The Business Led By Families

A large chunk of the world business arena is contributed by family businesses. Various forms and typologies of these exist and often it has been difficult to fetch a single applicable definition of the family business system. The different aspects of this unique phenomenon involve its form and level of family influence, ownership and inter-generational succession.

The various structural elements of identifying a family business include a multi-generational influence of family on a firm’s policy, objectives and ownership control by members of a family. It may also include ownership by a single family or individual or majority ownership by single family. Famous global family businesses include names such as Cargill, Levi-Strauss, Marriott, Wal-Mart etc.  All these companies have a strong presence in India as well.

There is also different organisational type such as family-owned and family-managed businesses.  A family owned is for profit in which majority of shares are owned by members of a single extended family. In comparison, a family owned and managed business is one in which not only are majority of shares owned by family members but family members are in active participation in the top management. A family owned and led company goes a step ahead. It shows the former characteristics and also the business has active participation by at least one member of the family on board of directors. In such an enterprise family members have control and influence over the company’s goals, strategy and culture.

There are many other types of family business which do not come under any traditional model. Today there are many forms of family business which display tradition family, conflict family and entrepreneurial traits. Also the degree of involvement can range from royalist, mixed management to professional management. The culture of the organization may range from paternalistic to democratic to participative and finally professional. The management style is indicative of the generation running the business and passing the baton that is succession is always a major decision. The inter-generational goal congruency is a determinator of organizational success. Despite the various models and studies in this field, it remains a complicated subject and one that is evolving as various new designs of family businesses crop up with time. These new manifestations further extend the typologies and definitions of family businesses. These businesses have their own unique dynamics related to the emotional family unit, succession and leadership style. Top executive search firms cater to family businesses and their unique needs in providing them with the right talent and executive coaching to aiding succession planning.

A Look At The Best Family Business Practice

The family businesses, small or large, are present in and around us; yet it is one of the most overlooked form of business ownership. As the business and the family grows, the challenges faced by the family business organisation increase manifolds. The family business organisations need to achieve the enhanced business performances keeping the family members committed to the growth of the organisation along with maintaining harmonious relationships within the family. Here we unveil some of the best family business practices which can help a family business grow. Take a look:

• A Well Defined Structure For Decision Making

Absence of a well laid decision making structure often creates conflicts amongst the family members in the organisation as everyone thinks he/she is the best decision maker. An effective decision plan and chain of command can reduce the level of conflict in this situation. Someone should be identified for the final decision making to ensure proper decisions are made instead of arguments.

• Identify Role Of Every Member

Often family businesses are infected with the problem of giving job roles without understanding the skill set of the individuals and investing properly in their skills. The role of each and every family person should be identified in connection with the interest and skills the person possesses and thus this way they can be made responsible for what they can do the best.

• Board of Directors

It is advisable to the family business organisations to formulate a Board of Directors which comprises of Accountants, Lawyers and other individuals of repute. The reason for formulating a board is to have a constant guidance of persons having knowledge of diverse fields. Their feedback about the direction of the company can be used for framing future plans and objectives for the company. Also, they can review the business on quarterly, half yearly and yearly basis, and bring any wrong practice going in the business firm to the table.

• Transition Plan For Next Generation

The family businesses are passed on from one generation to another and thus it becomes the responsibility of the present generation to make the transition smooth. For this, the next generation needs to be made understood what is expected from them and what needs to be done to take the business to new heights.