FAMILY BUSINESS MANAGEMENT

Course Code:ENT4315

Dr.S.SUNDARARAJAN
Chapter 1 - Understanding Family Business Planning - The Characteristics, -
Importance, and Types of Family Business. - Stages of family business
development, - Circle model of Family business.
Understanding
Family Business
Family business, as the name suggests,
is the business which is actively owned,
operated and managed by two or more
members of the single-family. ... Has the
involvement of multiple generations of
the same family and. Senior management
of the firm is drawn from the same family.
How are family business managed?
In a family business, two or more members within the management
team are drawn from the owning family. Family businesses can have
owners who are not family members. Family businesses may also
bemanaged by individuals who are not members of the family.
A family-owned business may be defined as any business in which two
or more family members are involved and the majority of ownership
or control lies within a family. ... According to the U.S. Bureau of the
Census, about 90 percent of American businesses are family-owned or
controlled.
Significance of Family Business:
Family-owned businesses are the backbone of the economy as they
create wealth, provide jobs, are locally rooted and connected to
communities. They seem to be around for long period of time.
What are the challenges of a family
business?
Let's take a look at ten of the most common challenges facing family
businesses today.
• Family problems. ...
• Informal culture and structure. ...
• Pressure to hire family members. ...
• Lack of training. ...
• High turnover of non-family employees. ...
• Sources for growth. ...
• Lack of an external view.
How successfully run a family business?
8 Tips to Run a Successful Family Business
• Communicate. Families have their own way of communicating, and, as
many family therapists will tell you, it is not always the best way. ...
• Evolve. ...
• Set boundaries. ...
• Practice good governance. ...
• Recruit from the outside. ...
• Treat employees like family. ...
• Make it optional. ...
• Plan for the future.
Characteristics of Family Business
Basically, in a family business:
• Single-family owns majority
percentage of ownership.
• Possess voting control,
• Has power over strategic decisions,
• Has the involvement of multiple
generations of the same family
and.
• Senior management of the firm is
drawn from the same family.
Types of Family Business
There are various definitions of family business given looking at the
different aspects of family business. For the convenience of
understanding, all definitions have been broadly classified into two
types based on the structure and process involved in family business.
4 Types Of Family Businesses
• Simple business, simple family.
• Simple business, complex family.
• Complex business, simple family.
• Complex business, complex family.
Characteristics of Family Business
Characteristics of Family Business:
a. A group of people belonging to one or more families run one business
enterprise.
b. Position in family business is influenced by the relationship the family
members enjoy among themselves.
c. Family exercises control over business in the form of ownership or in the
form of management of the firm where family members are employed on key
positions.
d. Family exercises the influence on the firm’s policy direction in the mutual
interest of family and business.
e. The succession of family business goes to the next generation
f. Family business in India is largely caste-related.
g. Every caste enjoys a dominant culture which gets duly reflected in their
family businesses also.
Components of Family Business
Family Business includes Family, Business and Ownership as the three
main components of the business, which form the pillar of any family
business.
Importance of Family business
• a family-owned and -run firm can help business owners maximise
productivity and profit each one of their family-owned businesses:
• Commitment and unified leadership
• Stability
• Trust and authenticity
• Flexibility and versatility
• Vision and long-term goals
• Decrease costs and expenditures
• Next-generation ingenuity
Family-owned and run businesses can achieve, maintain, and elevate a
sense of business stability in its leadership and overall organisational
structure and culture. Family positions and seniority can determine and
define the organisation's leadership, making way for leadership longevity.
 Importance of Family business
• 1 – Values
Family values can be translated into the way that the business operates, the culture of the family firm, and
these can be passed from generation to generation as well as from family members to other employees.
There is an immense level of pride amongst family members to respect the business, their predecessors and
in many cases to act as stewards to pass on the business to the next generation and the values that
underpin the family and the family business add to the essence of the family firm.
• 2 – Long Term View
Family firms are recognised for taking the long term view, not always focusing on the short term financial
performance and results of the business. A patient and often cautious approach can help to align resources
and plans too.
• 3 – Loyalty
Research has proven that shared values and vision amongst family members with clear and open
communication of their goals and objectives can result in greater loyalty from family members too.
• 4 – Retention
Employees of family firms are often cited by the family as an ‘extension of the family’ or as part of the
‘extended family’ and consideration and support of employees to such an extent can provide an incredibly
loyal workforce who enjoy the work environment, the support of the family and the way that they are treated.
• 5 – Legacy
Making a difference and creating a legacy is something that can come from a family in business and there
are lots of examples where family firms are integral to the community in which they operate. Building on the
efforts of previous generations and continuing the family tradition, protecting the name and the values that it
upholds are also drivers for subsequent generations to continue in the same manner and to continue to give
something back.
 Importance of Family business
• 6 – Trust & Integrity
Research has proven that the very nature of the family ownership can engender more trust from
stakeholders and customers alike, and more and more family firms are celebrating their history
and legacy in the brands that they are developing, recognising that it can be to their competitive
advantage.
• 7 – Innovation
Due to their governance and ownership structures family firms can be more innovative. In many
cases, they recognise the need for innovation as part of their strategic planning to keep the
business relevant and current and as such are able to respond to change and take on
opportunities as they arise more quickly than some of their non-family counterparts.
• 8 – Entrepreneurship
Successful family firms can be a breeding ground for entrepreneurship, supporting the next
generation in their pursuit of new opportunities, either through opportunity, training, career
progression or encouragement.
• 9 – Respect
Many family firms are massively involved in their local communities and give back in many ways
which engenders significant respect from the communities in which they operate.
• 10 – Relationships
Whilst it may not be seen as the ideal situation for some, families that work successfully together
get to spend more time together and sharing a drive towards goals for the business can be a
 Types of Family business
• Family Restaurant. Starting a restaurant as a family can be a great business opportunity, since it's a
business that requires multiple people and different skill sets.
• Family Band.
• Family Blog.
• Local Newspaper.
• Niche Website.
• Farm.
• Contracting Business.
• Home Rental Business.
Some of the world's largest family-run businesses areWalmart (United States), Volkswagen Group
(Germany), Samsung Group (Korea) and Tata Group (India).
• Family Owned Business: As the name suggests, a family-owned business in one in which the controlling
size of the ownership stake is owned by the family or by the member of the family.
• Family Owned and Managed Business: In this kind of businesses the controlling size of ownership, lies in
the hands of a single-family, or by a single member of a family. The controlling ownership allows the family
to formulate and decide the objectives, methods and policies.
• Family Owned and Led Business: In such a business, along with the ownership of majority stake by the
 Stages of family business development

