Reasons Of Family Business Failures

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This study explains the reasons of family business' failures and related problems which occur in family business'.

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Reasons Of Family Business Failures

  1. 1. REASONS OF FAMILY BUSINESS’ FAILURES
  2. 2. Family Business <ul><li>‘‘ Give him a living, but never discuss the Family business with him.&quot; </li></ul><ul><li>Don Vito Corleone to Tom </li></ul>
  3. 3. Outline <ul><li>What is the importance of family businesses? </li></ul><ul><li>Why do family businesses fail? </li></ul><ul><li>What are the main reasons? </li></ul>
  4. 4. Family Businesses <ul><li>According to researches; 65-80% of businesses around the world are family business. </li></ul>
  5. 5. Family Businesses
  6. 6. Surviving Through Generation
  7. 7. Why do businesses fail? <ul><li>Poor management </li></ul><ul><li>Insufficient Capital </li></ul><ul><li>Location </li></ul><ul><li>Overexpansion </li></ul><ul><li>… </li></ul>
  8. 8. Family Business’ Failures <ul><li>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. </li></ul>
  9. 9. Young Members’ Behaviors <ul><li>Dont change their behaviors (during transition period) </li></ul><ul><li>Disagree with new rules </li></ul><ul><li>Parents try to take control </li></ul><ul><li>Restrain young members’ activities </li></ul>
  10. 10. Old Members’ Behaviors <ul><li>Parents can not recognize that second or third generation members are old enough </li></ul><ul><li>Parents do not show any respect and they fail to pass authority </li></ul><ul><li>Parents do not want to be out of game </li></ul><ul><li>Parents see their children as their competitors </li></ul>
  11. 11. Deciding who will be involved in family business <ul><li>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. </li></ul><ul><li>Parents force children to involve in family business. They do not pay attention what their children want to do </li></ul>
  12. 12. Employing Children <ul><li>Employing children according to sex and age status </li></ul><ul><li>Oldest son for most important and critical position </li></ul><ul><li>Daughter for basic or not so important position </li></ul><ul><li>Ignoring abilities and management skills </li></ul>
  13. 13. Keep Family in Peace <ul><li>Ignoring children fails </li></ul><ul><li>Being away from arguing important cases about family </li></ul>
  14. 14. Communicating or Solving Problems via Third Parties <ul><li>Damages relationships between family members </li></ul>
  15. 15. Fraternal Fightings and Estate Conflicts <ul><li>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). </li></ul><ul><li>Conflicts between family members in and out of the business and with non-family members </li></ul>
  16. 16. Institutionalization (getting a corporate identity) <ul><li>First generation or the founder generally becomes disagree with institutionalization </li></ul><ul><li>They do not want to loose control </li></ul><ul><li>They do not want to see external people in company </li></ul>
  17. 17. Lack of Succession Planning <ul><li>Next generation lacks essantial skills, experience </li></ul><ul><li>Next generation have not been well prepared for job </li></ul>
  18. 18. Unfair Promote or Assignment <ul><li>Makes other employees disappointed </li></ul><ul><li>Decreases their willingness </li></ul><ul><li>Ignoring experience, skills, abilities, and education </li></ul><ul><li>Damages corporate identity </li></ul>
  19. 19. Insufficient Business Volume / Job Duties <ul><li>Study Case – Ali Sabancı </li></ul>
  20. 20. References <ul><li>http://www.milliyet.com/2004/05/13/isyasami/ais.html </li></ul><ul><li>http://capital.com.tr/haber.aspx?HBR_KOD=4454 </li></ul><ul><li>http://www.haber3.com/haber.php?haber_id=232028 </li></ul><ul><li>http://view.fdu.edu/default.aspx?id=2337 </li></ul>
  21. 21. References <ul><li>http://blog.tootoo.com/en/ninetown/post/688 </li></ul><ul><li>http://www.tuta.hut.fi/studies/Courses_and_schedules/Isib/TU-91.148/Family_Business_Rulebook.pdf.com </li></ul><ul><li>http://www.enetrust.com/Communications/PressReleases/PressReleases2004/2004_09_16.asp </li></ul><ul><li>http://www.robbinex.com/family.shtml </li></ul>
  22. 22. References <ul><li>http://www.trinvest.com/nshow.php?newsId=514&pageId=7&categoryId=45 </li></ul><ul><li>http://boston.bizjournals.com/boston/stories/2002/09/16/smallb3.html </li></ul><ul><li>http://www.forbesconferences.com/?page=event&eventID=107 </li></ul>
  23. 23. References <ul><li>Arguden, Yılmaz (2002). Aile Şirketlerinde Kuşak Değişimi </li></ul><ul><li>http://www.kobitek.com/makale.php?id=122 </li></ul><ul><li>Lea, James (2004). Planning could avoid many family business failures </li></ul><ul><li>http://www.bizjournals.com/triad/stories/2004/05/17/smallb3.html </li></ul>
  24. 24. <ul><li>Thank you for your attention  </li></ul>

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