Family Business - Essay Example

Family Business: Reflective Essay on Module Introduction After taking the family business module from the start of the semester, we have learnt about the family business as an emerging area of study. This has involved studying the theory behind family businesses, as well as the practical side of family business through role playing and completing a case study. As a student from a family that runs a business, I have always felt that I should improve my knowledge on the dynamics of the family business. When I read the course outline for the module, I knew this was an opportunity to learn about the issues and processes involved in ensuring a sustainable family owned business. For example, the main premise of the module was that family businesses had easily identifiable processes, for the recognition of opportunities and their evaluation. In addition, I was also attracted to the concept that this aspect of running a family business can be approached actively by studying the feasibility of the business processes and opportunities. Choice of Themes For me, this module has been designed to cultivate in students the awareness of aspects that set family businesses apart from other business models, as well as how these aspects affect the running and strategies of the business. These were concepts that I had never seriously considered but, suddenly, I understood how important they were going to be if I was to have any influential role in the family business. By the second week of the model, I decided on three themes in the module that seemed most important in the family business, especially with regards running a sustainable business. The first of these themes was the characteristics that make family businesses distinct from other forms of businesses. I found this theme especially important because these characteristics would inform my holistic understanding of the family business. The second theme that I identified was the lifecycle of the family business, particularly since the family business is into its third generation of leadership. I was especially drawn to the importance of understanding the concepts underlying ownership development and business perspectives of the family business. Finally, following from the second theme, I also identified succession dynamics as a critical aspect of the module, specifically regarding the importance of analyzing these dynamics. Characteristics that make Family Businesses Unique As stated, the characteristics that differentiate family businesses from other businesses are important to understanding the unique situation resulting from mixing family and business. The lecturer mentioned that, although most business people who are used to running businesses in the absence of influence from family members become uncomfortable in a family business setting, family businesses actually enjoy specific benefits over the rest (Lee & Li 44). This increased my curiosity about what the source of these benefits could be. I learnt that family businesses live in a paradox, especially considering the maxim that “family and business do not mix”. As part of the role-playing acts in class, I was able to see the issues that my father has to deal with in the family business in relation to balancing the interests of the business and the family, as well as, the compromises, which he was often faced with between the business and family perspective. The best outcome in these situations is one in which the dynamic tensions result in “win-win” solutions with neither the family nor the business being compromised (Lee & Li 44). I also identified that differences in perspective are common and that it is crucial to understand that family businesses are not necessarily influenced by similar views. For example, while some of the members may approach issues as family members, others may do so as owners and managers (Lee & Li 47). As a result, majority of conflicts will result from differences of personality, which it was insisted must be managed by allocating responsibilities according to personalities. By week four, it had also become clear that, in the family business, planning for continuity involved multiple dimensions. For instance, it was stressed in the literature that the business plans, ownership succession, and leadership must be integrated, while these aspects also have to be integrated with the family’s own financial plans., which, in turn, are best carried out in the context of articulated and shared values of the family. It is now evident that the goals and values of the family have a profound impact on the operations and processes of the family business. In addition, these very same-shared values and goals result in family members whose psychological comfort is dependent on the status quo (Lee & Li 47). As such, I am now aware that any attempts to change the business strategy will be tremendously difficult. Towards the middle of the module, I was also drawn to the fact that inactive owners of the family business are essential to the continuity of the business. This is because investors and managers of the business are mainly influenced by the financial expectations of the business (Bork 34). On the other hand, I remember the lecturer stressing the importance of maintaining voluntary and long term commitment from family, non-employee members, particularly to ensure security and stability, a fact that has been well noted and appreciated. I took it upon myself to research on what these non-employee family owners