Governance mechanisms for unlisted family businessesBrowne & Mohan
Family business need to adopt effective governance practices such as family office and on board independent directors. In this article, Browne & Mohan consultants describe what, when and how to go about implementing these in family businesses
Governance mechanisms for unlisted family businessesBrowne & Mohan
Family business need to adopt effective governance practices such as family office and on board independent directors. In this article, Browne & Mohan consultants describe what, when and how to go about implementing these in family businesses
Family business transformation is complex and messy affair. Family businesses must not only untangle the tightly intertwined family from business, but also bring business focus into the family. Successful family business transformation requires thorough planning and diligent execution. In this paper, Browne & Mohan consultants share the steps a family business must pursue to remain competitive, sustain their relevance and grow over coming generations.
Governance mechanisms that work in a family businessBrowne & Mohan
Adoption of good corporate governance practices and professionalization help business continuity of family business. This paper presents both formal and informal mechanisms that Indian family businesses of various sizes deploy to improve corporate governance. Formal mechanisms include family assembly, family office, board of directors for each business and independent directors. Informal mechanisms include shareholders assembly, and family outings etc..
Family businesses account for significant part of the UAE economy. Family businesses dominate automotive, retail, fashion, real estate and manufacturing sectors. Family owned enterprises represent 90% of the businesses community in UAE and they contribute about 75-90% of the $500 billion plus trading activity. However, they face challenges on business continuity, succession, diversification, and professionalization front. In this paper, Browne & Mohan consultants present the approach to transforming UAE family businesses.
BUS 499, Week 8 Corporate Governance Slide #TopicNarrationVannaSchrader3
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep ...
BUS 499, Week 8 Corporate Governance Slide #TopicNarration.docxcurwenmichaela
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep.
Les MUST of Family Businesses- HOT EXECUTIVE TOPS.pdfSalim Hajje
Planning, starting, operating and retiring from a family business can be difficult. Issues such as succession and pay, corporate governance and recruiting top talent pose special problems for these kinds of organizations. Rivalry among siblings who inherit a family firm is often the kiss of death for even the strongest family business. Nonfamily members, even those who are senior executives or directors, often feel that the family treats them unfairly or fails to listen to them.
In this guide, Dr. Salim Hajje analyzes and provides excellent advice about how to solve such seemingly intractable problems. His suggestions come out of his long experience successfully advising family-run businesses in the MENA region. We recommend this sage and savvy guide to family-business founders, successors, inheritors and nonfamily executives or directors.
In this guide you will learn:
- What makes family businesses special
- What kinds of problems they face?
- Why the issue of succession is a major challenge for these businesses
- Why family businesses should bring in outside directors to supply disinterested advice
Mercer Capital's Value Matters™ | Issue No. 2, 2018Mercer Capital
Mercer Capital's Value Matters™, published 6 times per year, addresses gift & estate tax, ESOP, buy-sell agreement, and transaction advisory topics of interest to estate planners and other professional advisors to business.
Mercer Capital's Value Matters™ | Issue No. 2 2018Mercer Capital
Mercer Capital's Value Matters™ addresses gift & estate tax, ESOP, buy-sell agreement, and transaction advisory topics of interest to estate planners and other professional advisors to business.
How to transform a family business: insights from the trenches Browne & Mohan
Working with many family businesses across industries, we realize they face a high rate of failure because of their inability to distinguish between family and business issues and build structures and process that protect value across generations. In this paper, we share governance process and systems that are a must for family businesses to preserve and sustain economic and social values across multiple generations.
A compilation of selected articles on professionalizing ownership.
The Impact of Family Business
How family businesses affect and contribute to the global economy.
The guide provides insights to Professionalizing Family Business Owners
Professionalization in the Family System, Ownership System, and Business Systems.
PART 1: Competent, Committed, and Sustainable Ownership
• A Practitioner’s Perspective
• Insights from the Research
• Being Competent in Ownership
• Being Committed to Family Ownership
• Making Ownership Sustainable
PART 2: Competent, Committed, and Sustainable Ownership
• Shared Values and Goals
• Psychological Glue
• Ownership Competencies
• Informal Family Governance
• Formal Family Governance
• The Trigger for Change
Competent, Committed, and Sustainable Ownership
Historically family business has been the agenda of many research initiatives from academic anthropologists and historians since the 19th century (Perez & Colli, 2013).
