Family Lab Bangladesh

Enterprising through Familipreneurship for Economic Growth

2011-06-01T20:48:00.001+06:00

Enterprising through Promoting Familipreneurship for Sustainable Poverty Reduction, Employment Generation and Economic Growth.

Abstract: This paper proposes Family Enterprise as a means of Enterprising through promoting Familipreneurship for sustainable Poverty Reduction, Employment Generation and Economic Growth. Familipreneurship means entrepreneurship of a family gained through Family Environment; it’s a way of life lived through as a Family. Family is the ultimate institution of mankind and is always sustainable as an economic unit. History started from the family, we have to go back to the family to go back to the future. This paper proposes Familipreneurship Education for Enterprising and urges continuous study on Familipreneurship to capture its salient features and dimensionalities for replication.

Key Words: Family Enterprise, Familipreneurship, Enterprising, Poverty reduction, Economic Growth.

Introduction

This paper is a conceptual argument based on real-life experiences for using enterprising as a means of poverty reduction which affects directly on employment generation and economic growth. It urges to promote Familipreneurship as a tool for enterprising. Familipreneurship means entrepreneurship of a Family gained through family environment; it’s a way of life to be a Family. Family is the ultimate institution of mankind. It is always a profitable institution as an economic unit itself which probably made it sustainable throughout the history. Families are largely based on emotional and moral obligations which are the largest social capital of mankind as well. History started from the family, we have to go back to the family to go back to the future.

Available information shows that about a century ago most of the enterprises were Family Enterprise, still on an average 70 percent of total enterprises are Family Enterprise, in USA its about ninety percent, in Europe about eighty percent, similar picture is prevailing in other parts of the globe. Familipreneurship enable us creating Family Enterprise from a little capital, especially finance capital. Promoting Familipreneurship may the best way for enterprising. This paper proposes Familipreneurship Education for Enterprising and urges continuous empirical study on Familipreneurship from the perspective of a family as an entrepreneurial unit, not the lone individual hero, and through this way bridges the knowledge gap in entrepreneurship literature in context of creating Family Enterprise.

Poverty reduction, employment generation and economic growth

Despite vigorous multidimensional efforts worldwide poverty is still the biggest enemy of mankind. Existence of poverty paves the way for several consequent problems which affect all sphere of life. In many countries like Bangladesh prevalence of poverty is increasingly alarming. Ensuring poverty reduction will enhance all other development process and eliminate many other problems. Our experience of overall poverty reduction is very depressing. Dream of sending poverty to museum begin to shrink; especially after starting contemporary controversy of microcredit, recognized as most powerful tool to fight against poverty, is deepening this desolation. Poverty, unemployment and economic growth are integrated and interdependent socio-economic phenomenon.

Promotion of enterprise is one of the tested and trusted ways for sustainable poverty reduction, employment generation and economic growth as well as wealth creation for the future generation. Many countries are doing well adopting this policy in their national economic development agenda. Post-war Europe and some emerging Asian countries may be the best example. Many developing countries are adopted this policy. But most of the efforts are towards existing, promising and profitable enterprise, distinguishing as SMEs. Institutional effort of creating new enterprise is very poor; there is no standardized system of creating new enterprise. Seemingly finance capital is the key element of creating enterprise but this view does not agree with our experiences. Our experience shows that finance capital alone can’t create enterprise, even it is not the most important element for enterprising yet our financial investment towards new enterprise creation is very little. There are common understanding that inadequacy of land, labor, capital, technology, knowledge and entrepreneurship are the obstructs for enterprising. Familipreneurship reduces these obstructs.

Family enterprise as a form of enterprise

Family enterprises, irrespective of scale of operation, legal form, industrial activity, have been the backbone of socio-economic growth. Historically, family firms are, for the most part, enduring institutions and families and business have always existed to a large extent in tandem (Morck and Yeung, 2002; Narva, 2001). Their importance parallels socio-cultural advances and technological advances. In market economies family businesses are a fundamental source of job creation. Globally percentage of enterprises owned or controlled by families is an average around seventy percent.

Probably the secret of family firms’ long lasting resides exactly in the capability of transforming weak points into strong points, by investing in human capital, developing distinctive competences, encouraging long-term investments, following with persistence the mission. The reciprocal relationship between families and business often evolves from the natural dynamics of both entities being in close proximity to each other, particularly in the case of the home-based business (Heck et al., 1995). Families and the family home, in fact, often serve as transparent incubators for the germination of business ideas and endeavors both in and out of the home as well as the storefront or factory. The birthplace of entrepreneurial ventures is often in the home. Families and businesses tend to move in parallel, with success in one leading to success in the other.

So as an enterprise, strength of family enterprise is proven. Recent studies on family entrepreneurship have only addressed the traditional issues of individual entrepreneurs in the family. Family enterprise will flourish in future for its inherent qualities. If we can create a family enterprise it will be continued or diversified by next generation. Creating family enterprise could be an effective strategy for sustainable poverty reduction, employment generation and economic growth. And this process could be institutionalized through formal Familipreneurship Education.

Family enterprise and entrepreneurship in existing literature

Though Family businesses predate recorded history (Colli, 2003), formal educational and research programs on family-owned firms are recent phenomena (Hoy and Verser, 1994; Wortman, 1994). Recent growing awareness, made family business studies growing at a rapid pace (Hoy and Sharma, 2006).

Family business research draws attention to better understand continuity and succession as well as expansion of existing business, particularly investigates resource shedding and reconfiguration. Entrepreneurship literature has focused on the creation of new venture/enterprises, especially through new endeavor and innovation. But perspectives, features and forms of entrepreneurship in context of creating new venture/enterprise/venture by family in an economy where inadequacy of resources is strongly prevalent are not well studied or missed or ignored. Especially in the case of using family enterprise as a tool of poverty reduction is remained untested.

While sociologists and political scientists have paid some attention to this question, this is an issue vastly ignored by the economists. Even though the latter do recognize the role of the family in economic decisions, there is not systematic empirical evidence isolating the importance of culture, as measured by the strength of family ties, on economic outcomes (Alesina and Giuliano 2007). In small, isolated primitive societies, the kinship system in itself can meet most of the basic individual and social needs (Martinson 1970). Family firm pursues both economic and noneconomic outcomes to sustain the business across future generations (Pearson, Carr, and Shaw 2008). Family businesses are the engine that drives socio-economic development and wealth creation around the world, and entrepreneurship is a key driver of family businesses and entrepreneurial family businesses are a primary source of job creation (Pistrui et al., 2006).

Evidence suggests that over time family firms are often more successful than nonfamily firms (Anderson & Reeb, 2003; Miller & Le-Breton-Miller, 2005). However, the mechanisms by which family firms outperform nonfamily firms are still unknown (Stanley 2010).

Few researchers have noted the connections between entrepreneurship and the family (Gartner, 2001; Upton and Heck, 1997) and have been entirely omitted by most entrepreneurship researchers (Aldrich and Cliff, 2003; Rogoff and Heck, 2003). Moreover, entrepreneurship research literature has given little attention to the interrelatedness of families and businesses (Davidsson and Wiklund, 2001; Shane and Venkataraman, 2000; Timmons, 1999). Entrepreneurship research, in particular, rarely acknowledges the underlying family dynamics. Some recent attention has been given to family ownership and its relationship to the ongoing performance (Anderson and Reeb, 2003). Both entrepreneurship and family business researchers view the business system as important and examine traditional topics such as strategy, management, production, labor, performance at business stages such as start-up, growth, maturity and exit (Rogoff and Heck, 2003). Moreover, family business research uses family systems theory while entrepreneurship is rooted in economics, management, strategy, finance, psychology and sociology.

Family as an agent of enterprising

Family as an entity is the oldest, largest in number, longest in existence organization of human history. Families are unique among social systems in that they are permanent, based more on obligation than contractual agreement, and membership is often determined by biology (Giudice,Peruta, and Carayannis 2011). Future generations carry on their ancestor’s knowledge and experience of togetherness both culturally and arguably, genetically. Familiness, especially in southern part of the world, is so powerful, effective and long lasting that family as an organization throughout the history exists without any oral or written constitution or standard norms. Matrix relations among the family members enable them to combine and best utilize their personal and collective financial, human, physical, social, knowledge, cultural, natural and intangible capital.

Anterprise skills are not fixed personality traits but can be learned and developed through experience. Relationships should be a source of considerable strength in family businesses (Milton, 2008). Relationships play an important role within most organizations. Within family firms, relationships may be a pivotal, insufficiently recognized, source of unique competitive resources (Sirmon & Hitt, 2003). In essence, “entrepreneurs are family products.”

The family is now seen as the competitive advantage in long run business success because it facilitates the development of future leadership and enhances annual shareholder return, return on assets, annual revenue growth and income growth. Despite these logical keys to superior performance, surprising little study has been made of the family’s role. (Heck et al., 2006). More recent entrepreneurship research places the entrepreneur(s) within a social context that is, in part, the family (Aldrich and Cliff, 2003) and has more equally focused on both the family and business (Stafford et al., 1999). The family is a critical element in the mix of resources that the entrepreneur needs at every stage of a venture (Rogoff and Heck, 2003).

Therefore, families are not just simply a group of individuals, but these individuals through family interactions and transactions create unique system or group attributes that are more than the sum of individuals and their attributes (Heck et al., 2006). These unique interactions make family businesses different. Both the family and the business are social systems which are purposive and rational. These two social systems transform available resources and constraints via interpersonal and resource transactions into achievements. The importance and powerful influence of family in all aspects of entrepreneurship and business has recently been highlighted (Rogoff and Heck, 2003). Families provide a sense of personal identity and a basis for a well developed community (Miller, 2001; Shepherd and Patzelt 2011). Families can be a source of resiliency, adaptability, trust, creativity and stress buffer. The household can serve as opportunity platform and incubator (Morris H. et. al. 2010).

Elaboration of research questions

In these sections of literature discussed above we examine the relationship among enterprising and the potentialities of family enterprise as a tool of poverty reduction, employment generation and economic growth and then assert the dynamics of family and family enterprise. We bring forward our research keeping in mind two hypotheses:

Hypothesis 1

Enterprising is the best way of poverty reduction, employment generation and economic growth.

Hypothesis 2

Family Enterprise is the best form of enterprise in context of resource constrain.

To summarize the intentions of the paper we seek to unpack the underlying dimensionalities of family in the establishment of family enterprise by addressing a research questions:

What is the best way of creating Family Enterprise?

Methodology

The family business is a context that enables unscripted temporal performances by founders. Characteristics of the venture creation experience are examined, and underlying dimensions are analyzed and empirically investigated. Building on social capital theory, experiences of founders of family businesses are explored.

This study has been conducted as additional task of professional responsibilities as a banker during the period of 2003 to 2010 at Dhaka and Chittagong, Bangladesh. Primary data and information collected as part of professional responsibilities for various purposes and then it is shorted according to our study needs. Around 5 hundreds new enterprise creation and 1 thousand existing enterprises are observed in multiple levels as real-life experiences. In-depth interviews were held with the founders of family enterprise and other members of that family with subsequent follow-up visits. Collected subjective experiences and data were analyzed objectively and closely monitored enterprise creation process as part of the process. Long discussion and interaction were held to capture the experiences of family enterprise creation. A large number of cases were studied. Existing literatures on family, family enterprise and entrepreneurship reviewed extensively to generate conception in line with the practices.

Given the lack of any comprehensive entrepreneurship theory (Venkataraman, 1997), proximity to the phenomenon of interest is a way to enrich the field of entrepreneurship (Zahra, 2007). Thus, rather than using deductive reasoning to formulate hypotheses, our explicit aim was to develop insights from proximity to the entrepreneurs behind creation of enterprises. Indeed, our realization of Familipreneurship emerged inductively through our data collection and analysis process. This confirms the appropriateness of qualitative research for revealing substantive issues that have rarely been addressed in entrepreneurship (Gartner & Birley, 2002).

Our paper employs a multiple case studies approach which is suitable for “how and why” questions and for research that involves observations over time (Yin, 1994). To identify appropriate participants we conducted searches within diverse socio-economic setting for start-up and existing enterprises for long time. Whilst initial data was gathered from official documents of Bangladesh Krishi Bank we selected a large numbers of case studies. According to theoretical sampling, “extreme” cases enable easier observation of the phenomenon and facilitate pattern recognition (Eisenhardt & Graebner, 2007). As the paper seeks to portray the details of the rich and complex setting, a few cases are deemed adequate (Langley, 1999). These cases where developed by a further round of interviews with the founders and other family members. Our analysis follows an iterative ‘back and forth’ approach between data and existing theories (Van Maanen et al. 2007). This method of comparison (Eisenhardt, 1989) permits inductive theory building as evidence is accumulated overtime to achieve theoretical replication (Yin, 1994). In line with Charmaz’s (2006) explanation of the social constructionist approach to theorizing reality is not considered as singular and concrete, thus insights into what the entrepreneurs believe is real for them were sought. By focusing on these few cases it becomes possible to provide enough evidence using both “power and proof” quotes (Pratt, 2008) so the reader can envisage the real-life experiences of the entrepreneurs in context of family enterprise creation.

Results and discussions

In Bangladesh, Chak Bazar, and Khatunganj, is the two largest wholesale markets in dominated by ‘Kuttis’ and ‘Sowdagors’. Define ‘Kutti’ and Sawdagar in brief. They are mostly illiterate but uphold strong entrepreneurial knowledge and skills inherited from their families/ancestors. So they are dominating the context from generation to generation. Most of them do not have any formal entrepreneurial education or training; only reason behind their success is Familipreneurship; entrepreneurship gained through family environment. Their practical knowledge of enterprise is gathered through ‘doing’, although even the exceptions do not complete their secondary level education, and then starts enterprise or venture with other family members. In most cases they are successful. In many cases founder of a family enterprise did not have any formal education let alone enterprise education, but they did very well in their job. Once a family enterprise is created, the next generation carries this on because of inherent Familipreneurship. If next generation fails to carry on, then easily they can start their alternatives because of their entrepreneurial qualities created through Familipreneurship.

Knowledge of Familipreneurship could be captured through study on Enterprise Families. We have to chalk out those special features of those families that made them successful. Context of Familipreneurship is unique in nature since it is live and continuous and interactive. It involves the whole family as a business organisation. Once it is started, it goes on for ever. Knowledge on Familipreneurship gathered is mostly transferable.

Through Familipreneurship Education an every single individual of a family achieves the power and capacity to combine, transform and utilize personal and family wealth and scattered resources into capitals. Knowledge and skills of Familipreneurship is transferable through generation to generation. Familipreneurship creates a natural environment of generating and transferring indigenous knowledge and skill to reach their personal and collective goal which will accelerate the whole enterprising process as well as economic development. Promoting Familipreneurship could be the best solution to create new family venture/enterprise in a less or under or least developed economy where inadequacy of resources is strongly prevalent.

