Familyness In Family Business

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Introduction – “Familyness”
According to the surveys and articles I reviewed, family businesses basically face the twofold problem of achieving strong performance while ensuring ownership and control. This problem is compounded by the new economic reality, which is more fluid, volatile and competitive. In this context, the “familyness” factor carries certain advantages and disadvantages, which often collide. Under this broad setting, in the first part of the report, I outline the winning qualities of the family business, the magic behind its success. In the second part, I briefly touch the challenges that are inherent in the nature of family business and in time can destroy this magic. Having reviewed the pros and cons, the third part concludes
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As the business and the family grow, is reasonable that the probabilities of conflict increase. The problem with family conflict is that you cannot change the family, as you would do with any other employee of the business. Consequently, it can overwhelm the undisrupted operation of the business. (PwC 2012)
Remedies – “Opening the parachute”
Every family business faces “a moment of truth” in its evolution, when its negative nature will surface. This moment is commonly ignited by a “major event” like first time exports or international expansion, as in our case, transition to next generation or entrance of external investors in the capital structure or sudden growth beyond expectations. These challenges can overwhelm a family business. The remedy is to set the family business in track to “professionalize the management” but also “professionalize the family”, if one can say so.
Professionalizing the management means infusing processes, corporate governance and new skills to the family business. (PwC
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Hence, meritocracy should become the driving force of the family business. A formalized performance management system will set clear accountabilities, targets, incentives and rewards to cultivate a culture in which performance is accredited. Apart from that, standards and procedures can be set for the employment of next generation’s family members. New entrants have to be educated, possibly carry substantial experience earned outside the company and undergo objective assessment both in the recruitment and promotion phase. For example an outside, independent agent could run the assessment procedure. (Stalk; Foley, 2012 and PwC 2014)
As illustrated in the challenges outlined in the second part of the report, the nature of the family business gives rise to issues that can impede its success. Professionalizing the business is not enough to shield its future. The next step should be to “professionalize the family” itself. Namely, to set a framework of rules and processes of how family members interact with each other and with the business. This framework will regulate the roles and relations of family members as shareholders, board members and managers. (PwC

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