FAMILY BUSINESS

MEANING
• Family Business & small business are
not the same. At the same time large
public firm are often family firms.
• Family Business can be regarded as the
most popular “mom & Pop” business.
 DEFINITION
• Acc to Gallo:-
“Family business are
essentially the same in every
country in the world relative to their
problems, issues & Interests.
 Gist of Definition
1. High percentage of share capital owned
by a family either jointly or individually.
2. Family members employed in the
highest decision-making posts.
3. Expression of intention to maintain
family involvement in future.
4. A no. of generation of the same family
involved in mgmt or ownership.
 Background
• Family business first occurred in the 17th
century.
• There are many family businesses in the world.
Take USA for example, they hold more than
90% in American economy.
• Among the top 500 companies listed by
Fortune, more than 1/3 are family businesses.
• Some renowned companies such as Motorola,
Dupont, Panasonic, etc are controlled by family
businesses.
SIX KEY ASPECTS OF FAMILY BUSINESS
 head of the family takes all decision
 all members live under one roof
 share the same kitchen
 three generations living together (though often
two or more brothers live together, or father and
son live together or all the descendants of male
live together)
 income and expenditure in a common pool-
property held together.
 a common place of worship
 all decisions are made by the male head of the
family
 HISTORY
• Families who combine their personal
history with the history of their family
business pass on their principles as well
as their business assets to future
generation
CREATE A FORMAL HISTORY
• Founder Vision & Mission:-
• Historical Accuracy:-
 Contd…
• Honoring longtime employees:-
• Thanking Customers & Vendors:-
• Background for the uninformed:-
 FAMILY BUSINESS SYSTEM
 It is important to recognize that
family business comprised of three
separate, but overlapping domains.
Families exist to care for and nurture their members and
provide safety and refuge in an impersonal world.
Success in family is measured in terms of harmony,
unity and the development of happy individuals with
solid and positive self esteem.

Business, however are economic entities where

success is measured in terms of productivity and
profitability

Ownership is based on yet another set of rules.

Success for owners is measured in terms of return
on investment, protection of ownership interests
and in terms of owners values and philosophy of
business.
 CHARACTERISTICS/FEATURES
1. Clearly Separate mgmt & ownership
2. Have a Clearly defined vision.
3. Have a common language of trust inside &
outside the family business.
4. Speak with one voice.
5. Have high staff Loyalty & low staff turnover
 IMPORTANCE.. (1 to 2)
In most countries family business is the
dominant form of business ownership & mgmt
Although big, public companies tend to attract
the most attention, especially in terms of share
offerings, stock values & speculation, family
business will undoubtedly endure as the
backbone of enterprise
Family Business are especially dominant in rural
& peripheral areas becoz of traditional land
owning patterns& the impracticalities of
operating larger corporations in marginal
economics.
The motives, goals & business behavior of
owners are different from others business types.
Family business contributes 60-70% of GDP of
most developed and developing countries.
It has observed that only 13% of the family
business survive till 3rd generation & only 4 % go
beyond third generation & 1/3 of business
families becoz of generation conflict
 Classic Conflicts
Some happy endings
 Reliance Story
The Myth of
Unity

• Game of unintended
consequences
•Watch out for poisoned
games
•Competition in a family
can easily escalate
dangerously
 TYPES OF FAMILY BUSINESS

Family Owned &

Family Owned Business
Managed Business

Family Owned &

Led Company
TYPES……..
Family Owned Business
 A family Owned business is a for-Profit
enterprise in which a controlling no. of voting
shares ( or others form of ownership)
Family Owned & managed business
 It is a for-profit enterprise in which a controlling
no. of voting shares ( or other form of
ownership) typically but not necessary a majority
of shares, are owned by members of a single
extended family, or are owned by one family
members but significantly influenced by other
member of the family.
Family Owned & Led Company
 Controlling no. of voting shares typically but not
necessarily a majority of the shares, are owned
by members of a single extended family, or are
owned by one family member bur significantly
influenced by other of the family.
 Characteristic of healthy Family
Business
• Individuals can manage themselves and
relationships with others
• Family has the ability to resolve conflicts with
mutual support and trust
• Communications are open and clear
• Individuals are flexible and able to use advisors
wisely
• Has the ability to make decisions and move
forward
• Clear about goals and navigates towards the
goals
Characteristic of Unhealthy Family
Business
• The family has poor communications skills and is
unable to manage conflict
• There is low trust between family members
• The goals and values of the family are unclear
• Family members’ roles and obligations are unclear
• The business lacks a sense of direction and does no
strategic planning
• The business lacks sufficient expertise – the family
tries to do it all
• little thought to succession planning
• little collaboration between the family and non-
family employees
QUESTIONS