Limitations of this paper

This paper does not use any structured method rather it implies a set of methods to capture the dilemma of enterprise creation in context of Bangladesh. Information was collected from diverse socio-economic and demographic setup but not tested in multiple countries. A number of enterprise creation processes were observed for a long time but did not analyze aggregated data. To gain insight and be able to offer an explanatory model, a qualitative research approach was used because creation of enterprise is a temporal experience.

Recommendation for Future research and Study

One may have different social, economical or occupational identity, but all are belonging to a family. If the families are addressed as an intervening point it not only ensure the benefit it will continuously and increasingly add value to society. As an institution family is contributing maximum benefit to the society, which is commonly remaining uncounted. Family bonding is highly define and explicit than any other forms of organization. Family is the first place to learn for individuals and the fundamental unit of our social construct. Our learning begins from family first. The lessons, learnt from family, are most influencing and effective for individuals. Our basic life skill and mind set grows from family culture which have ever lasting and enormous effects on rest of life. Culture of a society mostly depends on them families' culture of that society, individual characteristics of a person drastically influenced by other family members’ character.

If we take the family as a level of analysis and intervention, it would open a new horizon of our entrepreneurship knowledge. Continuous empirical study is needed to encode and theorize the dimensionalities of Familipreneurship. It will enhance our understanding to help the practices of family enterprise. Our study shows that Familipreneurship not only contributes during the process of family enterprise creation but also contributes later process also. Exploring Familipreneurship may describe the reasons behind outperforming of family enterprise which is still unknown in a theoretical basis.

Our work on individual-level drivers of creating enterprise suggests possible interesting insights for several areas of literature. Our research also moves to expand discussions on the role of family in entrepreneurship literature more broadly. We believe this finding opens opportunities for further research into the role of family in creating enterprise. Our paper has only looked at the process during the pre-launch and in the early days of new ventures, it would therefore, be valuable to probe the way in which they maintain and expand their enterprises in diverse socio-economic contexts.

Conclusions & implications

Creating family enterprise as a means of enterprising for sustainable poverty reduction, employment generation and economic growth is largely untested. Our reviews reveal that family enterprise as a form of enterprise bears immense potentials which remained unexplored. We propose to use family enterprise as a tool for enterprising which directly affect employment generation and economic growth of a developing country.

Morris H., et. al. (2010) shows that the venture creation experience involves the interplay among affective, cognitive, and physiological responses as events are "lived through". Surprisingly little is known about the early stages of family firms. Our study found that knowledge of Familipreneurship is generated and transferred through family by family. Family members learn enterprising education by ‘doing’ in family environment. One or more individuals take the lead but all other family members are integral part of it. Familipreneurship enables them to utilize their social capital in enterprising, as a result they are able to establish and run their enterprise profitably. If we can capture the features of Familipreneurship it will help us to use it in creating new family enterprise. Familipreneurship knowledge does not derive from any formal system rather it’s a indigenous system of learning. It is completely consistent with Sophocles’ (400 BC) observation “One must learn by doing the thing, for though you think you know it – you have no certainty, until you try.”

References:

Aldrich, H.E. and J.E. Cliff (2003), ‘The pervasive effects of family on entrepreneurship: toward a family embeddedness perspective’, Journal of Business Venturing, 18(5), 573–96.

Alesina and Giuliano (2007), in “The Power of the Family”, Harvard Institute of Economic Research Discussion Paper No. 2132 , IZA Discussion Paper No. 2750

Anderson, R. & Reeb, D. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58(3), 1301–1327.

Charmaz, K. (2006) Constructing Grounded Theory, Sage Publications: London.

Colli, A. (2003), The History of Family Business: 1850–2000, Cambridge: Cambridge University Press.

Davidsson, P and J.Wiklund (2001), ‘Levels of analysis in entrepreneurship research: current research practice and suggestions for the future’, Entrepreneurship Theory and Practice, 25(3), 81–99.

Eisenhardt, K. M. and M. E. Graebner (2007). "Theory Building from Cases: Opportunities and Challenges." Academy of Management Journal 50(1): 25-32.

Eisenhardt, K. M. (1989). Building Theories from Case Study Research. Academy of Management Review, 14(4), 532- 550.

Gartner, W.B. & Birley, S. (2002). Introduction to the special issue of qualitative methods in entrepreneurship research. Journal of Business Venturing, 17(5), 387-395.

Gartner, W.B. (2001), ‘Is there an elephant in entrepreneurship? Blind assumptions in theory development’, Entrepreneurship Theory and Practice, 25(3), 27–39.

Giudice, Peruta, and Carayannis (2011), Knowledge and the Family Business: The Governance and Management of Family Firms in the New Knowledge Economy (Innovation, Technology, and Knowledge Management), Springer New York Dordrecht Heidelberg London

Heck, R.K.Z., A.J. Owen and B.R. Rowe (eds) (1995), Home-based Employment and Family Life, Westport, CT: Auburn House.

Heck et al. (2006), “The family’s dynamic role within family business entrepreneurship” in Work” Handbook of Research on Family Business” Ed. Poutziouris, X. Smyrnios, and B. Klein, Cheltenham and Massachusetts, Edward Elgar Publishing Limited and Edward Elgar Publishing, Inc.

Hoy, and Sharma (2006), “Navigating the family business education maze”, in Work” Handbook of Research on Family Business” Ed. Poutziouris, X. Smyrnios, and B. Klein, Cheltenham and Massachusetts, Edward Elgar Publishing Limited and Edward Elgar Publishing, Inc.

Hoy, F. and T.G. Verser (1994), ‘Emerging, business, emerging field: entrepreneurship and the family firm’, Entrepreneurship Theory and Practice, 19(1), 9–23.

Langley, A. (1999) Strategies for Theorizing from Process Data. Academy of Management Review, 24(4): 691-710.

Martinson (1970), in “Family in society”, Dodd, Mead & Company, Inc. New York, USA

Miller, D. & Le-Breton-Miller, I. (2005). Managing for the long run: Lessons in competitive advantage from great family businesses. Boston: Harvard Business School Press.

Miller, J. (2001). Family and community integrity. Journal of Sociology and Social Welfare, 28, 23–44.

Milton (2008), Unleashing the Relationship Power of Family Firms: Identity Confirmation as a Catalyst for Performance Entrepreneurship Theory and Practice, 32(6),1063-1081

Morck, R. and B. Yeung (2002), ‘Family control and the rent-seeking society’, unpublished paper presented at the 2002 Theories of the Family Enterprise Conference, Wharton Business School, Philadelphia, PA.

H. Morris, A. Allen, F. Kuratko, Brannon(2010), “Experiencing family business creation: differences between founders, nonfamily managers, and founders of nonfamily firms”, Entrepreneurship Theory and Practice, 34(6), 1057-1084

Narva, R.L. (2001), ‘Heritage and tradition in family business: how family-controlled enterprises connect the experience of their past to the promise of their future’, in G.K. McCann and N. Upton (eds), Destroying Myths and Creating Value in Family Business, Deland, FL: Stetson University, pp. 29–38.

Pistrui et al., (2006),” Family and cultural forces: shaping entrepreneurship and SME development in China”, in Work” Handbook of Research on Family Business” Ed. Poutziouris, X. Smyrnios, and B. Klein, Cheltenham and Massachusetts, Edward Elgar Publishing Limited and Edward Elgar Publishing, Inc.

Pratt, M. G., K. W. Rockmann, et al. (2006). "Constructing Professional Identity: The Role of Work and Identity Learning Cycles in the Customization of Identity Among Medical Residents." Academy of Management Journal 49(2): 235-262.

Rogoff, E.G. and Heck, R.K.Z. (2003), ‘Evolving research in entrepreneurship and family business: recognizing family as the oxygen that feeds the fire of entrepreneurship’, Journal of Business Venturing, 18(5), 559–66.

Shane, S. and S. Venkataraman (2000), ‘The promise of entrepreneurship as a field of research’, Academy of Management Review, 25(1), 217–26.

Shepherd and Patzelt (2011), The New Field of Sustainable Entrepreneurship: Studying Entrepreneurial Action Linking “What Is to Be Sustained” With “What Is to Be Developed”, Entrepreneurship Theory and Practice, 35(2),137-163

Simon, D. and M. Hitt (2003), ‘Managing resources: linking unique resources, management, and wealth creation in family firms’, Entrepreneurship Theory and Practice, 27(4), 339–58.

Stafford, K., K.A. Duncan, S.M. Danes and M. Winter (1999), ‘A research model of sustainable family businesses’, Family Business Review, 12(3), 197–208.

Stanley (2010), "Emotions and Family Business Creation: An Extension and Implications",Entrepreneurship Theory and Practice, 34(6), 1085–1092

Timmons,J.A.(1999),New Venture Creation, Boston,MA: Irwin McGraw-Hill.

Upton, N.B. and R.K.Z. Heck (1997),"The Family Business Dimension of Entrepreneurship", in D.L Sexton and R.W. Smilors,ed.Entrepreneurship:2000, Chicago, IL:Upstart,243-266

Van Maanen, J., S. Rensen, J. B., & Mitchell, T. R. (2007). Introduction to Special Topic Forum: The Interplay between Theory and Method. Academy of Management Review, 32(4),1145-1154.

Venkataraman, S. (1997). The distinctive domain of entrepreneurship research: An editor’s perspective. In J. Katz & R. Brockhaus (Eds.), Advances in entrepreneurship, firm emergence and growth: Vol. 3, 119–138. Greenwich, CT: JAI Press.

Wortman, Jr, M.S. (1994), ‘Theoretical foundations for family-owned businesses: a conceptual and research based paradigm’, Family Business Review, 7(1), 3–27.

Yin, R.K. (1989), Case Study Research: Design and Methods, London: Sage.

Zahra, S.A, (2007). Contextualizing Theory Building in Entrepreneurship Research. Journal of Business Venturing, 22(3), 443 452.

Pre-incubation Program Structure for Entrepreneurial Society

2011-06-01T20:45:00.000+06:00

MCubator™

Do what you Enjoy

“Unlock your potentials..... Be your own BOSS”™

Ø ENTREPRENEURSHIP

Ø TRY it, KNOW it

Ø Explore yourself

o SWOT analysis

§ [Maximize] Strength

§ [Overcome] Weakness

§ [Optimize] Opportunity

§ [Bypass] Threat

Ø Set the GOAL

§ Expectations

§ Limitation

o Why you

§ Tuning

Ø Make PLAN

o Start action

§ Interpret

§ Innovate

o Make change

§ Be ENTREPRENEUR

Ø SUCCESS as an option not a destination

Ø Gateway

o Networking

o Sharing

§ Empowerment

· Rights with dignity

Proposed Sample Program Overview for Economic Development and Employment Generation through Family Based Capitalization (FBC)™

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Developing/promoting/nurturing/constructing/advocating/popularizing FAMILIPRENEURSHIP to maximize wealth and optimize capital;

Ø INCREASING social capital by promoting/using/developing Familiness

Ø EXPLORING potentialities of individuals

Ø VALUING human, knowledge and social capital

Ø OPTIMIZING use of human, knowledge, social, natural capital

Ø MINIMIZING the roles/needs of finance capital

Ø ORGANIZING scattered resources into performing asset and capital

Ø UTULIZING financial opportunities

Ø FACILITATING Family Edutainment

PROMOTE socioeconomically and environment friendly sustainable Family Enterprise.

FOR

Ø RESTORING inherited but shrink tradition and indigenous knowledge, culture, practices and values

Ø INSTITUTIONALIZING social educational and learning system through family basedEdutainment.

Ø CREATING employment opportunities within the family and/or community to reduce internal labor migration.

Ø IMPROVING accessibility, reliability, function ability, transparency and structural improvement of Alternative Dispute Settlement Process in local and community level which will drastically reduce the burden of formal judicial and administrative system.

Ø ESTABLISHING multidimensional role of family as a social catalyst to remove all sorts of discrimination and injustice towards an inclusive just society with diversity.

IMPLEMENTATION TOOLS/STRATEGIES/RESOURCES

1. Family Profile

Ø Exploring Present venture

Ø Individual SOWT analysis

Ø Kinship

Ø Family/Social/professional Circle

2. Planning Exercise

3. Need Assessment

4. Action Plan with time frame

5. Support services

Short term supports

Ø Feasibility/Viability assessment

Ø Training and motivation through Edutainment

Long term supports

o Pre-incubation program

o Incubation program

o Transgeneration preparation program

o Access to finance

o Seed Capital

o Information

o Networking

o Incentive/ Insurance

o Crisis/Resource/Community centre

o Bonding>Bridging>Linking

6. Results/outcomes

o Immediate

§ Income & Employment generation

o Long term

§ Economic

· GDP & per capita income growth

· Poverty reduction

· Social stability & peace

· Social capital

§ Social

· Rights with Dignity

· Democracy with Justice

7. M & E

o Social audit

o RBM

o Social Rating

8. Sustainability

It will be owned, controlled and managed by the beneficiary for their own shake.

Every family might be a Family Enterprise

2011-06-01T20:38:00.001+06:00

Enterprising through Promoting Familipreneurship for Sustainable Poverty Reduction, Employment Generation and Economic Growth.

Family as an entity is the oldest, largest in number, longest in existence organization of human history. Families are unique and fundamental unit of our social systems and they are permanent, based more on moral obligation than contractual agreement. Future generations will carry on their ancestor’s knowledge and experience of togetherness both culturally and arguably, genetically. Familiness, especially in southern part of the world, is so powerful, effective and long lasting that family as an organization throughout the history exists without any oral or written constitution or standard norms. Matrix relations among the family members enable them to combine and best utilize their personal and collective financial, human, physical, social, knowledge, cultural, natural and intangible capital.

Considering this, family as an organization of one or more individuals is more capable rather than an individual to create a new venture/enterprise. Just as individuals have brains and beliefs, families (organizations) have “cognitive systems and memories . . . world views and ideologies” (Hedberg, 1981). In many cases founder of a family enterprise did not have any formal education let alone enterprise education, but they did very well in their job. Once a family enterprise is created, the next generation carries this on because of inherent Familipreneurship, which has barely been highlighted in entrepreneurship literatures. If next generation fails to carry on, then easily they can start their alternatives because of their entrepreneurial qualities created through Familipreneurship. Alone with many other instances, Chak Bazar andKhatunganj, two largest wholesale market in Bangladesh are dominated by ‘Kuttis’and ‘Sowdagors’ who are mostly illiterate but upholds strong entrepreneurial knowledge and skills inherited from their families. So they are dominating the context from generation to generation. Most of them do not have any formal entrepreneurial education or training; only reason behind their success is Familipreneurship-entrepreneurship of a family gained through family environment. Practical knowledge of enterprise is gathered through ‘doing’, usually have very little formal education, even the exceptions do not complete their secondary level education, then starts enterprise or venture with other family members. In most cases they are successful.

