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Family business 101
1. Family Business 101
An introduction to the challenges & rewards of
family owned businesses
Kalli Matsuhashi, MA, LP
Executive Confidante
www.ExecConf.com | Kalli@ExecConf.com
3. Objectives
• Understand what factors set family owned businesses apart
from non-family owned businesses
• Learn the top 3 challenges of family owned businesses
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4. Definition of a family business
“Organization where ownership and/or
“Organization where ownership and/or
management decisions are influenced by a
management decisions are influenced by a
family or families.”
family or families.”
• Opportunity to build the wealth of the family & future
generations
• Employment opportunities for next generation
• Career flexibility and opportunity for all family members
• Opportunity to express the family’s values
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5. Non-family owned businesses
Business Ownership
Task-based,
competence & Profit-based,
commitment, legacy, retaining
growth & change capital
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6. Family owned businesses
Ownership
Profit-based, legacy,
retaining capital
Business Family
Task-based,
competence & Emotion-based,
commitment, loyalty & belonging,
growth & change continuity & harmony
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7. 4-Circle model
Ownership
Profit-based, legacy,
retaining capital
Business Family
Task-based, competence & Emotion-based, loyalty &
commitment, belonging, continuity &
growth & change harmony
Governance
Balance the interests between
owners/family and management 7
8. The systems
Ownership/Governance System
Ownership Values/vision
Legal structure
Ownership transfer
Board
Family System
Roles & relationships
Family values
Business Family Myths
Conflict
Clarity of communication
Business Management & Leadership System
Mission & strategy
Culture of the organization
Org structure
Compensation system
Decision-making system 8
9. Family vs business systems
Family System Business System
•Emotional system •Task based system
•Mission is to nurture off-spring into •Mission: produce profitable goods and
competent adults services (effective strategy)
•Equality rules •Competency prevails
•Acceptance is unconditional •Acceptance is based on objective
performance
•Relationships are permanent •Relationships are temporary and
contractual
•Power: generational/birth order •Power is primarily based on authority
and influence
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10. Interests vary depending on
position
1. Family members 3
2.Non-family, non-owner Ownership
employee
3.Owner, neither family
nor employee
4.Family with ownership
interest
6 4
5.Family employed in
business 7
6.Non-family owners 2 1
employed in business
Business 5 Family
7.Family with ownership
interest employed in
business
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12. The top 3 issues for family businesses
• Succession
• Wearing the right hat - owner or manager
• Lack of structure
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13. Succession
• Management & ownership: both types need to be addressed
• Timing & planning
• Management succession - family vs. non-family
• Identity shifts
• Ownership succession
• Closely tied to estate planning
• Multiple options (voting shares, non-voting shares,
financial compensation for non-ownership, trusts, etc.) 13
14. Wearing the right hat - owner or
manager?
• More difficult to do when the structure isn’t well-defined
• Difficult if family members don’t do well with respecting
boundaries
• Entitlement is often an issue with the next generation
• Requires self-discipline from family members
• Requires courage from other employees
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15. Lack of structure
• Many family businesses begin with one person and a big
idea
• Entrepreneurs are energetic, creative, and driven, but
typically dislike structure
• As the organization grows, more structure is needed
• Org charts, defined roles, administrative functions, defined
work processes, etc.
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16. Stages of Growth
Professional
TENSION!!!
Stage
Managerial
Entrepreneuri Stage
Growth is driven by what is
al Stage best for the business
Business is more organized
but experienced as being
Business is designed “like a family”
around the leader and • Market-driven strategy
driven by personal goals • Outside expertise • More & better planning
• Financial discipline • Goal setting
• Intuitive, opportunistic • Structure & accountability • Better structure &
• Hard work • Tension due to growing systems
• Trial and error pains • Accountability
• Entrepreneur is a “jack • Hub and spoke model • Management
of all trades” becomes more difficult to development & team
• Hub and spoke model maintain building
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17. Importance of structure & process
• Play a critical role in long-term growth of company
• Help companies get things done effectively and efficiently
• Have an impact on succession
• Regulate the interaction between family and business
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18. Quiz
1. Name two things that distinguish family businesses from
non-family owned businesses.
2. Describe one benefit of belonging to a family business.
3. Name two of the top three challenges that are faced by
family owned business.
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