

Surviving Through Generation

Why do businesses fail? Poor management Insufficient Capital Location Overexpansion …

Poor management

Insufficient Capital

Location

Overexpansion

…

Family Business’ Failures Family business failures were not often the result of market or macro enviromental forces. Family business’ failure reasons generally occurs from family and management issues.

Family business failures were not often the result of market or macro enviromental forces. Family business’ failure reasons generally occurs from family and management issues.

Young Members’ Behaviors Dont change their behaviors (during transition period) Disagree with new rules Parents try to take control Restrain young members’ activities

Dont change their behaviors (during transition period)

Disagree with new rules

Parents try to take control

Restrain young members’ activities

Old Members’ Behaviors Parents can not recognize that second or third generation members are old enough Parents do not show any respect and they fail to pass authority Parents do not want to be out of game Parents see their children as their competitors

Parents can not recognize that second or third generation members are old enough

Parents do not show any respect and they fail to pass authority

Parents do not want to be out of game

Parents see their children as their competitors

Deciding who will be involved in family business If more than one candidate, parents have to choose right family member for right position. They have to decide who will be in, who will be out. Parents force children to involve in family business. They do not pay attention what their children want to do

If more than one candidate, parents have to choose right family member for right position. They have to decide who will be in, who will be out.

Parents force children to involve in family business. They do not pay attention what their children want to do

Employing Children Employing children according to sex and age status Oldest son for most important and critical position Daughter for basic or not so important position Ignoring abilities and management skills

Employing children according to sex and age status

Oldest son for most important and critical position

Daughter for basic or not so important position

Ignoring abilities and management skills

Keep Family in Peace Ignoring children fails Being away from arguing important cases about family

Ignoring children fails

Being away from arguing important cases about family

Communicating or Solving Problems via Third Parties Damages relationships between family members

Damages relationships between family members

Fraternal Fightings and Estate Conflicts In 2003, twenty biggest and famous Turkish family businesses were failed. According to researches, the biggest two reasons were fraternal fightings (%43) and estate conflicts (%19). Conflicts between family members in and out of the business and with non-family members

In 2003, twenty biggest and famous Turkish family businesses were failed. According to researches, the biggest two reasons were fraternal fightings (%43) and estate conflicts (%19).

Conflicts between family members in and out of the business and with non-family members

Institutionalization (getting a corporate identity) First generation or the founder generally becomes disagree with institutionalization They do not want to loose control They do not want to see external people in company

First generation or the founder generally becomes disagree with institutionalization

They do not want to loose control

They do not want to see external people in company

Lack of Succession Planning Next generation lacks essantial skills, experience Next generation have not been well prepared for job

Next generation lacks essantial skills, experience

Next generation have not been well prepared for job

Unfair Promote or Assignment Makes other employees disappointed Decreases their willingness Ignoring experience, skills, abilities, and education Damages corporate identity

Makes other employees disappointed

Decreases their willingness

Ignoring experience, skills, abilities, and education

Damages corporate identity

Insufficient Business Volume / Job Duties Study Case – Ali Sabancı

Study Case – Ali Sabancı

References http://www.milliyet.com/2004/05/13/isyasami/ais.html http://capital.com.tr/haber.aspx?HBR_KOD=4454 http://www.haber3.com/haber.php?haber_id=232028 http://view.fdu.edu/default.aspx?id=2337

http://www.milliyet.com/2004/05/13/isyasami/ais.html

http://capital.com.tr/haber.aspx?HBR_KOD=4454

http://www.haber3.com/haber.php?haber_id=232028

http://view.fdu.edu/default.aspx?id=2337

References http://blog.tootoo.com/en/ninetown/post/688 http://www.tuta.hut.fi/studies/Courses_and_schedules/Isib/TU-91.148/Family_Business_Rulebook.pdf.com http://www.enetrust.com/Communications/PressReleases/PressReleases2004/2004_09_16.asp http://www.robbinex.com/family.shtml

http://blog.tootoo.com/en/ninetown/post/688

http://www.tuta.hut.fi/studies/Courses_and_schedules/Isib/TU-91.148/Family_Business_Rulebook.pdf.com

http://www.enetrust.com/Communications/PressReleases/PressReleases2004/2004_09_16.asp

http://www.robbinex.com/family.shtml

References http://www.trinvest.com/nshow.php?newsId=514&pageId=7&categoryId=45 http://boston.bizjournals.com/boston/stories/2002/09/16/smallb3.html http://www.forbesconferences.com/?page=event&eventID=107

http://www.trinvest.com/nshow.php?newsId=514&pageId=7&categoryId=45

http://boston.bizjournals.com/boston/stories/2002/09/16/smallb3.html

http://www.forbesconferences.com/?page=event&eventID=107

References Arguden, Yılmaz (2002). Aile Şirketlerinde Kuşak Değişimi http://www.kobitek.com/makale.php?id=122 Lea, James (2004). Planning could avoid many family business failures http://www.bizjournals.com/triad/stories/2004/05/17/smallb3.html

Arguden, Yılmaz (2002). Aile Şirketlerinde Kuşak Değişimi

http://www.kobitek.com/makale.php?id=122

Lea, James (2004). Planning could avoid many family business failures

http://www.bizjournals.com/triad/stories/2004/05/17/smallb3.html

Thank you for your attention 

Thank you for your attention 