Globally percentage of enterprises owned or controlled by families is an average around 70 percents. So as an enterprise, strength of family enterprise is proven. Recent studies on family entrepreneurship have only addressed the traditional issues of individual entrepreneurs in the family. Family enterprise will flourish in future for its inherent qualities. If we can create a family enterprise it will be continued or diversified by next generation. Creating micro and small family enterprise could be an effective strategy for sustainable poverty reduction. And this process could be institutionalized through formal Familipreneurship education. Knowledge of Familipreneurship could be gathered from study and research on those successful family enterprises. We have to chalk out those special features of those families that made them successful. Context of Familipreneurship is unique in nature since it is a live and continuous and interactive. It involves the whole family as a business organisation. Once it is started, it goes on for ever. Knowledge on Familipreneurship gathered could be transferred to potential/interested families.

Through Familipreneurship an every single individual of a family achieves the power and capacity to combine, transform and utilize personal and family wealth and scattered resources into capitals. Knowledge and skills of Familipreneurship is transferable through generation to generation. Familipreneurship creates a natural environment of generating and transferring indigenous knowledge and skill to reach their personal and collective goal which will accelerate the whole enterprising process as well as economic development. Promoting Familipreneurship could be the best solution to create new family venture/enterprise in a less or under or least developed economy where inadequacy of resources is strongly prevalent.

Family Based Capitalization (FBC)™

2011-06-01T20:36:00.001+06:00

Making the Future by Shaping the Present™

Family Based Capitalization (FBC)™: Restoring family as an entrepreneurial unit towards an entrepreneurial society by using Familipreneurship as a tool for interactive and evolving movement for the change to be ONE™;Virtually boundary/borderless An entrepreneurial world to build an equitable and just human civilization. FAMILIPRENEURSHIP™; entrepreneurship of a family as an entrepreneurial unit which enables them to utilize optimum opportunity and resources to activate as performing capitals ((Financial capital, Human capital, Physical capital, Social capital, Knowledge capital, Cultural capital and Intangible capital and natural capital)) Familipreneurship determines and architects matrix relationships of individuals with Family, community, society, nation and the world as an entrepreneurial village.

Bondage Linkage and Network in various forms are the largest social capital of mankind which remains mostly unused and undetected. Utilization of social capitals maximize wealth and optimize performing capitals by accumulating scattered, unused and undetected resources for making the future by shaping the present. FBC envisions an entrepreneurial society of healthy and just families. A family is a miniature of our society, even it is prototype of a country in terms of its functionalities.

Family is the most primitive and trusted institutions of human history. Still today its role and importance is pivotal. As an institution family is contributing maximum benefit to the society, which is commonly remaining unrecognized and uncounted. Family bonding is highly define and explicit than any other forms of organization. Familiness is a unique and irreversible relationship. Family is the first place to learn for individuals. The lessons learnt from family, are most influencing and effective for individuals. Family is the fundamental unit of our social construct. Irrespective of all other we identity we all belong to a common identity i.e. family identity. We may have different social, economical or occupational identity, but we are belonging to a family.

Our learning begins from family first. Our basic life skill and mind set grows from family culture which have ever lasting and enormous effects on rest of life. Culture of a society mostly depends on families' culture of that society, individual characteristics of a person drastically influenced by other family members’ character. So it can be argued that Just family is the precondition of a just society, for ensuring a just society where all sorts of discrimination and violence will be diminished, we have to ensure healthy and just family.

Communities do not exist in isolation but in relationship with others, as well as their natural and institutional environment. The strengths of them lie in their internal relationships (bonding), relations with other communities (bridging) and relations with their natural and institutional environment (linkage). This will enhance the process of inclusion internally and resulting more opportunities to link with the holistic development approaches.

Vision and Mission

Ø Just and friendly society.

Ø Restoration of inherited but shrink tradition and indigenous knowledge, culture and practices.

Ø Establishing social norms and values through enriching Family values.

Ø Multidimensional role of family as a social catalyst to remove all sorts of discrimination and injustice towards an inclusive just society.

Ø Institutionalization of social educational system through family and Community.

Ø Improved reliability, function ability, transparency and structural improvement of Alternative dispute settlement process.

Ø Entrepreneurial community

Ø Converting family into Enterprise by counting its in-house nonmonetary activities in GDP

Ø Making scattered/unused/undetected resources into performing Capitals

Ø Integrating work and family

Ø Family reunion

Ø Optimum utilization of social capital

Ø Reduced reliance on Finance capital

ORGANIZATIONAL STRUCTURE OF FBC PROGRAM

INDIVIDUAL>Beneficiary

=>Family (INTERVENTION ACCESS POINT)

=>Family club=>Village/Para/Moholla

Family+Community=Faminity club=>Word>community level

Family+society=Famity club =>UP>local level

Familipreneur club=>Upazila/Thana/Pourosova>Gateway for upward linkage

Familiprise club=>District> Gateway for upward and/or downward linkage

Forum of familipreneurs=>National>Coordination and international collaboration

INTERVENTION STRATEGY of FBC program

National level

Coordination

Policy environment

Infrastructure

R&D

Community through family level

Developing/enhancing/functioning/activating Capitalization capabilities

Networking>Bridging>Linking

APPROACHES

Ø IDENTIFY all household members.>>>> From invisible to visible.

Ø MAKE family profile>>>Need assessment and SWOT analysis

Ø TRANSFER knowledge and skill>>>Empowerment to defend self

Ø COMBINE personal/individual choice opportunity and potentiality

Ø ENCASH of resources and opportunities

Ø FORM family groups.>>>> From segregation to confederation.

Ø CHANGE attitude and mind set.>>>> From ‘for the people’ to’ by the people’.

Ø DEVELOP local solutions for local problems.>>>>> From endogenous to indigenous knowledge.

Ø BUILD alliance with other stakeholders.>>>> From isolation to Networks, bondages, links.

Ø ACCUMULATE capital.>>>>> From scattered resource to valuable wealth.

EXPECTED OUTCOMES

Ø Family integrity > social integrity >> community wealth >>> familipreneur nation of enterprises

Ø Diverse and enriched society

Ø Sustainable and convertible Wealth and capital

Making the Future by Shaping the Present™

2011-06-01T20:34:00.000+06:00

Our mission is enabling a family as an entrepreneurial unit for transforming our society as an entrepreneurial entity by using Familipreneurship as a tool for making the ground to evolve the world as ONE™; virtually borderless entrepreneurial world of human civilization. FAMILIPRENEURSHIP™ means entrepreneurship of a family as an entrepreneurial unit which enables them to utilize their scattered resources into performing capitals (Financial capital, Human capital, Physical capital, Social capital, Knowledge capital, Cultural capital and Intangible capital and natural capital). Familipreneurship enlightens, activates and architects the matrix relationships among individual, family, community, society, nation and the whole world as an entrepreneurial village. Family Based Capitalization (FBC)™ aims to promote Family Enterprise as well as all other forms of enterprises for economic development and employment generation. FBC™ envisions an entrepreneurial society of healthy and just families and believes family as a miniature of society; even it is prototype of a country in terms of its functionalities.

To know more details, please visit www.fbcbd.blogspot.com

The World's Most Successful Family Businesses

2011-05-26T00:47:00.003+06:00

We were lucky enough to be invited to appear at an extraordinary family business meeting. Campden Conferences of England pulled together notable family businesses from all over the world to meet together in Miami in February, 2008. The conference was unusual in that a family business couldn’t just apply, write a check, and sit in on the workshops. To get into a Campden conference, a family business has to qualify by virtue of the size and scope of its operation. This is quite rare in the world of business conferences, and many family business applicants had to be turned away. It was an impressive group to say the least.

There were closely held companies from Columbia, Mexico, Germany, Sweden, Argentina, Venezuela, and the USA. Among the group there was only one first generation entrepreneur; most of the companies were in their third generation or later, and one of the attendees was a sixth generation member of his family enterprise. The businesses ranged in size from about $70 million in sales to well over $3 billion. These were some of the most successful family and closely held companies in the entire world.

Their stories were all different and unique. At least one of the companies had gone broke in its not too distant past, some had been victims of political upheaval in their home countries necessitating the launch of new ventures in faraway lands, and some had suffered from untimely deaths requiring other family members to leap into the breach of leadership. There were, however, commonalities, some quite pronounced, among the businesses in attendance. Going further, it’s fair to say these practices were more than just “best practices.” They were universal; every single one of the successful businesses in attendance appeared to have the following characteristics. Here’s a quick rundown:

1. Every business had an active Board of Directors with at least one outsider among the members. How did they define outsider? An outside director is an objective, non-affiliated person. By non-affiliated, we mean the person isn’t a family member, is not nor has ever been an employee, and is not a paid advisor to the family business (i.e. attorney, CPA, banker, investment provider, etc). The objective boards were instrumental in the transition and growth of these family businesses as competition and their needs changed over the generations. The boards provided an excellent balance point between the senior and junior generations as issues of modernization, globalization, technology, and transition planning took place. The boards were instrumental in helping these companies develop strategies for reinvention as time and people passed.

2. Every one of the businesses in attendance had decided to be a “business first” organization as opposed to a “family first” organization. They had elected to put the needs of the business ahead of the needs of the family. That didn’t mean that family employment opportunities or wealth building opportunities were cut off – just the opposite. By focusing on the needs of the business first, wealth opportunities and success maximization opportunities were multiplied.

Being a business first organization means that family members aren’t employed in operations simply because of their bloodline. They have to qualify for their positions and be held accountable for their performance just as any other employee would (in fact, they may be held to a higher standard). Putting the business first doesn’t mean there can’t be love and harmony in the family. Rather, it is a pragmatic philosophy that separates the needs of the family from the needs of the business so that each can achieve its fullest potential.

3. Every business in attendance had successfully recruited and hired excellent non-family managers of the highest caliber and rewarded them handsomely with competitive pay, benefits, and retirement packages. They recognized that, while the entrepreneurial energy and enduring sense of values came from the family which created the company, they couldn’t go to the next level of success relying solely on the talent of one or a small handful of closely related people. They needed to reach outside the family to find new strengths and bolster weaknesses.

4. The businesses required, in fact mandated, accountability throughout their organizations including at the CEO and Board of Directors levels. On a true team, everyone has to pull his weight. When basketball teams compete, if one of the five players is lazy, doesn’t hustle, and doesn’t apply intensity to his defense, the other four players on the team suffer. It’s the same in business; you can’t have accountability on the shop floor or for your middle managers and not hold the CEO and the senior employees of the business just as accountable for their performance. It sends all the wrong messages throughout the organization.

What these multi-generation family enterprises had elected to do over time was undertake a serious effort at professionalizing their businesses. They all saw opportunities in the marketplace, and they concluded that it was in the best long term interest of the family to create a business which ran extremely well whether any of the family members showed up for work or not. They knew that by creating an entity which could at any time be put up for sale and be attractive to outsiders added to the opportunities and flexibility of the owning family. While many entrepreneurs fear that professionalizing their organizations and increasing accountability from top to bottom will choke off their entrepreneurial dreams and opportunities, these families have demonstrated that just the opposite is true; their opportunities have been multiplied by the fact they created independent, self-sustaining organizations.

Coming away from the conference we can’t help but be struck by the level of emotion, passion, and stewardship these families bring to their organizations. They’ve decided that they want to make their businesses perpetual and memorialize the family values that allowed them to become successful in the first place. By professionalizing their organizations, they found ways to maximize both. Organizing around the family business has allowed these families to continue to find an identity, share experiences, and share their uniqueness over the generations. Even though family members have elected to leave their hometowns or even leave their countries to pursue individual interests, the shared legacy of being a member of a business family allows them to come together periodically to enjoy each other socially and professionally, to preserve the values most near and dear to the family, and to enjoy the financial rewards associated with a multi-generation, sustainable closely held enterprise. To find the best of your family and your business simultaneously, it is wise to separate them so each can prosper while standing on its own.

Wayne Rivers is the president of The Family Business Institute, Inc. FBI’s mission is to deliver interpersonal, operational and financial solutions to help family and closely-held businesses achieve breakthrough success.

The Secrets to a successful family business

2011-05-26T00:47:00.000+06:00

Everyone sees the family business as a safety net. If you fail in the corporate world, you can always put your talents to work at your dad's shop or snag a few hours at your uncle's place. But if your family doesn't prepare, that safety net likely won't be around for the next generation.

Family businesses are at the heart of corporate America. While you might think of a neighborhood bakery or restaurant, family shops are not just mom and pop shops. You might have heard of the Maloofs with the Palm Casino and Sacramento Kings, the Heinz family, or the Blocks of H&R Block- families are the foundation of billion-dollar businesses. Most of us are likely a long way from a global empire, but if you want to be the one of the three businesses which will survive to the second generation (from the Family Firm Institute), you should focus on the following three areas: individualization, Internet marketing, and succession planning.

To each his own

You may work in your father or mother's business, but that doesn't mean you share their talents. They might love numbers or be a junk dealer in Los Angeles, but odds are you're going to be good at something different than your parents. And that means, it's your job to carve out your niche in the business. Find your talent or passion and discover how to apply it to the family business. Maybe it's drawing menus for the Greek restaurant your family runs or launching a financial services add-on service to your family's sales company.

The key here is that you have a personal goal that you can achieve and the freedom to pursue your own dreams within your family's business. That goal will make you work harder and feel even more invested in setting things up for the next generation. So, establish your place and carve out your own niche.

Take your message online

People want to work with family businesses. They like knowing that a person will answer the phone and a name is attached to a service. So, it's your job to do everything in your power to help them find you and your family's business. There are template websites available for free and you can get online within a week. You should consider maintaining a corporate blog to help establish your family's brand and allow people to connect with your family. Tell your family's story, the history of the company. People want to hear about you, in your own words. Often, families are unwilling to sell their best asset- themselves. Tell people why they should do business with you. Guess what? They probably will...

The children are your future

According to a study from Oregon State University, fewer than 30 percent of business owners have put a succession plan in place. And that can lead to a difficult situation when a family member retires or passes away. Who will take over as head of the business? Who knows the right contacts and has the insitutional knowledge stored inside the brain of your father or mother? You have to ask these questions and get the answers in place well before the first generation is ready to step down.

When you start looking at the future of your business, then you're thinking like the Heinz family and the Blocks- and you're one generation closer to a billion-dollar business.

Got any other tips? How has your family found success or just the patience to work together?