desire from the business, especially as this would be important to keeping them engaged in ensuring sustainability of the family business. I noted their need for responsibility and a role in crafting the strategy of the business, its governance system, and culture, particularly in order to justify their emotional and financial stake in the family business (Bork 34). I also listened with interest to the guest lecturer discussing the importance of motivation for one to become a successful successor in a family business, specifically one in which the previous owner created substantial wealth. I had never thought of wealth in a family business as paralyzing but now appreciate the ambivalence that most heirs will usually feel. This theme also stood out for its insistence on the uniqueness of family businesses with regards to an infinite time horizon and the importance of serving a social purpose as a result. From the lectures, I learnt that most owners of family businesses rarely use short-term forecasts in making business decisions, as well as the fact that they expect a higher purpose, usually preserving the business as an institution. As expected, the prevalence of conflicts of interest was covered in some detail, particularly their unique nature in handling business and family. Because of critically analyzing this theme, I now feel able to identify the unique features of family businesses in relation to other forms of business. Its vulnerabilities notwithstanding, these unique features give family businesses distinct advantages, such as longevity (Bork 35). Family Business Lifecycle from the Ownership Development Perspective Prior to taking this module, I was only vaguely aware of the importance of family business, lifecycle analysis to the importance of understanding successful family business case studies. Continuing from the uniqueness of the family business model, specifically the influence of the economy, circumstances and family mentality on this uniqueness, I soon discovered the importance of recognizing the typical patterns in the evolution of family businesses (Leach 72). As stated earlier, my family owns a yoghurt business that was started by my grandfather. The business has grown in leaps and bounds, and I attempted to trace its growth using knowledge gained from the discussion on strategic management of family and business in week six. I was drawn to the differences in strategy for business firms and what the guest lecturer referred to as the riddle of continuity in family businesses in Week 7. I was especially struck by the statistic that majority of family businesses rarely operate for more than three generations, in spite of the fact that this business model allows for leverage of the family name and long term orientation (Leach 72). I now understand that the strategy for a family business is affected by the stage of business evolution and that the strategy must take into consideration the lifecycle stage of business evolution, especially if it is to sustain success (Leach 77). As part of my case study, I drew from my family business experience to pinpoint the importance of maintaining the right balance between the vision of the business founder and their risk-taking attitude. This is normally the first stage of the lifecycle, and it is important for current and future owners to study the vision and dream of the founder, as well as how these were influenced by the environment’s traditional values. I leant a new term, “Invention and Conservatism”, which refers to the tendency of family business founders to become increasingly protective of their business efforts’ outcome and subsequent prevention of excessive risk taking after business success become a reality (Leach 77). I could almost see my grandfather starting the business as the discussion progressed, as he sought to preserve the ground he had gained after making his first consistent profits. The continuity of family businesses is dependent on the latter generation considering the previous strategy even as it attempts to bring in its own goals and vision, as well as introducing new strategy thinking (Carlock & Ward 54). In the discussion on family business strategy, it was also mentioned that the next stage in the family business lifecycle, expansion and restructuring, required massive effort towards innovation and risk taking. Obviously, this stage involves re-working and re-inventing strategy and, according to me, it is crucial for owners at this stage to consider the initial vision of the founder in adapting the business operations to current realities. I believe that an increase of family members involved in the business, such as I expect with our family business, is the main reason for a need to restructure the business. After my father and his brothers took up the yoghurt business, there was further influx of some cousins and in-laws into the business as it expanded, which was noted during the module as the phase that necessitates a more formal family governance structure. Accordingly, this stage is the most important in the lifecycle of a family business as it symbolizes a turning point (Carlock & Ward 54). I was especially attentive on the third phase of the family business lifecycle, especially as the family business is now approaching this phase, which is the consolidation phase. This phase strongly reminded me about the conservatism period of the first phase in the family business, partially because consolidation indicates a need to focus on rebranding the services and