Family business 101


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Learn the basics of family businesses and what sets them apart from non-family owned businesses.

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Family business 101

  1. 1. Family Business 101An introduction to the challenges & rewards offamily owned businessesKalli Matsuhashi, MA, LPExecutive |
  2. 2. Introduction• Kalli Matsuhashi• Family business advisor• Help with the “family” in the family business 2
  3. 3. Objectives• Understand what factors set family owned businesses apart from non-family owned businesses• Learn the top 3 challenges of family owned businesses 3
  4. 4. Definition of a family business “Organization where ownership and/or “Organization where ownership and/or management decisions are influenced by a management decisions are influenced by a family or families.” family or families.”• Opportunity to build the wealth of the family & future generations• Employment opportunities for next generation• Career flexibility and opportunity for all family members• Opportunity to express the family’s values 4
  5. 5. Non-family owned businesses Business Ownership Task-based, competence & Profit-based, commitment, legacy, retaining growth & change capital 5
  6. 6. Family owned businesses Ownership Profit-based, legacy, retaining capital Business Family Task-based, competence & Emotion-based, commitment, loyalty & belonging, growth & change continuity & harmony 6
  7. 7. 4-Circle model Ownership Profit-based, legacy, retaining capital Business FamilyTask-based, competence & Emotion-based, loyalty & commitment, belonging, continuity & growth & change harmony Governance Balance the interests between owners/family and management 7
  8. 8. The systems Ownership/Governance System Ownership Values/vision Legal structure Ownership transfer Board Family System Roles & relationships Family valuesBusiness Family Myths Conflict Clarity of communication Business Management & Leadership System Mission & strategy Culture of the organization Org structure Compensation system Decision-making system 8
  9. 9. Family vs business systems Family System Business System•Emotional system •Task based system•Mission is to nurture off-spring into •Mission: produce profitable goods andcompetent adults services (effective strategy)•Equality rules •Competency prevails•Acceptance is unconditional •Acceptance is based on objective performance•Relationships are permanent •Relationships are temporary and contractual•Power: generational/birth order •Power is primarily based on authority and influence 9
  10. 10. Interests vary depending onposition1. Family members 32.Non-family, non-owner Ownership employee3.Owner, neither family nor employee4.Family with ownership interest 6 45.Family employed in business 76.Non-family owners 2 1 employed in business Business 5 Family7.Family with ownership interest employed in business 10
  11. 11. Too much overlap Ownership Family Business 11
  12. 12. The top 3 issues for family businesses• Succession• Wearing the right hat - owner or manager• Lack of structure 12
  13. 13. Succession• Management & ownership: both types need to be addressed• Timing & planning• Management succession - family vs. non-family• Identity shifts• Ownership succession • Closely tied to estate planning • Multiple options (voting shares, non-voting shares, financial compensation for non-ownership, trusts, etc.) 13
  14. 14. Wearing the right hat - owner or manager?• More difficult to do when the structure isn’t well-defined• Difficult if family members don’t do well with respecting boundaries• Entitlement is often an issue with the next generation• Requires self-discipline from family members• Requires courage from other employees 14
  15. 15. Lack of structure• Many family businesses begin with one person and a big idea• Entrepreneurs are energetic, creative, and driven, but typically dislike structure• As the organization grows, more structure is needed• Org charts, defined roles, administrative functions, defined work processes, etc. 15
  16. 16. Stages of Growth Professional TENSION!!! Stage ManagerialEntrepreneuri Stage Growth is driven by what is al Stage best for the business Business is more organized but experienced as being Business is designed “like a family” around the leader and • Market-driven strategydriven by personal goals • Outside expertise • More & better planning • Financial discipline • Goal setting• Intuitive, opportunistic • Structure & accountability • Better structure &• Hard work • Tension due to growing systems• Trial and error pains • Accountability• Entrepreneur is a “jack • Hub and spoke model • Management of all trades” becomes more difficult to development & team• Hub and spoke model maintain building 16
  17. 17. Importance of structure & process• Play a critical role in long-term growth of company• Help companies get things done effectively and efficiently• Have an impact on succession• Regulate the interaction between family and business 17
  18. 18. Quiz1. Name two things that distinguish family businesses from non-family owned businesses.2. Describe one benefit of belonging to a family business.3. Name two of the top three challenges that are faced by family owned business. 18
  19. 19. Thank you! 19