FAMILY-OWNED BUSINESSES

Family-owned businesses are recognized today as an important and distinct organization in the world economy. Family-owned businesses now operate in every country and may be the oldest form of business organization, but only within the last decade have their unique benefits been identified and studied. Family businesses have been described as unusual business entities. The description is due to their concern for the long-term over generations, their strong commitment to quality and its relation to their own family name, and their humanity in the workplace where the care and concern for employees is often likened to that of an extended family.

More than 90 percent of the companies in North America and a majority of businesses located around the world are family-owned. Some of the more recognizable businesses still managed by family members include Benneton, Beretta, Estee Lauder Inc., Tootsie Roll, Playboy, Gucci, Carnival Cruise Lines, Harley-Davidson, Inc., U-Haul, Ford Models, Forbes Inc., and Ford Motor Co. They vary widely in regard to the overlap of family and business issues, and much can be learned from studying their experiences.

Family businesses provide the only setting for an unusual social phenomenon, the overlap of family issues and business issues. The family business offers two separate but connected systems of family and business with uncertain boundaries, different rules, and differing roles. Family businesses may include numerous combinations, including husbands and wives, parents and children, extended families, and multiple generations in roles of stockholders, board members, working partners, advisors, and employees.

The two systems in a family business, described as the interaction of two separate but connected systems, are often shown as two overlapping circles depicting the unclear boundaries of family and business.

THE PROS AND CONS OF FAMILY
BUSINESS

Family businesses provide a number of advantages to family members, the most common being freedom, independence, and control. In addition, they also offer many lifestyle benefits such as flexibility,

Figure 1
The Unclear Boundaries
of Family and Business

prestige, community pride, and creativity. Family businesses normally provide for closer contact with management, are less bureaucratic, have a built-in trust factor with established relationships, and provide for hands-on training and early exposure of the next generation to the business.

On the other hand, family businesses also bring a unique set of challenges. Family businesses are often recognized in the popular press as a source of difficulty when it comes to succession issues, identity development, and sibling relationships. Succession is one of the largest challenges facing family businesses, and in most cases the process is resisted. Succession becomes an issue when the senior generation does not allow the junior generation the necessary room to grow, effectively develop, and eventually assume the leadership of the business. Often business relationships among siblings or between parent and child deteriorate due to an underlying difficulty in communication within the family. This behavior erupts into criticism, judgments, conservatism, lack of support, and lack of trust—all elements that affect the business.

Family-owned businesses typically have a set of shared traditions and values that are rooted in the history of the firm. Depending on how they are viewed, deeply rooted traditions and values can be a positive or a negative influence. In a changing world, family businesses can honor their traditions if they realize they can be guides to selecting the best course of action when there is a recognized need for change. It makes sense to honor traditions and trust them; they have survived because they have helped the family business prosper. It doesn't make sense to let traditions stand in the way of progress and change. Traditions themselves have evolved and changed over time. In fact, the best time to reaffirm the family business's tradition is when it is threatened or appears to conflict with the future prosperity of the business.

Family communication, conflict with relatives, and sibling relationships typically rank among the top ten concerns among family-owned businesses. When these issues conflict with shareholder value, it often becomes necessary to bring in an outside consultant to deal with them. The main issue in solving such family-related problems is to deal with them openly and begin communications within the family toward solving the problems. Other keys to a successful family business include mutual respect, the presence of good role models within the family, the ability to not take business issues personally, and the patience and ability to listen to others.

A history of the family business can be a useful tool to improve communication and understanding among family members. By telling the story of how the business was founded and its early struggles, the history helps members of succeeding generations better understand the values and attitudes of the family toward the business. In addition to transmitting family values, the family business history can be used to perpetuate a unique business culture and create cohesiveness among employees. It can also be used as a marketing tool to project a positive image of the company and the family behind it.

ROLES IN THE FAMILY BUSINESS

The most successful families in business have clearly defined roles and responsibilities for individuals involved in the enterprise. Most often these roles have fallen along gender lines. The most common form of family business is one in which a husband and wife are both involved. Often, such a business has typically been referred to as "his," while the wife's role is of helpmate. Women are often in the office, on the computer, or doing the bookkeeping and have even been described as "invisible." These same capable women, however, often become "instant entrepreneurs" when their husbands are ill or die, or when an economic crisis forces them to assume the husband's role. Such gender stereotypes are slowly changing.

The role of a father who is also the boss of his children is more often a difficult one to balance. One father shared the story of his son who was always late for work and provided a bad example for other employees. He called him aside one day and said, "Son, as your boss, I have to tell you you're fired, and as your father, I am sorry to learn you have just been fired."

Research indicates adult children describe their fathers as bosses in many different ways. One son's statement relates the patterns that repeat in families and therefore carry over to the business, "I'm stubborn just like him, and it is like looking in a mirror." In the ideal case, the father serves as a role model and trainer for the next generation. He treats both his sons and daughters equally and exposes them to various aspects of the business. He listens to their ideas and lets them make their own mistakes. He views the business as a team project rather than an individual effort and turns over the leadership reins before the children reach the age of 35.

Mothers are influential whether they work in the business or not, and their roles need to be recognized. Traditionally, mothers have worked behind the scenes supporting their husbands and maintaining the home. The changing roles of women have brought them challenges when trying to balance home and business. One woman said she wished she was more like Mrs. Cleaver, which seemed to reflect her confusion about not being a mother like her own, yet also not being comfortable in a leadership role in a business. Often women do not get equal credit in the role they choose. Just like the case of the fathers, these roles also carry over into the next generation and influence both daughters and sons.

Brothers and sisters usually disagree in their views of their mother, but agree in their views of their father. This might be explained by the fact that fathers are seen primarily as the leaders in the business, while the mothers play a variety of roles, and sons and daughters describe the role they are most comfortable with. For example, one son describes his mother as always being at home for him, while the daughter described her active role in the business.

FAMILY BUSINESSES AS A TRAINING
GROUND

Perhaps the best job training programs throughout history have been family businesses. Research indicates that over two-thirds of all people starting businesses today grew up in a family business environment. Many share stories from early childhood when they stayed at the family store, rode on the delivery trucks, or went to visit customers with their parents. This early exposure enables them to hear, see, observe, and absorb the business environment. This experience can teach children about the value of money, customer relations, dealing with employees, and how an organization operates.

A number of factors have been found that predispose children to be interested in the family business. The first is time spent with their father in the business. Most family businesses currently operating in the United States were started after World War II and most were founded by men. As more women start businesses, children will also benefit in this way from spending time with their mother in the family business setting.

Exposure to various aspects of the business positively affects children. As they grow they assume new and varied roles, developing skills in the business as they take on each new role. With encouragement and a positive attitude from the parents about the business, their interest is heightened. Along the way, as children work in the family business, their individual contribution to the team needs to be recognized on a regular basis.

Lastly, an opportunity to join the company needs to be presented to the children as a career option. Not all children will join the family business, but they should know how to fully take advantage of the opportunity if they so choose. Throughout this training process children and parents who see each other as peers have an optimal relationship.

Daughters have special needs when it comes to developing as leaders in family businesses. They normally spend less time in the business, develop fewer skills, and face a major obstacle right from the start because fathers typically consider sons over daughters as potential successors. The process of preparing daughters to join the business is often overlooked. A report from the family business workshops held at the Wharton School of Business over a three-year period showed that among female Wharton business students, only 27 percent planned to enter the family business and only 22 percent studied business in college.

Research shows a number of surprising factors which influence the leadershipinterest of women. Women tend to show an interest in leading the family business when their brothers are not strong leaders, when they do not have a spouse or children of their own, and when they are asked by the father to join the company. Women are found to be held back from leading the company when they lack skills and knowledge, experience constraints within their own family, or have little encouragement from their father or husband. Women who are not at all interested in the family business have not developed an identity in the business, have found better opportunities elsewhere, or are dependent on their spouse to satisfy their financial needs.

When it comes to sons, researchers found that the quality of the work relationship between fathers and sons varies as a function of their respective life stages. When sons are between the ages of 17 and 22, and they are in the process of establishing identity and separating from the family, poor communication is common. At this time, the father is typically in his forties and is also re-examining his identity and appraising his life. Here fathers want to give their life meaning and exert power and control, needs that are in conflict with the needs of their sons at this time. As the father reaches his fifties, and the son matures from 23 to 33, the father has become less competitive and with his experience he may have the inclination to teach. Sons during this time feel an urgency to focus their lives and settle in, re-appraising the past and considering the future. They strive for competence, and desire recognition and advancement. By 40 the goals of competence, recognition, advancement, and security become pressing, and the son struggles with authority if the father is still involved in the business. The father, perhaps in his sixties, is reminded about retirement and often death, which leads to a problematic relationship should he try to hang on to the business. There are numerous cases of sons in their fifties with fathers in their seventies and eighties who still are in control of the family business. This becomes problematic for the individuals involved as well as for the business itself.

Sibling relationships in the family business are important since these are the vehicles by which social skills are learned, and siblings often go on to work together. These relationships play a significant part in identity development, yet research is sparse in this general area. Sibling accommodation in the family business occurs when they agree on their relative positions of responsibility and power.

EXTENDED FAMILY

Extended family members can play a wide range of roles in the family business. Family businesses become more complicated in multiple generations when all of the family members stay involved in some manner. For example, a husband and wife start a business and involve their three children. These three children have six children each for a total of 18. These 18 have a total of 29 children between them. Within 50 years over 50 direct descendents could now have involvement, and that does not include in-laws.

In-laws are controversial in family businesses. Some businesses have a rule not to involve in-laws in either ownership or management, while others involve them to varying degrees. In either case it is best to have clearly defined rules when it comes to the role and responsibility of in-laws, and clear expectations of the consequences in the event of a death, divorce, or involvement of children. In one case, the son-in-law was asked to stay on in a management capacity in the business after the daughter divorced him, which caused friction between the father and his daughter for the next 20 years.

THE PLANNING PROCESS

Planning is more crucial to the family business than to other types of enterprise because most families have a majority of their assets tied up in their business. Estate planning becomes essential and is intertwined with succession planning,business planning, and family planning.

Estate planning involves the financial and tax aspects of the company. Families plan to minimize taxes at the time of the owner's death so the resources can stay within the company. Current tax laws provide disincentives for families wishing to continue the business.

Business planning often guides the entire planning process and sets the agenda for the future operations of the business. This process may be overseen by a board of directors, an advisory board, or professional advisors. Owners must ask themselves where they want the company to be in 5, 10, or 20 years, including the level of family involvement. Owners often have a mental picture of this, but unless a business plan for financing purposes is necessary, it is usually not down on paper.

Succession planning is a long process that owners normally wait too long to address. The grooming, training, and development of talent in the next generation should start in the preadolescent years.

Most family businesses do not have a succession plan. This becomes crucial in the event of a sudden death. Often the remaining family members do not know where to begin to pick up the pieces. This is the reason most family businesses do not succeed to the next generation. The issues involved in succession are too numerous to leave to chance, and without planning, it is likely the family business will not successfully continue.

The lack of planning, particularly in first to second generation businesses, is often the fault of the founder himself. Usually the business is such an extension of his life that he has few outside interests and cannot imagine leaving the helm. As a result, his business dies with him. Others who recognize these issues too late in life may hastily turn over the business to an ill-prepared child, only to have him fail.

Family planning takes into account the needs and interests of all family members involved with the business. The formation of a group called a family council often guides the communication process between family members and management. They address issues such as rules for entry, conduct, and community relations.

A 1999 survey of 500 family-owned businesses conducted by family businessconsultants Regeneration Partners of Dallas, Texas, found that the number one concern among family-owned businesses was planning for estates, taxes, andwealth. Ownership transfer or succession ranked second. In spite of the significance of these concerns, an estimated 25 to 50 percent of all senior-generation business owners have put off making business estate plans.

SYSTEMS FOR PLANNING IN THE
FAMILY-OWNED BUSINESS

There are numerous systems which can aid planning in the family-owned business. Estate planning is normally handled by a team of professional advisors, including a lawyer, accountant, financial planner, insurance agent, and perhaps a family business consultant. Estate planning normally begins with the success of the enterprise and is continually updated as the business and family change.

A professional family business consultant can be a tremendous asset when confronting these planning issues. The consultant is a neutral party who can stabilize the emotional forces within the family and bring the expertise of working with numerous families across many industries. Most families believe theirs is the only company facing these difficult issues, and a family business consultant brings a refreshing perspective. He or she can be involved at many levels, including working through the succession process. This may involve a variety of issues, such as training the children, selecting a successor, involving non-familymanagement, and facilitating the transition process. In addition, the family business consultant can establish a family council and advisory board and serve as a facilitator to those two groups.

Often the firm's attorney and accountant may see planning problems coming, but they are not prepared to face them directly for many reasons. Some do not feel they have the specialized understanding of family dynamics, while others fear they could lose a client when dealing with sensitive issues. Instead, they may make the recommendation to bring in an outside family business consultant for an interim period of time.

A family council is a system that encourages family involvement and communications. It allows for a regular meeting where family members can voice their opinions and plan for the future in a structured way. Ultimately a more organized and strengthened family will emerge. Children gain a better understanding of the opportunities in the business, learn about managing resources, and inherit values and traditions. Conflicts can be discussed and settled.

Topics brought to family councils can include: rules for joining the business, treatment of family members working and not working in the business, role of in-laws, evaluations and pay scales, stock ownership, ways to provide financial security for the senior generation, training and development of the junior generation, image in the community, philanthropy, opportunities for new businesses, and diverse interests among family members.

These family meetings evolve and change as the business evolves. A business in the first generation usually only involves a nuclear family, whereas a business in the second generation with a sibling team faces additional issues of family harmony, equal treatment, and the involvement of multiple children in the business. A family business in its third generation or beyond may include cousins, in-laws, and family members not working in the business. Issues in this case become much more complicated and may include commitment, traditions, community image, and resource allocation.

Family businesses typically evolve through three stages, and the type of leadership required at each stage is different. In the entrepreneurial stage, the business is designed around the founder or leader. It is driven by personal and family goals and depends on the leader's intuitive direction. Eventually the business evolves to the managerial stage, where it is more organized but still like a family. The firm begins to require outside expertise and financial discipline. Structure and accountability are established. Tension can arise as family members begin to lose some of their freedom from structure, but they recognize that a lack of structure is causing frustration, too. Finally the firm enters the professional stage, where it is driven by what is best for the business. More goal-setting and market-driven strategic planning takes place. In determining who will be the next leader of the family-owned business, it is necessary to recognize what stage the business is in and select the leader with the most appropriate strengths and characteristics.