products through distribution channel consolidation and expansion to new towns (Carsrud & Brännback 38). The discussion left me feeling that this phase was more of a renaissance period for the business. However, I was left with several important questions, such as whether a family business necessarily has to go through all three of the phases, as well as what would happen if the business proceeded from the foundation stage straight to the phase of expansion. In addition, I also felt that the influence if family traditions and culture were important in cycle and strategies taken during each cycle. Overall, the most revealing thing I learnt about this theme was that the most important aspect of strategy in family business was managing the different lifecycle stages by combining professionalism, family cohesion, and realism (Carsrud & Brännback 38). Succession Dynamics of Family Owned Businesses This theme was covered in weeks four and five and involved some of the most interactive sessions of the module. The Harilela case study brought to my attention the dynamics of succession planning, its pitfalls, challenges and opportunities. I was immediately drawn to the success that the Harilela family business, started by six Indian brothers in Hong Kong had become a multi-billion dollar company. The way in which the business dealt with issues of governance, leadership, management, family employment, and ownership, as well as how these aspects influenced succession, was an excellent study of succession dynamics. For example, with five generations of the family now involved in the business, the dynamics of succession are now changing as generational conflicts arise. It is intriguing to follow the contemplations of Dr, Hari Harilela about the future of the family business, especially with regards to ensuring a smooth succession that sees his son succeed him. However, the fact that this will also make him head of the family makes for interesting strategic decisions as he does not only have to consider business issues. This goes back to the first theme and how the unique nature of family businesses impact on their operations. In this case, the requirement to balance family and business, which is a paradox, becomes critical in deciding succession, which could either break or unite the family. From the discussion on succession process and planning, it is evident that generational “stack-up” has the potential to create working styles that conflict. Family-run businesses face an important challenge when it comes to continual role changes, as new generations become part of the business (Carsrud & Brännback 44). The guest lecturer when discussing successor development insisted that dynamics have grown more complex over the past fifty years, particularly as family members gain higher life expectancy. With regards to successor development, it was noted that, while family businesses were passed down to one generation to the next in the past, current realities mean that these businesses are passed from one generation to a number of other generations. It was also important to integrate knowledge about the effects of recession on businesses from earlier modules. This was expounded on during the lecture, especially with regards to the return to active roles in businesses by older generations as retirement plans were hurt by falling property prices. In addition, some from the older generation returned to guide the businesses through the crisis and to return to profitability (Carsrud & Brännback 45). Moreover, people returned to family businesses after being laid off during the recession. As a result of studying this module, particularly regarding succession dynamics, I feel that my understanding of inter-generational effects on succession planning and business strategy, as well as how the unique features of the family business affects the former two themes, has improved significantly. Older family members, for example, will take to their role in the business as a lifestyle, rather than a job, which may lead to conflicts when the younger generation wants to lead. Again, the unique nature of running a family and business simultaneously means that succession planning and business strategies at different lifecycle stages of the business will have to take into consideration the conflicting interests of both entities. I now understand the importance of creating career tracks for members of the family, while also noting that inter-generational conflicts and patterns must be recognized by the family business in the strategic process, as well as the value brought by each generation to the table. Succession planning, quite easily, has emerged as the most important challenge, among numerous other unique challenges, that face family businesses. Works Cited Bork, David. Working with Family Businesses: A Guide for Professionals. San Francisco: Jossey-Bass Publishers, 2009. Print. Carlock, Randel S & Ward, John L. When Family Businesses Are Best: The Parallel Planning Process for Family Harmony and Business Success. Basingstoke: Palgrave Macmillan, 2010. Print. Carsrud, Alan L. & Brännback, Malin. Understanding Family Businesses: Undiscovered Approaches, Unique Perspectives, and Neglected Topics. New York, NY: Springer, 2012. Internet resource. Leach, Peter. Family Businesses: The Essentials. London: Profile, 2010. Print. Lee, Jean & Li, Hong. Wealth Doesnt Last 3 Generations: How Family Businesses Can Maintain Prosperity. Hackensack, NJ: World Scientific, 2009. Internet resource. Read More