EMBA 530 initial post week 9 - Essay Example

Family Business and Social Entrepreneurship Family business is defined in different ways worldwide, because the exact of role family members in the business is not fixed. By family is usually taken to mean family members as business owners, but it is not certain if family members should also be the business manager, the successor, or workers, or if the family must be performing at least a number of these roles for the business to be classified as a family business (Ayranci, 2010). Therefore, in the following discussion that identifies and reacts to five most important conditions (i.e. factors) that led to successful family businesses.

One important factor is the use of participative decision making involving all the family members led by the senior members – i.e., the parents in a nuclear unit. This means that family meetings are held on most vital matters, and there is a generally liberal attitude in these collaborations. This factor was linked specifically to the longevity and success of the business (Fahed-Sreih & Djoundourian, 2006). A second important factor in successful family businesses is a resistance to institutionalization (Ayranci, 2010).

This does not mean opposition to professionalism, because many of these firms are succeeded by younger family members who have obtained MBAs and formal training. What the family business resists is the formalization of procedures which many call bureaucracy. Family members prefer to maintain a level of informality where they could talk to each other simply and directly despite the difference in their position in the hierarchy. A third factor is ownership preferences, pertaining specifically to higher degrees of ownership concentration in successful family businesses (Hoopes & Miller, 2006).

As mentioned earlier, the family business is not necessarily one which is wholly owned by one family; in some cases, those organizations referred to as family business may simply be majority-owned, and some not. Successful family businesses, however, have a higher concentration of ownership held within the family, and the more the ownership is held by family members, the more focused the firm’s strategy is and the more successful it becomes. The fourth important factor is the family’s commitment to change (Davis, 1983).

In this rather dated article, a timeless observation was made that family businesses tended to be of two types – those which placed an emphasis on the way things had been done in the family business for decades and would not want to change them, and those which are keen on the changes taking place in the environment, and have allowed their business to evolve while maintaining an unwavering commitment to quality and the time honored values of the firm. The fifth important factor is the emphasis on human relations, among the family members within the firm, and between the firm and its clientele who, more often than not, become family friends with the familiarity that grows between company and customers through years of cooperation (Venter, Boshoff & Maas, 2003).

The key qualifier of human relations both internal and external is trust. When the family members trust each other and the family business trusts its customers. The customers accord such businesses trust if they feel that the company’s products and services have them, the customers, as the principal focus of its efforts. It goes without saying that participative decision-making is advantageous of all businesses, but for family businesses this specifically means that several generations will be contributing their input to decisions, which makes it better.

Resistance to formalities also appears to work best with family businesses because while absence of protocols in other companies may lead to disorder, families are normally informal with each other and relate more expeditiously and efficiently. Greater ownership concentration ensures the family’s commitment to the betterment of the firm, and there is a stronger strategy and corporate culture. Commitment and openness to change enables the firm to become more flexible and to adapt to the changing times, and the coming to age of the younger generations are effective in ensuring constant change.

Finally trust, crucial in all organizations, is exceptionally effective in family businesses because trust among family members is also attended by filial love and stronger bonds.ReferencesAyranci, E. (2010). Family involvement in and institutionalization of family businesses: A research. Business & Economic Horizons, 3(3), 83-104. Fahed-Sreih, J., & Djoundourian, S. (2006). Determinants of Longevity and Success in Lebanese Family Businesses: An Exploratory Study. Family Business Review, 19(3), 225-234. doi:10.1111/j.1741-6248.2006.00071.xDavis, P 1983 Realizing the Potential of the Family Business.

Organizational Dynamics. Summer 1983. pp.47-56Hoopes, D. G., & Miller, D. (2006). Ownership Preferences, Competitive Heterogeneity, and Family-Controlled Businesses. Family Business Review, 19(2), 89-101. doi:10.1111/j.1741-6248.2006.00064.xVenter, E. E., Boshoff, C. C., & Maas, G. G. (2003). The influence of relational factors on successful succession in family businesses: A comparative study of owner-managers and successors. South African Journal Of Business Management, 34(4), 1-13.