Family members who participate in family councils find it a good forum to voice their opinions. They feel more like a team, and they see progress being made. Leadership of the family council can be on a rotating basis, and the family business consultant may leave the facilitating role once the forum is well established and emotions are under control. Stepping out too early, however, can lead to a collapse of the entire system.

Advisory boards can be established to advise the president or board of directors. These boards consist of five to nine non-family members who meet regularly to provide advice and direction to the company. They too can take the emotions out of the planning process and provide objective input. Advisory board members should have business experience and the capabilities of assisting the business to get to the next level of growth. For example, a company with five million dollars in annual sales should seek advisors who have experience with moderately more profitable companies. In most cases, the advisory board is compensated in some manner.

As the family business grows, the family business consultant may suggest many different options for the family. Often professional non-family managers or an outside CEO are recruited to play a role in the future growth of the business. Some families operate with few or no family members in the business and simply retain ownership. The family can retain ownership by serving on the board of directors or setting up a holding company, which may manage several companies and investments for the family.

One second-generation family in the steel business recognized a declining market for its product and decided to sell off their divisions and liquidate the remaining assets. The dollars generated from this process led to the sibling team staying together and forming an investment company. Today they are in the business of buying other family businesses and putting in professional managers to operate them. They now manage eight such companies in a variety of industries throughout the United States.

How to Keep Success in the Family

2011-05-26T00:45:00.002+06:00

Some of the most famous and successful businesses are family businesses. Consider the media conglomerates built by Rupert Murdoch, Hugh Hefner, and the financial empire of Donald Trump. These high-profile businessmen have managed to keep their companies strong, in part, by involving their children in the administration of their business. But the family that works together does not always keep the business together.

Take the example of U-Haul. The Schoen family turned U-Haul into a small business run from the family garage into a leading nationwide transport service. However, conflicts between the Schoen siblings led the company into Chapter 11 bankruptcy. So what separates successful family businesses from those that flounder and fail?

Succession is a crucial issue. For those family businesses that stumble, the vulnerable period often comes when the older generation turns control over to the younger one. Sibling rivalry can create bitterness and resentment among the major players.

Successful family businesses negotiate the tricky issue of succession by keeping issues of family and business separate. A business owner may be tempted to hand the reins to the oldest sibling because that seems most "fair". However, catering to the vulnerable egos of one's children can be deadly to the continued health of a family business.

In a successful family business, control of the company is handed over to the family member with the greatest desire and aptitude for the job. Rupert Murdoch has chosen his younger son James as successor over his older brother Lachlan, who was once the heir apparent.

Despite the public's romanticized view of the father-son relationship, a smart businessman does not let gender deter him from doing what is best for the company. Hugh Hefner turned Playboy Enterprises over to his daughter Christie, and Sumner Redstone of NewsCorp passed over his son for his daughter Shari when choosing a successor.

Kids should be favored in the home. In a successful family business, however, the CEO's children are subject to the same meritocracy as everyone else.

Children should be actively involved in the business from a relatively early age and given the opportunity to prove themselves. Donald Trump realizes this; that is why his children play such a high-profile role in company operations. Trump's children are subject to being fired, just like everyone else. Under no circumstances should the company business be foisted upon a child who does not want it.

Successful family empires put the business before family pride. It is better to hand the company over to a cousin or in-law than to a son who wishes to pursue a different career.

Tradition vs. Merit in Family Business

2011-05-26T00:44:00.000+06:00

An Emiriti entrepreneur (we'll call him Ibrahim) had worked industriously his entire life to provide a valuable business to pass to his sons. Through shrewd trading, adherence to conservative financial management principles and hard work, and aided by an outgoing personality and endless energy, Ibrahim had amassed a network of enterprises that generated many millions of dollars in annual sales. Now in his mid-60's, he faced the challenge of passing the mantel of leadership and the responsibility of ownership of the company to his children.

Two of Ibrahim's nine sons worked in the business with him, each managing a separate company. His eldest son, Salem, ran the smallest of the companies and his second eldest son, Hassan, ran the largest. Salem was a devout Muslim and a mediocre businessman. He was content to run his company so as not to lose anything and to maintain his comfortable lifestyle. Hassan was the opposite, lukewarm in his religious convictions but naturally charming and filled with the fire of commerce.

The traditions of Ibrahim's culture and belief system suggested that he pass the torch of his legacy and leadership to his eldest son. But Ibrahim feared the inertia of Salem's natural complacency would cause him to simply stand still. He would focus his time on merely protecting the torch flame from the gathering winds of competition. Hassan, on the other hand, would carry the torch forward courageously, using his talents and entrepreneurial drive to take the company into new markets, create fresh ideas and earn higher gross margins.

As the sun rose behind me, warming the shoreline air, I remembered why Ibrahim had hired me. He needed someone to help him think through this pending generational transition, identify possible options for dividing responsibility and ownership, analyze those options according to the guiding principles of the family and suggest the best possible solution.

I watched an apparently exhausted sea snake struggle to swim through the constant crash of the small waves near the shoreline and thought of what I would do in his place.

Strategies for Success in Family Business

Families rule the world of business. Their firms make up more than 2 out of 3 companies across the globe and employ over half of the world's industrialized workforce. They produce 65% of the Gross National Product in the United States. Their names are some of the world's most famous brands -- Marriott, Disney, Ford, Nestle, Anheuser Busch, Ferrari, and Levi Strauss.

Family businesses are leaders in their particular industry (think Washington Post, Dell, Johnson & Johnson). When compared to their non-family competitors, they are more than 5% more profitable, achieve higher annual revenue and income growth, provide higher annual shareholder returns and are valued 10% higher by the equities markets. *

Family business leaders are often the best and brightest executives in their industries. They run professional, innovative, aggressive companies that expand the horizons of productivity and efficiency. J. W. Marriott, Jr. for instance, succeeded his father as CEO of the Marriott Company in 1972 when revenues were nearing US $200 million. Today, in the twilight of his career, Bill Jr. leads the US $9 billion, 140,000 employee international company. Under "Junior's" guidance the company grew to 45 times the size of the company his father passed on to him.

Family businesses are also known by many to be a minefield of complex relationships and competing norms. Employee/manager relationships in any company are difficult. Add to the mix a manager who is your father, or aunt, or owner's son, and going to work becomes more complicated. Family norms often run headfirst into the demands of the business. Issues related to fairness between siblings can easily spill over into the workplace, increasing tension and anxiety among employees and family members. The challenge of passing the business to the next generation in a fair and logical manner can cause immense tension and stress.

Based on these challenges then, it is not surprising that 7 out of 10 family businesses fail to make the transition to the second generation. And only 1 of 10 makes it to the third generation. That's a discouraging 60 + % failure rate per generation that leads to a number of perplexing questions.

Why do so few survive the transition from one generation to the next? And when they survive, how is it that family-businesses outperform their non-family competitors? What principles do they follow to help them overcome family business challenges?

Four Principles of Family Business

Based on my research and experience in working with over 55 families from 13 different nations, I believe that adherence to four straightforward and simple principles will benefit any family business system, regardless of its size, industry, generation or location.

Form a Firm Foundation

Forming a firm foundation means answering three questions;

1) What do we believe is important and right?
2) What are our objectives?, and
3) How do we plan to achieve them?

The best organizations make decisions based on what they believe to be important and right. In 1982, seven people in the Chicago area died shortly after taking poisoned Tylenol products. . There remained the possibility that more would perish or be seriously injured if the leaders at Tylenol didn't act fast. Jim Burke, then CEO of Johnson & Johnson who produced the painkiller, made the decision to pull US $150 million of Tylenol from the shelves of drugstores and pharmacies across North America because of a J & J guiding principle that named customers their number one priority.

Family business leaders must identify and prioritize the guiding principles that they want to form the foundation of the family's legacy. Guiding principles are those principles that 1) you want to teach to your children and grandchildren, 2) will be just as important 100 years from now and 3) you would stick to even at your own financial peril. Most importantly, they must be more than just a nice frame and calligraphy. Leaders must create and follow a plan to make them useful to any family member facing an important question. They should provide guidance and inspire excellence in every aspect of life, whether related to the business or not.

Make it a Meritocracy

Seemingly at birth we begin to believe in the "Norm of Equality", which states that our parents should give us gifts, benefits, advantages, opportunities, affection and time in the same allotments as our siblings. The Norm of Equality is deeply ingrained in any sibling, but is completely impossible. No two siblings throughout history have been treated equally, ever. Not even twins. One is born before the other, thereby receiving more time and attention than the second; forever throwing off the balance.

Family business leaders must protect their businesses from inappropriate family intervention by developing a meritocracy; a system that recognizes and rewards achievements rather than birth rights. Whereas equality means treatment based on circumstances, meritocracy means treatment based on results.

If the business is to continue to provide benefits to the quickly expanding family, it must grow and remain profitable. As such, it must hire and keep talented managers and shed family and non-family members alike who are not achieving desired results. So often multi-generation family companies struggle under the weight of a top-heavy organization chart filled with underachieving family members. In an increasingly competitive global economy, no business can afford the risk of burdening itself with the suffocating overhead of fat salaries for inefficient leaders.

Communicate consistently and constantly

Communication in a family business means two things: information sharing and openly discussing important issues. Families are generally terrible in both areas.

Family leaders too often hide important information from other family members, including spouses and children. Some family business leaders withhold financial and business related information associated with estate planning and personal assets because they don't want their children to overestimate their wealth and believe they will never have to work hard. Others, particularly in Latin and Central America, fear that their children could talk too much about their money and thereby put themselves in jeopardy of being kidnapped.

While both are legitimate concerns that warrant careful consideration, secrets and confidentiality breed mistrust in any organization. And high mistrust in a family is a big step towards the edge of the succession planning cliff. Fall off the cliff and find yourself looking down at the jagged rocks of accusation, shareholder conflict, legal disputes and eventual bankruptcy.

Certainly, some information is confidential and should be kept close to the vest, but spouses and children of family business leaders often need information in order to make decisions about their future. Education and career choices, for instance, are often influenced (and rightly so) by the financial situation of the family. "Do I have enough financial security to pursue my dream of teaching disabled children, or do I need to focus on a higher paying career?" is an example.

It is the responsibility of senior family members to identify what information should be shared with children and at what age (I am convinced that children can handle more truth and information than we give them credit for) and then do it! Plan and carry out a one day, quarterly family council meeting that brings the family together to share relevant information and discuss important issues. This will give them the chance to learn about what's going on in the business and allows family members to ask the delicate, potentially combustive questions in a safe and predictable environment. Junior generation members cannot lead this effort because their questions about wealth and succession planning in the family is often misconstrued as greed or impatience.

Put a Process in Place

One of my client families was at an exclusive resort in Thailand the day the tsunami struck. They happened to be there at the same time as a branch of a well-known American business family that had just gone through a terrible, intra-family dispute. As a result of the dispute, some major assets of the family had been sold to pay off a disgruntled shareholder. As my client and a leader of the other family talked about the family business challenge, my client asked the other what would have staved off the crisis. "Some sort of process to get us to work together, communicate better, think through issues together and make decisions together would have kept things together," came his sad reply.

Beginning a process that is designed to protect the well-being of the family, the success of the business and the education of the shareholders group is a logical thing to do. But it's daunting because it means bringing family members together to discuss difficult issues. And the family members who take charge of the process are too easily seen by siblings and cousins and aunts and uncles as having an ulterior motive, though there is rarely any political power associated with starting a coalition to protect the family business. So what's a family to do?

Find and hire someone to help you as a facilitator; someone who is a trusted advisor to the family and is not easily associated with one generation or the other. This person could be an attorney, religious leader, consultant, family friend or distant relative. Explain to them your particular situation and ask them to help you begin a process of understanding future challenges, evaluating options for alleviating them and deciding on a long term plan for guarding and enhancing the family, it's company and the company owners.

Conclusion

In the end, Ibrahim's dilemma was solved to the blessing of the whole family. Together we undertook a process of teaching his children the unique challenges of family business, opening their eyes to the fact that the financial and social benefits they receive from the business are only available to them because it is growing and profitable. We then included them in a family business governance process with the objective of designing a long term plan to protect and enhance what Ibrahim was leaving to them.

Over the course of 9 months we met regularly in workshops, family council meetings and individual work sessions with that goal in mind. And in the end it was not me or Ibrahim who decided that Hassan was his most logical business successor, but Salem, the eldest son, who said "what is best for the business is also best for the family; that I take over as leader of the family and protector of our guiding principles and that Hassan lead the family business, even though he is my younger brother."

Successful family businesses, those that enjoy profitable, growing businesses, educated and committed shareholders and a healthy, balanced family, apply these four time-tested principles. When rightly and correctly integrated into the family and business, they act as a road map, guiding the business and family leaders as they work together to improve the well being of the entire system.

Characteristics of Successful Family Business

2011-05-26T00:42:00.000+06:00

The economic boom of the nineties encouraged complacency and avoidance in dealing with conflicts within the family-owned business. Issues that were in remission under the palliative salve of a high revenue stream have most likely been eating away at the infrastructure of many family owned businesses. As the revenue stream slows, relationship problems can no longer be relegated to the backburner. Family business owners are finding that if money cures all ills, the cure is only transient.

HAVE HOPE!!

From our experience in consulting to family-owned businesses we have developed a list of seven major characteristics that we know to be correlated with successful business practice and successful family relationships. Some of these attributes have also been cited by other experts in the field. By understanding these characteristics and implementing them within your own business, you can help your family owned business survive and thrive.

· ESTABLISH CLEAR BOUNDARIES AROUND THE BUSINESS AND THE FAMILY

The key to success in family-owned business is being clear on where the family ends and the business begins. Relationship issues and personal needs , if not attended to in the family, play themselves out in the business. If these needs for approval, respect, competency, independence and nurturance have not been recognized in the family, people look to the workplace for fulfillment. The business may then becomes the arena for the gratification of these needs. Business decisions may then be determined by emotional factors and sibling rivalries and jealousies are often acted out in the business.

Successful family-owned businesses treat business as business, and family as family

· DEVELOP A SUCCESSION PLAN

Successful family-owned businesses are busy making their plans for succession. The founding generation is looking ahead, planning and considering their own future and the future of the business. Passing the baton means that the owner is entering into new stage of life. As we describe it, it is not just a question of what one is leaving or retiring from, but what they are retiring to.

A succession plan, important in any business, is critical in a family-owned business. Succession planning always provokes critical business and family issues. At stake is who will run the business, how that decision will be made, and how that decision will be implemented. Succession planning forces family members to acknowledge the founder’s (parent’s ) retirement and the fact that he/she is not immortal. One apocryphal story has the CEO / founder , talking about succession, saying ‘and if I should die.’ Succession raises questions about parent-child relationships, the founder’s marital relationship, and evokes issues concerning dependency and autonomy. Succession planning is a major issue because both business and family transitions intersect, as both enter the next stage of their respective life cycles. Successful succession planning is a long term project; having the ability to take long range perspectives is one of the advantages of having a family-owned business. We strongly advise our clients…begin planning now!