There’s a lot of history noted in the evolution of family systems of organization and structures of social life in the post 1940s (Perez & Colli, 2013).
The family system had been a focus of many dissertations of European and North American scholars since the 1940s drawn from theories culled from extensive field research developed in Africa, South America, Oceania, and Asia.
The momentum of using all this extensive research and knowledge into a set of tools that will eventually be the arsenal of future family business consultants may have stemmed from the efforts of Barbara S. Hollander.
Hollander published first empirical studies emphasizing the relationship between the family and the Business.
During the 1980s the family firm began to be perceived as a unique business form and was quite a discredited topic at that time according to John Davis when he was interviewed May 13, 2009.
Those who were practicing family business consulting at that time see themselves as “Business Doctors” who solved problems, theorized, performed research, and published articles on family firms.
Since the beginning, the whole exercise of legitimizing family business studies was mainly a professional and academic process mostly taking place in the United States. Richard Beckhard and Ivan Lansberg organized a meeting in 1982 to bring together people who shared the same concerns about the family business.
This meeting eventually led to the founding of the Family Firm Institute or FFI with Barbara Hollander being its first president and founder.
FFI was officially incorporated in the Commonwealth of Pennsylvania with 22 founding members in 1986.
What are the Biggest Challenges for Family-Owned Businesses.pdfCentro LAW
Discover the biggest challenges that family-owned businesses face and how to overcome them. Learn from experts and gain insights to ensure the success and longevity of your family business.
Family business transformation is complex and messy affair. Family businesses must not only untangle the tightly intertwined family from business, but also bring business focus into the family. Successful family business transformation requires thorough planning and diligent execution. In this paper, Browne & Mohan consultants share the steps a family business must pursue to remain competitive, sustain their relevance and grow over coming generations.
Governance mechanisms that work in a family businessBrowne & Mohan
Adoption of good corporate governance practices and professionalization help business continuity of family business. This paper presents both formal and informal mechanisms that Indian family businesses of various sizes deploy to improve corporate governance. Formal mechanisms include family assembly, family office, board of directors for each business and independent directors. Informal mechanisms include shareholders assembly, and family outings etc..
Family businesses account for significant part of the UAE economy. Family businesses dominate automotive, retail, fashion, real estate and manufacturing sectors. Family owned enterprises represent 90% of the businesses community in UAE and they contribute about 75-90% of the $500 billion plus trading activity. However, they face challenges on business continuity, succession, diversification, and professionalization front. In this paper, Browne & Mohan consultants present the approach to transforming UAE family businesses.
BUS 499, Week 8 Corporate Governance Slide #TopicNarrationVannaSchrader3
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep ...
BUS 499, Week 8 Corporate Governance Slide #TopicNarration.docxcurwenmichaela
BUS 499, Week 8: Corporate Governance
Slide #
Topic
Narration
1
Introduction
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss Corporate Governance.
Please go to the next slide.
2
Objectives
Upon completion of this lesson, you will be able to:
Describe how corporate governance affects strategic decisions.
Please go to the next slide.
3
Supporting Topics
In order to achieve these objectives, the following supporting topics will be covered:
Separation of ownership and managerial control;
Ownership concentration;
Board of directors;
Market for corporate control;
International corporate governance; and
Governance mechanisms and ethical behavior.
Please go to the next slide.
4
Separation of Ownership and Managerial Control
To start off the lesson, corporate governance is defined as a set of mechanisms used to manage the relationship among stakeholders and to determine and control the strategic direction and performance of organizations. Corporate governance is concerned with identifying ways to ensure that decisionsare made effectively and that they facilitate strategic competitiveness. Another way to think of governance is to establish and maintain harmony between parties.
Traditionally, U. S. firms were managed by founder- owners and their descendants. As firms became larger the managerial revolution led to a separation of ownership and control in most large corporations. This control of the firm shifted from entrepreneurs to professional managers while ownership became dispersed among unorganized stockholders. Due to these changes modern public corporation was created and was based on the efficient separation of ownership and managerial control.
The separation of ownership and managerial control allows shareholders to purchase stock. This in turn entitles them to income from the firm’s operations after paying expenses. This requires that shareholders take a risk that the firm’s expenses may exceed its revenues.
