Chapter 5 Packet Notes

Question 1

A group of people bound by a shared history and a commitment to share a future together, while supporting the development and well-being of individual members.

Answer 1

Family

Question 2

An organization in which either the individuals who established or acquired the firm, or their descendents, significantly influence the strategic decisions and life course of the firm.

Answer 2

Family Business

Question 3

• Family concerns
• Business concerns

Answer 3

Family and Business Overlap

Question 4

• Care and nurturing of family members
• Employment and advancement in the firm
• Loyalty to the family

Answer 4

Family Concerns

Question 5

• Production and distribution of goods and/or services
• Need for professional management
• Effective and efficient operation of the firm

Answer 5

Business Concerns

Question 6

• Strength of family relationships during challenging periods of business change
• Financial sacrifices that family members make for the good of the firm
• Operation as a family business distinguishes the firm from its competitors
• Higher levels of concern for its community and non-family employees
• Capability to plan and prepare for the long haul
• Emphasis on quality and value

Answer 6

Advantages of a Family Business

Question 7

• Conflict among family members about
• Family business momentum
• The founder’s imprint on the culture
• Organizational culture

Answer 7

Disadvantages of a Family Business

Question 8

• Risk (consequences of failure) to the family in launching a business.
• Nepotism and the differences in competencies and merit of family members involved in the business.
• Family traditions versus the business need to innovate and seize opportunities.
• Unity and cooperation of family versus business need to foster diversity and competition.
• Family loyalty versus the necessity to provide opportunities for non-family employees

Answer 8

Conflict Among Family Members

Question 9

The founder’s core values become a transmitted part of the culture (for better or worse).

Answer 9

The Founder’s Imprint on the Culture

Question 10

• Patterns of behaviors and beliefs that characterize a particular firm.

Answer 10

Organizational Culture

Question 11

• Mutual respect
• Integrity
• Wise use of resources
• Personal responsibility
• “Fun”

Answer 11

Family Business Cultural Values

Question 12

• Parental concerns in passing the business on
• Co-preneurs
• Sons and Daughters
• Sibling Cooperation, Sibling rivalry
• In laws in and out of the business
• The entrepreneur’s spouse

Answer 12

Family Roles and Relationships

Question 13

• Temperment and ability necessary for business leadership
• Motivation of the children to take an interest
• Education and expertise
• Timetables in employing and promoting
• Avoiding favortism
• Sibling rivalry likely problems, avoidable?
• Preventing the business relationship from damaging or destroying the parent-child relationship.

Answer 13

Parental Concerns in Passing the Business On

Question 14

• Opportunity to share more in each other’s lives.
• Business differences interfere with family life.
• Work doesn’t leave time for family life.
• Sharing family responsibilities eases the load.

Answer 14

Co-Preneurs (Husband-Wife Teams)

Question 15

• Personal preferences different from the business
• Personal qualifications insufficient to assume role in business
• Desire for personal freedom to choose another career.

Answer 15

Sons and Daughters

Question 16

• Best case: Siblings work as a team, each contributing services according to his or her abilities.
• Worst case: Siblings compete as rivals and disagree about their business roles.

Answer 16

Sibling Cooperation, Sibling Rivalry

Question 17

Disagreements about how to treat and reward in-laws and family members/children.

• Assign to different branches or to different business roles.

Answer 17

In-Laws in and Out of the Business

Question 18

Communication between entrepreneurs and spouse is critical for their performance as an effective team for both the business and the family.

Answer 18

The Entrepreneur’s Spouse

Question 19

• Best practices (Professional management)
• Nonfamily employees in a family firm
• Family retreats
• Guidelines
• Family Councils
• Family business constitution
• Family protocol

Answer 19

The Need for Good Management in the Family Firm

Question 20

• Promote learning to stimulate thinking and fresh strategic insights.
• Solicit ample inputs from outsiders to keep things in perspective
• Establish channels for constructive communication and use them.
• Build a culture that accepts continuous change
• Promote family members only according to their skill levels
• Attract and retain excellent nonfamily managers
• Ensure fair compensation for all employees, including those outside the family
• Establish a solid leadership succession plan
• Exploit the unique advantages of family ownership

Answer 20

Best Practices (Professional Management)

Question 21

• Hazards:
  
  • Competition with family members for advancement.
  • Getting caught in the crossfire and politics of family competition within the firm.
• Solutions:
  
  • Identify family-only reserved positions in advance.
  • Treat both family and nonfamily employee’s fairly in matters of reward and promotion.

Answer 21

Nonfamily Employees in a Family Firm

Question 22

• A gathering of family members, usually at a remote location, to discuss family business matters.
• Use of an outside facilitator may be necessary.

Answer 22

Family Retreats

Question 23

• Set a time and place.
• Distribute an agenda prior to the meeting.
• Plan a schedule in advance.
• Give everyone a change to participate.
• Keep it professional

Answer 23

Guidelines

Question 24

• An organized group of family members who gather periodically to discuss family-related business issues.
  
  • Represent the family to board of directors
  • Useful in developing the family harmony.
  • Increases understanding of family traditions and interest.

Answer 24

Family Councils

Question 25

A statement of principals intended to guide a family firm through ties of crisis and change.

Answer 25

Family Business Constitution

Question 26

An extension of the constitution incorporating additional agreements that includes: * Ownership agreements (inheritance and buy-sell compacts). * Governance and personal politics * Use of business resources by family members * Conflicts of interest and noncompetition agreements. * Codes of conduct

Answer 26

Family Protocol

Question 27

* Avaliable family talent: * Mentoring * Guiding and supporting the work and development of a new or less-experienced organization member. * Competency * Allowing only qualified competent family members to assume leadership roles in the firm increases the value of the firm for all who have an ownership interest in it.

Answer 27

Available Family Talent

Question 28

* A sound, profitable business * Stable, healthy family relationships * Advance planning for leadership succession * Positive family leadership and team-oriented management structure. * Presentation of career opportunities without pressure. * Open communication on family business issues * Reluctant parents and ambitious children

Answer 28

Conditions Favoring Successful Leadership Succession in a Family Firm

Question 29

Passing ownership of a family business to the next generation. * Who will inherit the family firm? when? * Should each heir recieve an equal share? * Should ownership be transferred gradually? * How are tax considerations to be handled? * What to do with other wealth and assets of the founding enterpreneur?

Answer 29

Transfer of Ownership