Family Entrepreneurship Management - Research Paper Example

Family Entrepreneurship Management 0. Definition of Family Business In the thought of Poza, family business refers toa business that is owned and managed by one or more families (4). The family-owned firms are ones that have a member or members of the family as the main shareholders. Poza continues to argue that in these firms, the family members garner a huge percentage of the shares in the business, in such a manner that in the event of determining and passing decisions in the organization, the family gains a greater hand in the same (4). However, it is vital to note that in the family business, at times other members that are not family members may gain shares in the business. The participation of the family members as the owners and managers of the firm has been instrumental in facing the dynamic challenges of the business. Since all families have their own distinctive issues, family members are better placed to run family businesses. Poza is also keen to indicate that family businesses come in various forms, and that the same range from 80-98 % in the entire globe (5). Additionally, family businesses are dissimilar in terms of the ownership and the major concern for the family relationships (Poza7). 2.0. The concept of Succession Planning As seen in the family business, succession planning involves a process of developing and spotting persons who have the capability to fit in the managerial position in the business (Fager & Mckinney 19). Succession planning, in this case, has been helpful in ensuring that the employees that are competent and able have the best groundwork mentally to deal with the complexities of family business. The selected board in the succession planning, as Fager & Mckinney indicate, become the key players and always available for consultations in the business (14). Succession planning, on the other hand, involves smooth progression of the talents present in the organization; thus, devision of a pool of people or groups that are helpful in the smooth transition of the leadership line and team. The family business is steered towards achievement and success for the case of succession planning. Fager & Mckinney continue to say that success planning is a procedure in which an institution makes sure that the right employees are selected to take up specific roles in the company (18). Superior employees are selected based on their proficiency, and are able to develop their adroitness and abilities to handle the most challenging tasks in the family business (Fager & Mckinney 19). It is, therefore, debatable that succession planning ensures that employees are able to function efficiently as well as fit in their novel jobs (Fager & Mckinney 29).Succession planning is hence successful only if the persons with the right potential are recognized, a strong database is created to make the right enrollment decisions, and leaders are occupied in supporting high potential teams. Fager & Mckinney conclude by emphasizing that succession planning has been instrumental in improving the retention of employees and meeting the expectations of the employees (58). 3. 0. The concept of Estate Planning As argued by Simon & Caverly, estate planning refers to the collection of practices that involve preparation that involve the management of individual’s roles in the event of death or incapacitation (35). Estate planning ensures that the heirs of the deceased access the left assets as well as the taxes that pertain to the business are settled on time and with minimal conflicts and confrontations (Simon & Caverly 36). It is, however, crucial to note that in the case of the family business, estate planning is done with the help of an attorney that is experienced in matters of estate law (Simon & Caverly 36). In the compilation of Simon & Caverly, estate planning is inclusive of coming up with a will, limiting the estate taxes by devising a trust account under the name of the beneficiaries, identifying the guarding of the deceased as well as the executor of the terms of the will, updating the life insurance of the beneficiaries, setting up a permanent power of attorney so as to direct other assets and investments and lastly, establishing annual gifting to minimize the taxable estates (36). Simon & Caverly are quick to note that estate planning is a continuous process that begins once the family business has an asset base, and as life proceeds, the goals shift and the estate plans to function based on the new goals put in place (37). In an event that there is poor estate planning, the beneficiaries may be overburdened by financial debts. 