· FORMULATE A BUSINESS AND STRATEGIC PLAN

As with non-family-owned businesses, strategic planning and business planning are critical to the success of the business. A family-owned business is more likely to have the flexibility necessary to anticipate and adapt to changes in the market place than a non-family-owned business. It is essential that family business owners learn from the experience of others as to the regular and predictable issues that will surface in the family-owned business. Developing and codifying job descriptions, entry criteria and compensation formula is helpful. Problems occur when family members perform multi-tasks without clear delineation of responsibilities, with either disappointment in compensation or unrealistic understandings about promotion ensuing. Sibling issues often arise when leadership refuses to address the issues of succession, nor make clear entry and compensation standards and job descriptions.

· HOLD REGULARLY SCHEDULED BUSINESS MEETINGS

Family-owned businesses, particularly smaller ones, tend to be run informally, the way one might run a family. Business meetings are held on a ‘catch as catch can’ basis. We cannot stress how important it is to hold regularly scheduled business meetings. Each meeting should have a formal agenda with an opportunity for all to talk. These meeting are a perfect opportunity for expectations to be clarified so that resentments don’t smolder and for the younger generation under the tutelage of current management teams to begin to take the responsibility for corporate initiatives.

· PLAN REGULARLY OCCURRING FAMILY GATHERINGS

We believe that ‘better family means better business’. While we certainly encourage having family councils and retreats to discuss family matters, there are dozens of naturally occurring opportunities for the family to get together, ie.holidays, birthdays, anniversaries, special events, weekends in the summer home, or just getting together for a sporting event or the theater. These gatherings, whether they be one-to-one or in larger groups, help insure that emotional needs are gratified within the family and that the business is not used as the arena for the fulfillment of these needs. Keep the focus on developing and maintaining healthy family relationships and preventing the business roles from enveloping the more basic familial roles.

· DEVELOP CONFLICT RESOLUTION SKILLS

All healthy people living or working in close proximity argue. It is impossible for mature individuals to coexist in perfect, total, and perpetual harmony. In the successful family-owned business, family and non-family members feel free to express their thoughts and feelings. Sometimes this leads to constructive arguing. In order for arguments to be constructive, certain techniques of good communication need be adhered to. Rather than list all the varied rules and techniques of communication and conflict resolution, suffice it to say that it is imperative that the founder/parent lead by example and encourage open discussion, questioning and even disagreement. Communication and the ability to fight constructively are skills that can be taught. Learn them.

· APPOINT AN OUTSIDE BOARD OF ADVISORS

Successful family enterprises have an outside board of advisors. The adage about not seeing the forest from the trees is never more appropriate than when considering one’s family business. Outside advisors are critical in helping to establish succession, compensation and entry criteria, diffusing sibling issues and in developing market strategy. Unbiased, non family professionals can give input and help business leaders make difficult, emotionally laden decisions. Also, they can identify for the business owners options and alternate resources, i.e.; consultants and other advisors.

No successful family-owned business should be without an outside board.

Founders and owners of family enterprises are typically highly invested in the business. This commitment needs to be balanced with investment in the family. We advise our clients: Don’t take the business for granted; don’t take the family for granted- be proactive in both.

Managing a Successful Family Business

2011-05-26T00:41:00.001+06:00

Introduction

Family Business account for over 80% of all US businesses, contribute 50% of our Gross National Product and provide half our workforce. However only about 10% of family businesses make it to the third generation due to the unique challenges family companies encounter. In this article on Running and Managing a Successful Family Business, we discuss five key areas:

Ø Starting & Joining a Family Business

Ø Compensation & Resources

Ø Limitations & Conflicts

Ø Next Generation Preparation & Issues

Ø Management and Business Succession & Continuation

Starting & Joining a Family Business

1) Starting a Venture with Family:

There are certain advantages to starting a family venture:

ü Initial costs and losses are easily shared.

ü Later success benefits the family as a whole.

ü Enables the family to be together.

ü Family may trust each other more than outsiders.

However, there are many challenges which come up during a start-up venture which need to be addressed:

Ø Tips for Spouses jointly running and starting a business:

· Follow business rules; romance is for non-business hours.

· Clearly define each spouse’s role.

· Accentuate each other’s talents.

· Keep business and personal life separate- understand the inherent conflicts of interest.

· Set strong ground rules and understand you won’t always agree.

· Define your expectations specifically and clearly.

· Set aside family time.

· Involve young family members in the business for fun, short tasks and jobs.

· Have a system for recognizing and rewarding hard work and accomplishments of family members.

Ø Understand clearly what the business relationships of Family Members are.

Ø Have a solid Business Plan which clearly defines the company structure, responsibilities, roles, strategic direction and so forth.

Ø Clearly identify who is the lead entrepreneur.

Ø Identify the strengths and weaknesses of each family member.

Ø Understand each family member’s business experience and background.

Ø Establish how much money each family member will contribute.

Ø Agree up front how equity will be divided.

Ø Honest and clear communication between family members.

Ø Professional, business environment and structure.

Ø How and where non-family will be incorporated into the venture.

2) Joining an Early Stage Family Venture:

Advantages for family members joining a new family venture are numerous:

ü Family can help and are inexpensive during the development period.

ü Family wants the opportunity to help the business as it benefits the family as a whole.

ü Flexible hours, days and pay are attractive to family member initially, using minimum resources.

ü The business brings family back together.

ü Family members join the family venture because they are frustrated with their current work place and environment.

Issues to consider for an early stage family Venture:

Ø Largely interpersonal issues. Experience role reversals.

Ø Resentment can build if a family member isn’t adequately challenged and rewarded.

Ø Issues concerning power, rivalry and jealousy are common between family members.

Ø Take in consideration a family member’s personal interest, skills, experience and training when assigning areas of responsibility.

Ø Define, exactly, each family member’s area of responsibility.

Ø Define who each family member is accountable to, as well as, for.

Ø Determine compensation structures- salary, bonus and equity stakes.

Ø How will a disagreement be handled?

Ø What will be done if a family is not contributing?

Ø If a family member wants out, what is the buyout plan and continuation plan?

Ø Are you going to allow family members to be non-participating, passive investors in the business?

Best Advice: Defining upfront the various rules, expectations and structure unique to a family business is vital for its success. These unique requirements need to be well developed and delineated in the Company Business Plan and continually discussed in periodic family meetings. This way, every family member feels they are vital and contributing to the overall strategic direction and future of the family venture.

3) Coming into a Family Company as a Later Generation:

This can be the biggest challenge for a family member: Where do I fit in a Family Business which has been in operation for a period of time and/or for successive generations? Some characteristics and challenges to consider for a later stage/ mature family business:

Ø Having a policy that everyone starts at the bottom and works his or her way up through the ranks no matter their experience level, can initially set back family members joining the existing enterprise. However, they will soon realize it is very important not to show favoritism between family members and non-family employees. This nips in the bud issues of favoritism, entitlement, jealousy and resentment.

Ø Family members can sometimes be transient, interim or temporary employees to help during seasonal demand, a particularly tough business environment or during high growth periods. This phenomenon can increase spirit de corps, but it can also cause strife. Again, having family meetings to decide such matters and ensuring the majority is on board with bringing in temporary family help, is critically important.

Ø Some family members may use the business as a stepping stone on a career path or starting their own venture. Planning for this potential loss and contingency should be part of every family business’s Management Plan. Also, establishing non-compete rules upfront and protecting the proprietary nature of the business if a family member moves on should also be part of the Company’s Planning Structure.

Ø The issue of the family successor is huge in a mature family enterprise. How will a family business choose its next successor? Is there room for the next generation? What are the expansion options for family members? Is the Company growing enough to support new family blood? Does the current management structure and style permit the flexibility and latitude the next generation seeks? This all speaks to the importance of having well developed; family- contributed Business Planning in order to maintain successive-success for future generations. This phenomenon becomes more urgent and important in maturing family operations. We deal with this future outlook issue in subsequent section in detail, along with conflicts, limitations and issues faced by a family enterprise.

Advantages a mature stage family business enjoys are numerous, but the following are common, and often, keys to success:

ü Each family member is contributing to the overall benefit of the entire family.

ü Family members can enjoy making and reaching goals together,

ü Be a member of a very special team which is very close knit.

ü Everyone pitches in to do the hard work- getting things done, that “need doing”.

ü Family teamwork translates into identifiable and quantifiable progress.

ü A feeling among family that is “our business”. It is “what we do”. It is all about ownership and legacy.

ü Special attitude shared by family members pushes them to work hard for the success of the business.

ü Bringing in new life, new skills and added experience into the maturing business.

ü Mature family companies often have and keep market advantage and competitive edge as new generations often ensure the company doesn’t stagnate.

Compensation & Resources in a Family Business

1) Compensating Family Members:

Compensation and profit sharing can be difficult issues as some family members believe they contribute to the overall success of the business more than others in the family. Here are some helpful tips when considering compensation levels:

ü Compensation should be based on job performance, experience, contribution and skills, not family position.

ü Benefits are useful financial incentives and rewards, but it is very important family benefits conform to those given to non-family employees.

ü Stock Plans, Deferred Profit-Sharing Plans, Pension Plans and Stock Purchase Programs can be very effective in placating unhappy family members. These type of Plans also do not hamper cash-flows significantly, so profitability is maintained, yet has the synergistic effect of attracting, holding and pulling family members together.

ü Often Family Members are given a Managerial title and role but be careful not to show favoritism. If a family member does not have the qualifications to be a manager, then for the sake of the business and employee relations, the family member should be given a position which matches his/ her experience level.

ü There should be a double standard when analyzing a family member employee and non-family member employee. The family member should be held at a higher standard and be required to work up the ranks of the Company. This way the family member does not take the position for granted, sets a good example and is highly qualified for management when that time comes. While gaining experience with another outside Company is recommended and beneficial for family members, they should enter the family business on a level which gives them a firm understanding of the entire Company and how it works. Once the family member has cross-trained in the Company’s various departments, gaining invaluable insight into Company operations, an appropriate position and title can be assigned and rewarded.

ABC Business Consulting Resource: For detailed analysis and strategies relating to Small Business Compensation Planning, please refer to our article: Compensation Planning for Start-Up Ventures and Growth Stage Companies.

2) Family Resources:

The amount of capital available within the family may significantly limit expansion. While initially during early stages of growth, family resources and connections may be quite adequate, but as the family enterprise grows and matures, the amount of borrowing power can be limited by the amount of family assets. Then certain questions and concerns come to the forefront for the family:

Ø How should money be obtained to fuel growth?

· Borrowing, issuing stick, selling assets, private investment or other financial strategies?

Ø How should financial Planning be developed and implemented?

Two key steps when assessing the future of the business’s financial resources:

ü Step One: Hire an experienced Business Consultant to provide third party, objective, experienced help in developing the Company’s Strategic Plan and resulting Financial Strategy.

ü Step Two: Through the assistance of the Business Consultant, hire a Financial Consultant to implement the Financial Strategy in terms of securing future financial products and instruments.

By hiring and utilizing a Business Consultant and Financial Consultant, a family business is assured that its future financial and resource planning and acquisition isn’t unduly affected by certain family members. It should be approached from a point of view which is objective, yet, experienced. It is incumbent upon the Consultants to work well with and include all the Company’s family and non-family, key employees in the Plan analysis, development, recommendations and implementation. While it is very important to utilize Business and Financial Consultants to help grow a small business, it is quite imperative in a family business which is transitioning. Developing Financial & Resource Strategic Direction can be a touchy, sometimes explosive, situation for a family business; therefore, having experienced, objective third-party professionals to help guide the process, can be a stabilizing factor, helping build directional consensus among family members and non-family key employees alike.

ABC Business Consulting Resources:

Ø For more information on how a Business Consultant can help your business, please visit our article: All about Business Consultants and Business Consulting.

Ø For more information on Small Business Finance, Funding Sources, Financial Strategies, Private Investors and Commercial Loans, please visit: Small Business Finance Tips.

Family Limitations and Conflicts

1) Family Limitations:

Common issues & Considerations:

Ø Family members go straight to the top, head family position, skipping protocol and the organization’s structure.

Ø Personality clashes and unrestrained emotional reactions among family members can cause inefficient operations and make it a hard environment to recruit talent.

Ø Lines of authority and adherence to an organizational structure, with responsibilities clearly defined, should be firmly established and separate from the family’s personal authority lines.

Ø Due to the nature of a family business, the number of competent family members from whom to choose managers can be limited. Therefore, it is important for the family business to ensure family members obtain the necessary experience and skills to assume management or find suitable outside-the –family managers. This issue speaks to the next section in this article, Next Generation Preparations, so we will expand on it subsequent.

Ø Family businesses must fight the common phenomenon of maintaining the status quo. Just like any healthy, growing business, company leadership and management should keep up with the times and not be complacent with past successes. Planning, Market Trending, Training, RE-Training and Continuing Education are incredibly important for a family enterprise, as complacency is a common challenge as the Company matures.

Ø Family Management Gaps can be a touchy issue as family companies are often run and managed by family members. However, if a qualified family member is not available for a post, it is important to fill the management position with someone outside the family who has ample experience and history with the Company and the family members. Bringing in outside Professional Managers can be a mistake as they can alienate suitable non-family employees and lack an established relationship with the family members in the business. Only hire outside management if no qualified alternatives exist within the Company.

Family Conflicts:

Family businesses are naturally pre-disposed to conflict so it is very important to establish firm ground rules and roles:

ü Define responsibilities and accountability clearly.

ü Assign jobs and positions relative to experience, training, skills, capabilities and interests.

Ø If jobs and positions aren’t clearly defined and respected, you often have siblings performing similar jobs or have over-lapping responsibilities, causing unhealthy competition and a constant vying for attention toward parents and authority positioned family members. Additionally, clicks can form within a family company which is counter-productive, causing unnecessary strife and conflict.

Ø Family Businesses should work with a Business Consultant to develop, design and implement a fair and firm organizational structure which promotes professionalism and shuns clicks and in-fighting.

ü Keep emotions out of the decision making processes in a family business. Be sure you are fighting the issues, not the emotions or personality conflicts. Discussing and agreeing to plans prior to major Company changes and events take place fosters a professional environment of respect and cooperation. Keep the personal family business where it belongs, at home. Again, an experienced Business Consultant can be very useful in this area to assist in developing business rules, regulations and protocols, along with, decision making structures and processes. Additionally, it is important to develop structures, policies and rules to guide non-family employees and interactions between family and non-family employees. Non-family employees often feel alienated and unimportant if these accountability, responsibility and organizational systems, processes and structures aren’t clearly defined and effectively implemented and adopted throughout the Company.

