«When the business loses its name, it loses its soul.» Do you agree with this statement? The family is emotionally attached to their business. That’s why it’s so important to keep it, especially if the business success influence a family name.
This family business management essay is about the potential risks of family small businesses and ways to overcome them.
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The theory and practice of entrepreneurship show interesting results. Emotional bonds in the family and commitment to the company increase when children start a business after the founder. And shrink rapidly when grandchildren (cousins) come to the company.
A family is a system of many generations that are linked by blood ties and emotions, experiences. Right, families differ in their levels of emotional dependence. The family firms have their own unique DNA, and it becomes a significant competitive advantage.
It is essential to understand that taking over a family business is not easy. Often, children are afraid of failing to live up to the expectations of their ancestral parents. That’s why many experts recommend starting to work for other companies. This will allow you to gain a better understanding of the business, test yourself, and believe in your strength.
Problems of a family business
- Family conflicts.
Family business review demonstrate that the failure to separate business and personal life give rise to many tiffs. Sometimes, hostility is about defending the private interests of each family member. Sometimes the spirit of rivalry affects the business environment.
But whatever the reason, you need to find a way to end the altercation. Feuds can jeopardize the overall goals of the business, increase employee turnover, and create a hostile atmosphere.
- Family patronage.
Working with relatives is a delicate matter. And it’s worth acknowledging that children do not always live up to the expectations of their successful parents.
In family businesses, it is essential to keep a balance between family ties and the needs of the company. Just hiring someone based on family ties can be the start of a family affair. Also, it will eliminate the motivation to work for other non-family workers.
- The influence of emotions
It is clear that the topic of emotions cannot be overlooked when running a family business. After all, they have considerable influence on important decisions. Separating emotions from a business is not easy. But letting emotions drive your business can seriously affect your business decisions.
- Loss of non-family workers
Every employee of the company has a desire to advance his career. However, their chances are much lower than those of family members. After all, all management positions are usually occupied by members of the family who own the business.
Often, ambitious and talented workers are unable to move on and look for a new place to work. The positive impact of non-family workers on the development of family businesses and business structure should be recognized. They are less emotional and add some balance to the functioning of the company. In addition, family disputes can negatively affect the development of the firm.
- Strategic planning
According to a recent McKinsey survey, less than 30% of family businesses survive today (https://www.mckinsey.com/business-functions/organization/). And of that 30 %, less than half live to the 4th generation. In the fourth generation, a stable income to the owner brings only 5% of what started.
For the long-term success of the family business, it is critical to use a succession plan. The family business must remain profitable until the fourth generation, carry the original traditions, values and attractiveness. You need to take care in advance who will be the successors and whether there will be children of the founder.
Ways to solve problems
- Every employee involved in the business should have their responsibilities and understand their role in the management of the company
- All issues must be solved quickly, throwing emotions aside
- Take care of an effective incentive system based on personal abilities and merit
- Make it possible for non-family workers to move
- Clearly identify the goals of the company and how to achieve them
- Prepare a business development plan for an atypical event