4.0. Larger family businesses- protection of their financial well being Larry clearly indicates that family business must be extremely cautious of their financial status so as all the members are well conversant with what is expected of them in the business (74). Since emotions may constantly interfere with the business, family business partners must endeavor to believe in the approach that the business is theirs whether in favorable and bad times (Larry 76). The business can sustain its financial situation by fixing their eye on the prize by adhering to the command chain and working towards the mission and goal of the business. Through holding neutral family meetings, the management team is able to is able to come up with strategies of how to spend money; thus, efficiency in spending of the profits in the business. The family members need to be advised on the needs to save money just like they spend the same money. This is to mean that the spending initiatives need to be in line with income generation in the shortest time possible (Larry 75). The family business can also manage its finance by paying a consultant who can help explain the values of the opportunities at hand (Larry 76). In the case of valuable opportunities, that involve projects that are valuable, the consultant may give an intensive research on the validity of the project to the business (Larry 76). This will in the long run facilitate the profits and income sustainability in the family business. The consultant is also crucial in advising in the sources of funds for the business. A general involvement of the entire family members in a discussion of the financial issues creates a sense of responsibility of the entire family on the success of the business (Larry 77). 5.0. Encouragement of younger family business members to the business Eckrich& McClure argue that the non-family employees can be motivated to become better leaders in the business especially in times when the company is facing a crisis and requires a member of the family to be involved in the business (51). In addition, Hess indicates that non- family members can be members of the business only if the business continually and consistently hires employees on the basis of merit, their needs as well as qualifications (49). In this case, the non-members of the family business will feel motivated to be part of the business due to the feeling that favoritism will be minimal or inexistent. Hess continues to argue that non- family members can be attracted to the business if the employees are compensated arms-length for the job done (49). It is also vital that the managers of the family business discern and rate employee performance based on the standards of practice of the employees and not as relatives (49). Ward appreciates the family culture that sees parents pass on culture and values to their children (122).It is at this instance that the family business managers ought to come up with career mentorship programs and other development programs that aims at utilizing the young labor force in the family. As Wars says, in the US family businesses are seen as problem of a nuclear family unit that requires the assistance of the extended family (126). Assistance, in this instance, ranges from financial to managerial assistance that ultimately builds trust among the family members. The association then becomes a family linked or related one, and also a successful one. 6. 0. Selection of the next CEO in the family business Aronoff says that coming up with a layout management for the subsequent CEOs of the family business is crucial for ensuring that there is continuity of the management for the family business (24). Family businesses can only manage to pick their next CEO by establishing a novel board of directors that is inclusive of outside directors that endeavor to select the best person for the candidature of family business (Aronoff 24). This is done once the job description for the CEO is drafted. Phan & Butler admit that every CEO of the family business must exit the firm regardless of the situation whether death or otherwise (151). The authors continue to argue that managers may select the most active and loyal person in the organization to be the next CEO (152). The management then has no option, but to seek a neutral board to aid in the selection of a successor especially if the business is doing the selection for the first time. Aronoff, McClure & Ward warn that if a family executive team is applied in selection of the successor, a conclusion may not be arrived at peacefully (32). In this event, the succession disputes need to be eliminated immediately. The management is therefore left with the option of selecting the best mechanism of selecting the best CEO to fit in the business. The underlying factor in this case is to ensure that there is smooth transition from one leader to the next. Works cited Aronoff, Craig. Letting Go: Preparing Yourself to Relinquish Control of the Family Business. NY: Family Enterprise Publisher, 2003. Print. Aronoff, McClure, S., & Ward, John. Family Business Succession: The Final Test of Greatness NY: Family Enterprise Publisher, 2003. Print. Eckrich, Christopher. & McClure, Stephen. Working for a Family Business: A Non-family Employee's Guide to Success. New York: Family Enterprise Publisher, 2004. Print. Fager, Mike. & Mckinney, Dave. Succession Planning for the Family Owned Business. NY: Lulu.com, 2007. Print. Hess, Edward. The Successful Family Business: A Proactive Plan for Managing the Family And the Business. New York: Greenwood Publishing Group, 2006. Print. Larry, Colin. Family, Inc.: How to Manage Parents, Siblings, Spouses, Children, and In-laws in the Family Business: Easy read Super Large 24pt. NY: ReadHowYouWant.com, 2009. Print. Phan, Philip. & Butler, John. Theoretical Developments and Future Research in Family Business (Hc).London: IAP, 2008. Print. Poza, Ernesto. Family Business. London: Cengage Learning, 2009. Print. Simon, Jordan. & Caverly, Esq., Brian. Estate Planning For Dummies. NY: John Wiley & Sons, 2011. Print. Ward, John. Perpetuating the Family Business: 50 Lessons Learned from Long-lasting, Successful Families in Business. London: Palgrave Macmillan, 2003. Print. Read More