ü Best Advice: Form a Family Council. This council should be composed entirely of family members who are key to the future of the business and have significant interest in the business. The Council should have clear and open communications. Family members should feel free to share their thoughts, concerns and ideas. This forum ought to foster understanding and trust among family members, addressing and fixing issues which develop as the business matures and grows. It is the vehicle to develop and put in motion Company plans; particularly the business’s Long-TermStrategic Plan.

The council should provide the Company Strong Strategic Direction, Objectives, Goals, Milestones and Performance Standards. The Council can be headed by the Company’s Chairman (if a family member) so the board of Directors has a true understanding of the Company’s long term direction and growth goals. While the Council takes in consideration all Key family members’ inputs and opinions, it is not’s necessary to have 100% family participation on its Board. The Family Enterprise’s Board of Directors should contain the top family executives (Chairman and President/ CEO, etc.); however, it should also consist of non-family members to ensure objectivity, different viewpoints and experience levels. The Council is for family discussions and providing strategic direction to the Board, which in turn, contains a mix of family and non-family alike.

Next Generation Preparation & Issues

1) Preparing the Next Generation:

Children may not automatically want to be part of the family business. Sometimes children who have grown up in the business become bored, uninterested or lack the desire and drive necessary to successfully run the business in the future. They may actually take the business for granted, assuming it will always be there for them.

The questions to ask are: Why do children join a family business? What are their motivations?

Ø To Influence the Family: This can be a good thing or a bad thing, depending on the kid’s underlying motivations. A Family Business should foster a mission which positively influences family members, not provide ammo for the children to attack each other. Positive Influences include:

ü Family Education Fund/ Emphasis on Continuing Education

ü Foster an Atmosphere of Openness & Learning

ü Set good examples for kids to aspire toward

ü Ingrain the values of Business Integrity and Ethical Responsibility

ü Foster & Promote Civic Duty

ü Promote & Support Community Volunteer Work, Projects and Board representation

Ø To Help the Family Succeed: Success for the Family Business should translate to the success of the Family. Future generations can have better lives, pursue their passions and be happier if part of a cohesive team striving for a better future for the entire family- not just those in the business.

Ø An Opportunity to Further one’s Career: It isn’t necessary for every family member to remain with the business. Family members should be encouraged to pursue their passions, and the family business can be the proving grounds, the incubator, for family who want to pursue other careers or possible spin off another related business. Often, children find that after working for other companies early in their careers, the Family Business is a great career destination, allowing them to reach their full potential and constructively apply their expertise and experience.

Ø Like the Family Business: Having a passion for the industry and business the family enterprise occupies is often a major reason why family members join the Company. What also plays into this is the requirement to work outside the Company to gain expertise and experience. When the family member returns to the family business, there is inherent respect for the opportunity given and the successful growth history of their predecessors before them. Having a firm understanding of what makes the family business special and unique creates a strong loyalty and passion for it.

Ø The Challenge: If family members worked in the family business from a young age, were taught the value of a dollar, went off to college and to work for an outside Company for a several year period, then returning to the family enterprise can be a fantastic challenge to pursue. For this reason, it is important the family business provides qualified family members with a real growth opportunity, a challenge to inspire drive, loyalty and passion in their career maturation.

Ø Sense of Duty & Responsibility: Some of the older children in the family’s next generations may feel the duty and responsibility to serve their family interests and ensure future succession success of the business. This becomes apparent after the younger children become involved in the Company and sometimes the older child moves onto another career since his or her passion was extinguished by the stress and forbearance of fiduciary responsibility. Or, it is sometimes the older children who spin off a subsidiary or new Company after feeling they have accomplished their role in the Company. It is important to encourage the family’s children to pursue their passions, no matter what industry, and gain outside experience; however, sometimes it is a necessity to have the older child assume responsibilities early on if resources are scarce in the Company’s particular Growth Stage.

ABC Business Consulting Resource: For more information on a Small Business Growth Stages, the inherent characteristics, risks and issues, please see our article: Strategies for Managing Small Business Growth.

Ø To Make Money: While this is often the number one reason family members join the family business, it is closely followed by the “Liking the Business” category. This relationship certainly makes sense: making money is a major requirement of any career but it is strongly linked to liking what you are doing, the passion factor. A well-prepared family business provides ample growth opportunities for family members to nurture their passion and be well rewarded for it through a competitive Compensation Package.

Considerations when planning and preparing for the next Generation in a Family Business:

Ø When family members are young, have them work on simple jobs on a part-time basis.

· This provides insights into the business, helps them understand the business from the bottom up, gives them a strong work ethic and encourages them to pursue and finish higher education.

Ø Work for an outside Company after graduating from college to broaden training and background.

· If the family members worked in the lower ranks of the business before and during high school and during the summers in his/her college years, then outside experience can justify moving a family member into a higher position level upon entering back into the business.

Ø Some tips when preparing for the next generation to join the Company:

· Never allow a family member to work in senior management until that member has worked for someone else for a few years.

· Rotate the family member throughout different positions to cross train, as well as, pinpoint interests and skills.

· Promotions only come when earned, just like everyone else in the Company.

· Devote time every day, preferably over breakfast, for face-to-face mentoring, teaching and training.

· Don’t take business issues and matters back home.

· Reward the family member with responsibility so he or she can learn to manage the business in order to potentially take over or have executive level responsibilities in the future.

· Make sure the family member knows you trust him or her.

· Allow them to make mistakes and fail; give them room to grow and learn. Help them when asked; give them autonomy.

2) Next Generation Issues:

Three main generational issues characteristic to family business operations are:

Ø The Business Owner Who Won’t Delegate: A very common problem in family enterprises is the owner or CEO who can’t let go. Many owners have a strong personal connection to the business which prevents them from allowing next generations to assume more responsibility in the business.

· The second generation are “entrepreneur successors” in training and the business owner patriarch or matriarch should be very careful not to stifle that passion and drive.

· An inherent attitude that an owner’s or founder’s shoes cannot be filled is common in a family business; therefore, it is vitally important to the future continuation of the business for a clear path toward ascendancy for the next generation be established through training, mentoring and delegation of responsibility.

· Best Advice: Hire a Business Consultant to help you work through these issues in order to develop a clear ascendancy plan that is fair, yet, challenging. Establish clear goals and expectations so next generation family members can strive to attain goals and career growth, without stifling their passions and drive. The Business Consultant can bring valuable experience and objectivity to this often controversial issue.

Ø Next Generation Gaining Acceptance, Respect and Credibility: If a family member has worked from the bottom up during their formative years, gone off to college to earn their business related degree(s) and gained valuable expertise and experience working for an outside firm, give him or her the respect they deserve.

· Next generation members will work hard in the business if they are praised, encouraged and accepted as equals.

· Be careful not to set expectations too high, they should be in line with the family member’s training, education, personality, skills and experience.

· A next generation member should express strong interest in the family business so the family knows of his or her passion, drive and interest level.

· The next generation member should know what their capabilities are and communicate that clearly to the family owner(s).

· A next generation family member should conduct a self-analysis of goals and skills:

ü What are my strengths and weaknesses?

ü What areas do I need to work on or need help on?

ü What other parts of the business do I need to learn about?

ü What are my leadership qualities? Are they sufficient?

ü What training, mentoring and continuing education do I need to fulfill a leadership role in the family business?

ü Am I happy working in the family business?

· Three Stage Training Program for Family members joining the business:

ü Stage 1: Initial learning stage to fully understand all the aspects and divisions of the Company: Cross-Training.

ü Stage 2: Specialization in a particular skill.

ü Stage 3: Become a generalist, learn to manage, motivate and lead. Need to have strong strategic Management Skills.

ABC Business Consulting Resources: Below is a list of how to articles which expand on important Small Business Management and Leadership Skills:

Leadership Qualities of a CEO

Maximizing Business Profits

Managing Small Business Growth

Small Business Success & Failure

Cash Flow Management

· The next generation should have mentoring relationships not just with the family founder/ owner/ CEO but also with experienced business people in their industry, preferably one from other family enterprises. Long-term development mentoring support is a vital component in a next generation member’s growth.

· As previously discussed, a next generation family member should work outside the family business as this will increase his or her knowledge, experience, confidence, and most importantly, enhance credibility with family and non-family employees alike.

Family Business Next Generation Management, Continuation & Succession

What makes a family business unique, and quite often is the key to its Competitive Edgeis its close family connections, experience and expertise. In order to sustain this unique edge, a family business needs to plan early, carefully and thoroughly so successors can be developed and groomed from the family ranks.

1) Succession Issues & Concerns:

Ø Treating all family children fairly

Ø Reactions from non-family employees

Ø Family communications and conflict

Ø Estate Taxes

Ø Executive and Management level organization and structure

Ø Determine how best to select successors:

· Groom one child from an early age to take over?

· Allow family members to compete and choose replacements and successors with the aid of the Board of Directors and/ or the Family Council?

· Choose successors without the aid of a third party?

· Form an Executive Committee of family members (3-5members)?

· Allow the children and/ or family as a whole to choose incoming leaders?

How to go about choosing future leaders and successors really is a factor of a particular family business’s history, current structure, planning, success, future growth forecasts, available resources (human, technical, strategic and financial), aspirations, goals, wishes and a host of contingent variables. The complexity of succession issues really dictates the use of an experienced Business Consultant, Attorney and Accountant to help develop and implement a successful Continuation Plan. The Business Consultant should be the quarterback of the planning process: he or she should coordinate the inputs of the current leadership, Board of Directors, Family Council, key non-family employee, legal, human resources and accounting; along with the Consultant’s experienced advice, to come up with an acceptable, flexible, successful Business Succession Plan.

A Business Consultant can be a great investment when replacement choices are limited. If faced with this challenge, a family business needs to utilize professional help to:

ü Analyze present key position assignments, responsibilities and performance to determine current capabilities and weaknesses, as well as, future succession management and leadership gaps.

ü Take a Close look at the current company structure and determine if the structure needs to be modified to meet future human resource challenges.

ü Do present family members need cross-training, leadership education and mentoring? Or are there key non-family employees who can fill future leadership gaps?

In order to find a solution to a leadership and management future gap threat, it is important to have sound, objective, experienced third-party professional advice and expertise at hand. Moreover, all present managers and key people, family and non-family, should be included in the decision making and planning process when replacement choices present an inherent challenge.

2) Planning for future Business Continuation & Succession: In a family enterprise, succession occurs when the family business owner/ leader/ founder passes away, becomes incapacitated, exits the company or retires. You can never start too early in planning replacements; along with succession and continuation contingency planning. Having explained the various areas and issues to consider when planning for future Company leadership and management, we will now examine the importance of Operating Authority Planning; how this authority will pass from one generation to the next when planned for, as well as, putting in place emergency, contingency authority planning when the family business’s leader and/ or top management suddenly departs.

Ø Sudden Departure Planning: Sudden death or incapacity in a business’s upper leadership echelon can be paralyzing if not properly planned for. It is very important to consult an experienced Certified Financial Planner, Estate Planning Attorney and Business Accountant to ensure a Business Continuation Financial Plan is in place, which sets up the necessary wills, trusts, insurances, investments and other vehicles to ensure the business can have a successful financial transition. This is often accomplished with Key Person Life Insurance and Disability Insurance. It is very important these advisors work in concert with the Company’s Business Consultant, Financial Consultant and Business Attorney so that the Business Succession and Continuation Plan link both Management & Leadership Planning with the Operational Authority Planning.

Ø Planned Departure Planning: As previously discussed, there should be a Leadership and Management Continuation Plan in place. This ensures a smooth transition and can be overseen by the Company’s Board of Directors. This Departure Plan will kick in automatically with the Operational Authority Plan if a sudden, unplanned Leadership Departure occurs. The Continuation and Succession Strategy should be implemented in stages so the existing Company leader can ensure a smooth transition. Having finances in place to take care of any dips in sales and profits during this transition is key and should be part of the plan.

It is important that the outgoing Company leader can retire comfortably and has a retirement life plan in place. When it is time to go, according to the plan, the family Company leader must cleanly go and not hold on. It is time for the next generation to move the Company forward. A Certified Financial Planner and Compensation Structure Expert should be consulted to determine the best way to set up a successful Retirement Plan for outgoing family members- their retirement comfort is key toward continuing a clean break from the business.

Selling Stock to Family Members: A successful transition is only complete when the outgoing business leader/ owner sells his stake in the business to the remaining family members as per the Operating Authority Plan. The advantages of this type of transition are numerous:

ü Business remains in the family.

ü Business continues to provide a source of steady employment to family members.

ü The family’s status and stature are preserved.

ü The former owner/ leader is freed up to actually retire and travel.

ü A successful successor(s) instills confidence and happiness throughout the family.

ü Strengthens family bonds rather than causing additional friction and conflict.

ü Future success rewards the family very well financially.

ü Selling the Business Option: After several generations, sometimes family contracts or its members choose alternative careers and businesses. It is better to sell a successful venture than one withering and dying on the vine. This option should be included in the Operational Plan and be well thought out, utilizing the expertise of a Business Consultant, Registered Investment Advisor, Valuation Expert, Business Broker, Attorney and Accountant. If planned for properly, a business sale can be a great thing for a multi-generational family. The proceeds and resulting investments can secure future education funds, new business ventures, philanthropic organizations and other generational family interests and passions.

Some things to consider when selling the family business:

ü The business owner/ leader ought to plan a transition period into the business sale process. An immediate retirement can reduce a Company’s attractiveness to a buyer as having the founder/ leader/ owner around during the transition is often preferable.

ü Utilized Valuation Experts and Accountants to evaluate assets, project profitability and determine good will mark up, among other value determinants. A prestigious accounting firm conducting a full audit and investigator go a long way in deriving a premium sales value which is acceptable to the buyer.

ü Building up profits, retaining earnings and instituting cash flow management strategies can go a long way to attracting good buyers.

ü Structuring the deal with the family retaining a small, passive stake in the business can be very attractive to a buyer as it instills confidence in the new leader and management, while giving the family the opportunity to profit from the Company. This can also make a premium price structure more palatable to a buyer.

ü Shift assets to heirs to lower your basis in the business, thereby, decreasing and spreading out the tax load.

ü Ensure financial records are up to date and audited with projections tending to air on the conservative side, while having realistic marketing outlooks and inherent assumptions.

ü Need to understand what you and your family members will lose from the sale and plan accordingly with your financial advisors. Things to consider:

· Pension/ Retirement Investment Plan

· Stock Plan

· Health, Life, Disability & Long-Term Care

· Company cars

· Club dues

· Perks & Benefits

ü Tax implications can be substantial in a business sale so utilize a good tax planning firm, along with garnering advice from your Certified Financial Planner.