Shareholders specialize in managing their investment risk. Those managing small firms also own a significant percentage of the firm and there is often less separation between ownership and managerial control. Meanwhile, in a large number of family owned firms, ownership and managerial control are not separated at all. The primary purpose of most large family firms is to increase the family’s wealth.
The separation between owners and managers creates an agencyrelationship. An agency relationship exists when one or more persons hire another person or persons as decision- making specialists to perform a service. As a result an agency relationship exists when one party delegates decision- making responsibility to a second party for compensation. Other examples of agency relationships are consultants and clients and insured and insurer. An agency relationship can also exist between managers and their employees, as well as between top- level managers and the firm’s owners.
The sep.
Les MUST of Family Businesses- HOT EXECUTIVE TOPS.pdfSalim Hajje
Planning, starting, operating and retiring from a family business can be difficult. Issues such as succession and pay, corporate governance and recruiting top talent pose special problems for these kinds of organizations. Rivalry among siblings who inherit a family firm is often the kiss of death for even the strongest family business. Nonfamily members, even those who are senior executives or directors, often feel that the family treats them unfairly or fails to listen to them.
In this guide, Dr. Salim Hajje analyzes and provides excellent advice about how to solve such seemingly intractable problems. His suggestions come out of his long experience successfully advising family-run businesses in the MENA region. We recommend this sage and savvy guide to family-business founders, successors, inheritors and nonfamily executives or directors.
In this guide you will learn:
- What makes family businesses special
- What kinds of problems they face?
- Why the issue of succession is a major challenge for these businesses
- Why family businesses should bring in outside directors to supply disinterested advice
Mercer Capital's Value Matters™ | Issue No. 2, 2018Mercer Capital
Mercer Capital's Value Matters™, published 6 times per year, addresses gift & estate tax, ESOP, buy-sell agreement, and transaction advisory topics of interest to estate planners and other professional advisors to business.
Mercer Capital's Value Matters™ | Issue No. 2 2018Mercer Capital
Mercer Capital's Value Matters™ addresses gift & estate tax, ESOP, buy-sell agreement, and transaction advisory topics of interest to estate planners and other professional advisors to business.
How to transform a family business: insights from the trenches Browne & Mohan
Working with many family businesses across industries, we realize they face a high rate of failure because of their inability to distinguish between family and business issues and build structures and process that protect value across generations. In this paper, we share governance process and systems that are a must for family businesses to preserve and sustain economic and social values across multiple generations.
A compilation of selected articles on professionalizing ownership.
The Impact of Family Business
How family businesses affect and contribute to the global economy.
The guide provides insights to Professionalizing Family Business Owners
Professionalization in the Family System, Ownership System, and Business Systems.
PART 1: Competent, Committed, and Sustainable Ownership
• A Practitioner’s Perspective
• Insights from the Research
• Being Competent in Ownership
• Being Committed to Family Ownership
• Making Ownership Sustainable
PART 2: Competent, Committed, and Sustainable Ownership
• Shared Values and Goals
• Psychological Glue
• Ownership Competencies
• Informal Family Governance
• Formal Family Governance
• The Trigger for Change
Competent, Committed, and Sustainable Ownership
Historically family business has been the agenda of many research initiatives from academic anthropologists and historians since the 19th century (Perez & Colli, 2013).
There’s a lot of history noted in the evolution of family systems of organization and structures of social life in the post 1940s (Perez & Colli, 2013).
The family system had been a focus of many dissertations of European and North American scholars since the 1940s drawn from theories culled from extensive field research developed in Africa, South America, Oceania, and Asia.
The momentum of using all this extensive research and knowledge into a set of tools that will eventually be the arsenal of future family business consultants may have stemmed from the efforts of Barbara S. Hollander.
Hollander published first empirical studies emphasizing the relationship between the family and the Business.
During the 1980s the family firm began to be perceived as a unique business form and was quite a discredited topic at that time according to John Davis when he was interviewed May 13, 2009.
Those who were practicing family business consulting at that time see themselves as “Business Doctors” who solved problems, theorized, performed research, and published articles on family firms.
Since the beginning, the whole exercise of legitimizing family business studies was mainly a professional and academic process mostly taking place in the United States. Richard Beckhard and Ivan Lansberg organized a meeting in 1982 to bring together people who shared the same concerns about the family business.
This meeting eventually led to the founding of the Family Firm Institute or FFI with Barbara Hollander being its first president and founder.
FFI was officially incorporated in the Commonwealth of Pennsylvania with 22 founding members in 1986.