Family development is under the influence of the dominant influence of the

biological clock which consists of the following stages: a) stage appearance - the
emergence of young business family - parents less than 40 years, children
less than 18 years, b) phase of inclusion of children in a business family –parents.
Family businesses are often classified as (1) first generation or founder firms,
(2) sibling ownership or partnership, or (3) family dynasty or cousin
consortium. These classifications serve us well for identifying the predictable
issues arising in each stage
• Stage 1: Founding Fathers (or Mothers…) The first stage of growth is known as
The Founder Stage. ...
• Stage 2: The next generation. ...
• Stage 3: The family legacy
 Circle model of Family business.
The Three-Circle Model of the Family Business System shows three
interdependent and overlapping groups: family, ownership, and business. An
individual in a family business system occupies one of the seven sectors that are
formed by these three overlapping circles. With the Three-Circle Model, one can
depict seven distinct interest groups (or stakeholders) with a connection to the
family business:
• Family members not involved in the business, but who are descendants or
spouses/partners of owners
• Family owners not employed in the business
• Non-family owners who do not work in the business
• Non-family owners who work in the business
• Non-family employees
• Family members who work in the business but are not owners
• Family owners who work in the business
COURSE CONTENTS - Chapter 2
Challenges of Family Business
- The family dynamics challenge,
- The ownership Challenge,
- The governance and professionalism challenge,
- Approaches to avoid conflict in family business
COURSE CONTENTS – Chapter 3
Governance of Family Business
– Family council meeting,
– Family constitutions,
– Benefits of attending family council meeting,
– Duties of performed by family council meeting.
COURSE CONTENTS – Chapter 4
Succession of Family Business
– Responsibilities and Right of family shareholders,
– Exception of family shareholders from managers of business,
– Succession Matrix,
– Succession in family business.
COURSE CONTENTS – Chapter 5
Family Business Plan
– Strategies for improving capability of family business,
– Rules to save family business,
– Essential content of family Business plan,
– Creating a business plan.