CHAPTER 10 Flashcards
(12 cards)
what is a family business
A family business is one that is influenced by family ties in order to achieve
the vision of the family over, potentially, several generations.
• What constitutes a family business:
– The family (at least more than one family member) is actively involved in
that particular business.
– Family members make a definite input into the strategic direction of the
business.
– The intention is to continue the family business over time – preferably
over generation
Name the 2 systems of a family business
Two broad systems in a family business:
1. Family system
• The social system that focuses on caring for its members (regarded as
emotional).
• The protection of the family’s name and reputation could become more
important than the exploitation of new ideas.
• Entrepreneurship is therefore negatively influenced, which may cause the
business to stagnate.
• Actions could be more conservative and could result in changes not being
readily accepted.
2. Business system
what are the different Roles in a family
The different roles are as follows:
1. Family members
2. Non-family investors
3. Non-family employees
4. Family shareholders
5. Non-family working owners
6. Working family members
7. Working family owners
8. Family owners and business leade
what are the strengths of a family business
Less conflict between owners and managers
• Tend to have a long-term orientation supporting sustainability
• Effective leadership leading to faster decision-making and the availability of
resources from a wide network including the family itself
• Building a strong family culture which can survive over generations
• Fostering a better sense of community among the various members
• Creating jobs and ensuring job security
• Gaining specialist knowledge and experience in the business
• Allowing individuals the freedom to develop their creative potential because family
businesses are mostly small and medium size
problems in family business
Problems within a family business
• Keeping the business growing to address the needs of a larger family unit
• The ability to adapt to changing circumstances in the economy
• Lack of or poor strategic planning for the business and the family
• Lack of cohesion between the older and the younger generations
• Inability to ensure that talent is optimally developed in the family busi
SUCCESSION AS A TOOL FOR SUCCESS IN
FAMILY BUSINESSES
Succession is the process through which the leadership and/or ownership of
the family business is transferred from the existing leader to a subsequent
family or non-family member (a professional manager
Some obstacles to succession that could result in few family businesses
being transferred successfully to a second and third generation in
The founder is autocratic and does not want to transfer leadership.
• The existing leader acts as though he or she will never die.
• There is “a-child-stays-a-child” scenario (“How can my child tell me what to
do?”).
• The existing leader misinterprets environmental trends and does not
implement changes in time.
• The leader does not want to make a choice with regard to a possible
successor.
• The leader selects a successor who can be his or her “slave”
If the owners have decided to go ahead with succession, the following
options are open to them
• Appoint a family member to take over.
• Appoint a caretaker manager if the family member is still too young to take
over.
• Appoint a professional manager if no family member wants to take over
However, if a parent is still young and does not want to retire yet, other
strategies can be followed, for instance
The child(ren) can gain wider experience in other industries, organisations,
and/or countries.
• The child(ren) can be employed as normal employees where justified.
• New projects can be started in which the children are interested and in
which they can be given an opportunity to express themselves
ADVISORY BOARD AS A TOOL FOR SUCCESS
IN FAMILY BUSINESSE
The board should ensure that the business is strategically aligned to major
environmental trends, that the business stays entrepreneurial by constantly
exploiting opportunities such as digital transformation (a factor that becomes more
critical for agility), that conflicts within the business are managed timeously, that
decisions are taken based on facts and not emotions, and that decisions are in line
with the family value system.
• An advisory board should
– consist of family members, non-family members and external specialists (not
necessarily from the same industry)
– hold regular meetings during the year
– uphold formality at board meetings.
• Service providers (e.g. bankers, auditors, consultants) are not necessarily part of an
advisory board because they are already involved in one way or another
FAMILY COUNCIL AS A TOOL FOR SUCCESS IN
FAMILY BUSINESSES
The role of the family council is to oversee family-specific matters, such as
the family’s philosophy, succession planning, employment criteria,
involvement in the business and response to the external environment.
• The family council must consist of selected members of the family organised
in such a way that there is a good balance between different age groups and
genders
TALENT MANAGEMENT AS A TOOL FOR
SUCCESS IN FAMILY BUSINESS
• Family businesses find themselves in the midst of rapid global changes.
• The rules of the economic game change by the minute because of many
factors.
• Family businesses are involved in innovative activities.
• The innovation ecosystem – “[a] twenty-first century innovation ecosystem is a
multi-level, multimodal and multi-agent system of systems”.
• The focus becomes more centred on better education and greater
professionalism within family businesses