What are the Biggest Challenges for Family-Owned Businesses.pdfCentro LAW
Discover the biggest challenges that family-owned businesses face and how to overcome them. Learn from experts and gain insights to ensure the success and longevity of your family business.
Similar to Capital n Tax mgmt session 1&2.pptx (20)
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The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
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Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
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Students, digital devices and success - Andreas Schleicher - 27 May 2024..pptx
Capital n Tax mgmt session 1&2.pptx
1. Session 1 & 2
BBA_FB
Prof. Surbhi Jain
Jindal Global Business School
2. Family businesses is defined as the whole gamut of enterprises in which an entrepreneur or
next-generation CEO and one or more family members significantly influence the firm. They
influence it via their managerial or board participation, their ownership control, the
strategic preferences of shareholders, and the culture and values family shareholders
impart to the enterprise.
A working definition of a family business as a unique synthesis of the following:
1. Ownership control (15 percent or higher) by two or more members of a family or a partnership of
families
2. Strategic influence by family members on the management of the firm, whether by being active in
management, by continuing to shape the culture, by serving as advisors or board members, or by
being active shareholders
3. Concern for family relationships
4. The dream (or possibility) of continuity across generations
The following characteristics define the essence of the distinctiveness of family firms:
1. The presence of the family
2. The overlap of family, management, and ownership, with its zero-sum (win–lose) propensities,
which in the absence of growth of the firm, render family businesses particularly vulnerable during
succession
3. The unique sources of competitive advantage (like a long-term investment horizon) derived from
the interaction of family, management, and ownership, especially when family unity is high
4. The owner’s dream of keeping the business in the family (the objective being business continuity
from generation to generation)
3. Family businesses constitute 80%–98% of all businesses in the world's free economies.
Family businesses generate 49% of the gross domestic product (GDP) in the United
States.
Family businesses generate more than 75% of the GDP in most other countries.
Family businesses employ 80% of the U.S. workforce.
Family businesses employ more than 75% of the working population around the world.
Family businesses create 86% of all new jobs in the United States.
A total of 37% of Fortune 500 companies are family-controlled.
A total of 60% of all publicly held U.S. companies are family controlled.
Number of family-owned businesses in the United States: 17 million
Number of U.S. family-owned businesses with annual revenues greater than $25 million: 35,000
Family business outperformance of nonfamily businesses in the United States: 6.65% annually in (ROA) :10% in
market value
Family business outperformance of nonfamily business in Europe: 8%–16% annually in ROE, depending on the
study.
Family business outperformance of nonfamily business in Latin America (Chile): 8% annually in ROA and ROE.
4. SUCCESSION PLANNING
1. Conservative: Although the parent has exited the business, the parental shadow
remains, and the firm and its strategies are locked in the past.
2. Rebellious: In what is often an overreaction to the previous generation’s control of the
firm, the next generation launches a clean-slate approach to the organization. As a
result, traditions, legacies, and even the business model or its “secret to success” are
destroyed or discarded.
3. Wavering: The next generation is paralyzed by indecisiveness, unable to adapt the
business to current competitive conditions; it also fails to make its mark and assume
leadership effectively.
5. In the systems theory
approach, the family firm is
modeled as comprising the
three overlapping,
interacting, and
interdependent subsystems of
family, management, and
ownership.
In its more extreme forms,
this phenomenon leads to
categorization of family
businesses based on their
propensity to have 1)family-
first, 2) ownership-first, or 3)
management-first perspective
on issues.
6. 1) Family-first Business:
In family-first family businesses, employment in the business is a birthright. The
stereotype of nepotism, which still dominates most people’s views of family businesses,
derives from this not-so-infrequent sub-optimization of the family business system.
Nonfamily managers with high career aspirations are often reluctant to join family
businesses out of concern for their future prospects.
Well-managed and well-governed family businesses may have sound reasons for
paying all the members of the next generation in top management equal or nearly
equal salaries, family-first businesses tend to equalize compensation regardless of a
family member’s responsibility, results, and overall merit.
The continuity of the business across generations depends on the agendas of
individual family members and the levels of conflict associated with running the
business.
The absence of balance and clear boundaries between family, ownership, and
management is not always resolved by putting the family first.
7. 2) Ownership-first Business:
In ownership-first family businesses, investment time horizons and perceived risk are
the most significant issues.
When shareholders come first, the priority is risk-adjusted economic returns or owner
rents—for instance, shareholder value, EBITDA, earnings growth rates, and
debt/equity and debt/asset ratios.
3) Management-first Business:
Management-first family businesses are likely to actively discourage family members
from working in the business and/or to require work experience outside the business
as a prerequisite for employment.
The performance of employed family members is reviewed in the same manner as the
performance of nonfamily managers, and human resource policies generally apply
equally to family and nonfamily employees.
Compensation is based on responsibility and performance, not on position in the
family hierarchy. And the scorecard on business performance is all business; for
example, the focus is on profitability, return on assets, market share, revenue growth,
and return on equity
8. Because of the complexity implicit in a system that is composed of three
subsystems, each potentially with different goals and operating principles, family
businesses are vulnerable to the consequences of blurred boundaries among the
family, ownership, and management subsystems.
For instance, suppose a younger son insists on starting work after 10 A.M. every day,
despite the requirement that, as a customer service manager, he report to work by 7 A.M.
His father or aunt, to whom he reports, may choose to avoid the conflict and anxiety his
tardiness provokes by ignoring it and allowing it to go on. Avoiding resolution of this
disagreement out of fear or altruism only diminishes problem-solving ability; unchecked,
problems can grow for years. Succession hurls many of these unsettled issues to the
forefront of family business management, often at a very vulnerable time in the life of a
family business.
9. Implicit in systems theory is the capacity to jointly optimize interrelated
subsystems in such a way that the larger system can be most effective and
successful in the pursuit of its goals.
Intuitively, reaching this state would seem akin to reaching nirvana, and it is
equally as difficult.
They balance the goals and needs of each of the subsystems.
Companies facilitate joint optimization of family, management, and ownership
subsystems by writing policies that guide the employment of family members in
the business.
In these companies, the performance of employed family members is reviewed in
the same manner as that of nonfamily managers, with compensation decisions
based on both level of responsibility and performance. Siblings or cousins in the
same generation may, therefore, receive quite different salaries and benefits
packages.
10. Its culture and values statement says:
1)We are:
Family-Owned, Professionally Managed. We are a family acting in the Company’s
best interest.
2)We believe in:
Integrity: We do what we say we will do.
No Walls: We have no barriers to communication.
Tenacity: We have an unrelenting determination to reach objectives.
Profitability: We are committed to performance and results.
Improvement: We are never satisfied.
Service: We are loyal to our customers and respect them
11. Traditionally, agency theory has argued that the natural alignment of owners and
managers (the agents) in a family business decreases the need for formal
supervision of agents and for elaborate governance mechanisms, thus reducing
agency costs of ownership in family firms.
According to agency theory, a firm’s board is an important mechanism for limiting
managers’ self-serving behaviour in situations in which a firm’s managers and its
owners have conflicting goals.
Research suggests that agency costs may be controlled or avoided through the use
of certain managerial and governance practices.
12. The competitive advantages inherent in family businesses are best explained by
the resource-based view of organizations. From this theoretical perspective, a firm
is examined for its unique, specific, complex, dynamic, and intangible resources.
These resources—often referred to as “organizational competencies”—embedded
in internal processes, human resources, or other intangible assets, can provide the
firm with competitive advantages in certain circumstances.
Other resources unique to family firms may be customer-intense relationships,
which are supported by an organizational culture committed to high quality and
good customer service, and the transfer of knowledge and skills from one
generation to the next, which makes it easier to sustain and even improve firm
performance.
13.
14.
15.
16.
17.
18.
19.
20.
21. This perspective claims that founding-family members view the firm as an
extension of themselves and therefore view the continuing health of the enterprise
as connected with their own personal well-being.
In this perspective, individual and self-serving goals will be met when the work is
done for the good of the organisation.
22. 1) Parsimony refers to the propensity of family firms to be vigilant about their
financial resources, due to the fact that the family owns those resources.
2) Personalism refers to the unique power resulting from the combination of
ownership and control held by the same family.
This concentration of power frees family firms, relative to nonfamily firms, from the
need to account for their actions to other constituencies, giving them the discretion
to act as they see fit.
3) Particularism is the product of this concentration of power and its resulting
discretion. Family businesses, scholars argue, have the particular ability to use
idiosyncratic criteria and set goals that deviate from the typical profit-maximization
concerns of nonfamily firms.