Tax & Estate Planning Implications:

One of the biggest threats to the successful continuation and succession of family businesses are the constantly changing tax laws. Utilizing an experienced Estate Planning Attorney, Tax Attorney and Business Attorney, along with a solid Business Accounting Firm, to ensure you not only maximize present profits while minimizing your tax liability, but also successfully plan to pass your estate and business onto heirs in the most tax preference way. Some Estate Planning considerations to keep in mind while planning for business continuation and succession:

ü Major concerns typically are the perpetuation of the business and maintaining liquidity. Without sufficient cash to pay estate taxes, heirs have little choice but to drain cash from the business when it most needs it or worse, be forced to sell it or sell many of its prized assets.

ü Good Estate Planning can:

· Reduce the need for beneficiaries to remove funds from the business.

· Maintain beneficiaries’ interest stakes by keeping funds in the Company.

· Provide a smooth transition when developed in conjunction with the Management/ Leadership Strategic & Succession Plan and the Company’s Operating Authority Plan (see previous sections for more details).

ü Selling the patriarch’s/ matriarch’s stake in the business, in advance of any Succession Plan implementation (whether a planned or sudden departure) to family members can be the best estate planning a family business can employ, while giving the business leader control of the Company until the agreed upon relinquishment.

ü There are a host of structural tools which can be used to minimize estate tax liability, that should be fully explored with your Financial Advisory Team, such as:

· Gifting

· Stock Sales

· Trusts

· Limited Liability Corporations

· Family Limited Partnerships

· Share holder Buy/ Sell Agreements

ü Critically Important: Establishing a valuation of the business which is in compliance with IRS regulations is critically important. Overvaluing, as well as, undervaluing a business for tax purposes can both be highly expensive mistakes. This is why having an excellent Tax & Financial Team of Advisors in place is absolutely essential.

The Moment of Truth

Not everything can be planned for, but if you adopt the strategies prescribed in this article, which are commonly unique to a family enterprise, running and managing the successful family business is significantly improved, while ensuring successful next generation business continuation and succession. Family Businesses have a unique set of Competitive Advantages, which if planned for, can be used to exploit new markets and ensure future profitability and success. In the end, if you, the family business owner/ founder/ leader successfully plan, build and manage the family enterprise, you will need to give up control and ultimately ownership in your cherished accomplishment. If built well, the family business will continue to reflect the leader’s/ founder’s ambition, innovation, initiative, entrepreneurship, character, values, integrity, ethics; all those things in testament to hard work and perseverance. This is the legacy of the business, clearing the way for future generations.

Problems and Conflicts to a Family Enterprise

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Family Businesses can have their unique set of issues and conflicts. Having policies and systems in place to handle these typical hurdles can make running a family business a lot more effective and profitable.

Common Family Business Issues and Its Solutions

1. Family members go straight to the top, head family position, skipping protocol and the organization’s structure.

2. Personality clashes and unrestrained emotional reactions among family members can cause inefficient operations and make it a hard environment to recruit talent.

3. Lines of authority and adherence to an organizational structure, with responsibilities distinctly defined, should be firmly installed and separate from the family’s personal authority lines.

4. Due to the nature of a family business, the number of competent family members from whom to choose managers can be limited. Therefore, it is important for the family business to ensure family members obtain the necessary experience and skills to assume management or find suitable outside-the–family managers. This issue speaks to the next section in this article, Next Generation Preparations, so we will expand on it subsequent.

5. Family businesses must fight the common phenomenon of maintaining the status quo. Just like any healthy, thriving business, company leadership and management should keep up with the times and not be complacent with past successes. Planning, Market Trending, Training, RE-Training and Continuing Education are incredibly important for a family enterprise, as self-complacency is a common challenge as the Company matures.

6. Family Management Gaps can be a touchy issue as family companies are often run and managed by family members. However, if a qualified family member is not available for a post, it is important to fill the management position with someone outside the family who has ample experience and history with the Company and the family members. Bringing in outside Professional Managers can be a mistake as they can alienate suitable non-family employees and lack an established relationship with the family members in the business. Only hire outside management if no qualified alternatives exist within the Company.

Family Business Conflicts and How to Deal with Them

Family businesses are naturally pre-disposed to conflict so it is very important to establish firm ground rules and roles:

1. Clearly define accountability and key responsibilities.

2. Assign jobs and positions relative to experience, training, skills, capabilities and interests.

3. Without clear job definition and respect, family members are often performing identical tasks and jobs with overlap in responsibilities, which ultimately causes an unhealthy competition and a constant vying for attention from parents and family authority figures. This often results in clicks forming within the company which can create a lot of conflict and a lot of poor productivity.

4. Family Businesses should work with Small Business Consultant to develop, design and implement a fair and firm organizational structure which promotes professionalism and shuns clicks and in-fighting.

5. Keep emotions out of the decision making processes in a family business. Be sure you are fighting the issues, not the emotions or personality conflicts. Discussing and agreeing to plans prior to major Company changes and events take place fosters a professional environment of respect and cooperation. Keep the personal family business where it belongs, at home. Again, an experienced Business Consultant can be very useful in this area to help in developing business rules, regulations and protocols, along with, decision making structures and processes. Additionally, it is important to develop structures, policies and rules to guide non-family employees and interactions between family and non-family employees. Non-family employees often feel alienated and unimportant if these accountability, responsibility and organizational systems, processes and structures aren’t clearly defined and effectively implemented and adopted throughout the Company.

Form a Family Council

A Family Council needs to be entirely composed of the family members that are significant to the future of the family company and hold significant interest in the company. There needs to be clear and open communications with in the council and outside the council to the business management. Family members should really feel comfortable in sharing their ideas, thoughts and concerns. It is important to foster a trust and understanding among the family, providing a valuable structure and forum to address and fix issues which can develop as the business grows and matures. It is the vehicle to develop and put in motion Company plans; particularly the business’s Long-Term Strategic Plan.

The council should provide the Company Strong Strategic Direction, Objectives, Goals, Milestones and Performance Standards to carry out its Business Plan. The Council can be headed by the Company’s Chairman (if a family member) so the board of Directors has a true understanding of the Company’s long term direction and growth goals. While the Council takes in consideration all Key family members’ inputs and opinions, it is not’s necessary to have 100% family participation on its Board. The Family Enterprise’s Board of Directors should contain the top family executives (Chairman and President/ CEO, etc.); however, it should also consist of non-family members to ensure objectivity, different viewpoints and experience levels. The Council is for family discussions and providing strategic direction to the Board, which in turn, contains a mix of family and non-family alike. The family council can be a great resource for a family company’s Funding Business Plans.

Making Family Business Function

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According to Mr. Cooper, the Victrola was sold in 1927 by his ancestors in the old Cooper Music Company three generations ago when it was still based in Pennsylvania. A descendant of the original owner saw the Cooper Music logo inside the Victrola and decided to see if the company was still around. Not only was Mr. Cooper happy to hear from the Victrola owner, he was so interested in the Victrola as a family memento that he decided to buy it back.

Blake Cooper and his siblings are the fourth generation of Coopers to manage the Cooper Music Company, which celebrated a century of business in 2006.

The Coopers have a "history wall" in their facility which demonstrates their understanding of the responsibilities and significance of being successors to a family business. Looking back at the triumphs and failures of their ancestors inspires them to stay the course. However, the Coopers emphasize that a strong sense of history must be combined with the ability to embrace change. This delicate balancing act between the lessons of yesterday and the challenges of today is their secret of success.

Learn to balance historical legacy with the ability to adapt to change. That is a key strategy for a successful family business. Here are five more strategies that can help your family business grow:

1. Emphasize the "business" aspect of "family business"
If a family business puts too much emphasis on the "family" aspect of their operation, all sorts of problems can arise. Imagine a family that tackles a business problem the same way it decides on what movie to watch – everyone has a suggestion and no one wants to give in. This kind of informal business infrastructure can lead to indecisiveness, confusion and, ultimately, a lack of effectiveness and productivity.

Like any other business, a family business should have a clear vision and mission. It should have clear objectives as well as internal systems and processes that can help the company achieve these objectives.

If you are not sure whether you treat your company as a professional business, ask yourself one thing: do you have a clear-cut set of objectives and complementary systems and processes in place? Or do you lack even something as basic as a table of organization? This leads us to our second strategy.

2. Clearly define roles and responsibilities
In many family businesses, family members are equipped to handle similar duties and responsibilities. There's nothing wrong with that. In fact, having multiple and flexible roles is a hallmark of a strong family business. It allows family members to quickly close ranks to overcome big challenges.

However, it’s one thing to have similar roles and responsibilities as opposed to having overlapping roles and responsibilities. The latter leads to endless debates even over the smallest things, which slows the wheels of the organization down considerably.

From the very beginning, clearly define roles and responsibilities so that everyone knows who is in charge of a particular area. It simply won't work if everyone fancies themselves to be marketing or production experts and insists on having their way.

3. Have a firm succession plan in place
Without a succession plan, family members who consider themselves worthy of running the business would be posturing and lobbying endlessly to capture the top spot. There would be a tendency to sacrifice growth to gain greater control of the organization.

It’s also possible for the current head of the family business to refuse to step down. That would lead to even more chaos, and it's the business that will suffer the most.

Family businesses should always have a formal succession plan in place that defines the details of how and when the next generation will take over. The plan should also spell out the financial package and benefits of retiring family members. The family may want to consider hiring outside professionals to handle this delicate matter.

4. Avoid "sympathy" appointments
Many of us have felt the frustration of being under a boss who doesn't care about the business or know what he is doing. Is there anything worse for a professional organization than to have unqualified people assigned to sensitive and critical posts?

Unfortunately, there's a lot of that going on in family businesses. Where else can you see the founder's grandson with a freshly minted MBA suddenly being appointed as head of the division? Not only does this affect morale, it also stifles creativity and initiative. Worse, these unqualified family members think their position is a birthright and that they don't have to work hard to prove their worth.

Don't make your family business a storehouse for your children, nephews, nieces or others who can't find a job elsewhere. Always hire family members based on their qualifications and skill.

5. Be willing to seek outside advice
There are times when it’s hard for a family business to make decisions not based on emotion. For instance, can you sell part of the business or hire other family members without emotions coming into play? Wouldn’t it be hard to refuse a family member or sell your grandfather's outdated factory because they are close to your heart?

There are times when it’s best to seek outside counsel from a professional non-family member whose decisions can be accepted and respected by all.

Outside experts bring fresh, objective and creative ideas to the table. You can count on them to make the hard, but wise decisions. Unlike anyone from the family, these external consultants are not too close to the forest to see the trees. They are not burdened by having to please the rest of the family when making a decision.

Guide to Operating a Successful Family Business

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No doubt about it, running a business with a spouse, parents, siblings, children or other family members presents unique challenges over and above the usual problems a small business faces. That's why only one in three family businesses survives to the next generation.

Here are four essentials for striking the right balance when operating a family business.

1. Set some boundaries. It's easy for family members involved in a business to talk shop 24/7. But mixing business, personal and home life creates a volatile brew. Limit business discussions outside of the office.

2. Establish clear and regular methods of communication. Problems and differences of opinion are inevitable. Consider weekly meetings to assess progress, air any differences and resolve disputes.

3. Divide roles and responsibilities. While various family members may be qualified for similar tasks, duties should be divvied up to avoid conflicts.

4. Treat it like a business. A common pitfall in a family business is placing too much emphasis on "family" and not enough on "business."

Action Steps
The best contacts and resources to help you get it done

Seek better balance with outside advice

Decision-making in a family business can sometimes be too closed. Fresh ideas and creative thinking can get lost in the tangled Web of family relationships. Seeking guidance from outside advisors who are not affiliated with any family members can be a good way to give the business a reality check.

I recommend: The Family Firm Institute offers an excellent guide for finding and choosing a family business consultant. Family Business Magazine also has anadvisor directory. Membership in FFI will get your family business access to a variety of other services and information. Family Business Consulting Group offers consulting services and a lot of helpful publications through Family Enterprise Publishers.

Join up with a university-based family business center

Many major universities across the U.S. have developed specialized family business centers that are a terrific place to network with other family business owners and experts.

I recommend: Check the Family Firm Institute's comprehensive list of Family Business Centers, Education Programs & Forums around the world.

Keep up to date on family business matters

Family Business Magazine calls itself "The Guide for Family Companies."

I recommend: The Family Business Magazine eNewsletter is free and will keep you abreast of the latest news and operating tips for and about family-owned companies. Family Business Magazine also lists family business conferences of interest. Family Business Review, published by FFI, is another good resource.

Get your family business properly insured

Family-owned businesses have unique needs for insurance
I recommend: Mass Mutual, the big insurance company, has specialized in meeting small and family-owned business needs for over 150 years. The firm has developed a list of solutions that can help your family business avoid common mistakes. Mass Mutual also sponsors 60 university-based family business centers across the country.

Stay abreast of estate tax matters that impact family business owners

Family-owned businesses have a big stake in and changes the federal government makes in the estate tax laws.

I recommend: The IRS small business/self-employed site has answers to estate tax questions.

Tips & Tactics
Helpful advice for making the most of this Guide

· Family-owned businesses offer unique benefits. One is access to human capital in the form of other family members. This can be a key to survival, as family members can provide low-cost or no-cost labor, or emergency loans.

· Treat family members fairly. Qualified family members can be a great asset to the business. But avoid favoritism. Pay scales, promotions, work schedules, criticism and praise should be evenhanded between family and non-family employees. Don't set standards higher or lower for family members than for others.

· Put business relationships in writing. Be clear up front about compensation, exit plans and other details before they become a problem.

· Develop a succession plan. A family business without a formal succession plan is asking for trouble. The plan should spell out the details of how and when the torch will be passed to a younger generation.

· Require outside experience first. If your children will be joining the business, make sure they get at least three to five years business experience elsewhere first; preferably in an unrelated industry.

The official source of Operating a Successful Family Business is
the Family-Owned Business Education and Training page at Business.com

A family-owned business can generally be defined as any enterprise in which two or more members of the same family have a substantial ownership interest and also participate in the management of the business.

Family enterprises form a significant part of global economy and indeed, some of the world‘s largest corporations are family-owned. Statistics generated by the University of Southern Maine‘s Institute for Family-Owned Business have it that 35 per cent of Fortune 500 companies in the United States are family-controlled.

In Nigeria, names like Dangote, Globacom, Ibru, Anyiam Osigwe, Eleganza and Folawiyo readily come to mind in any discourse on family-owned enterprises.

Many Small and Medium Scale Enterprises in Nigeria are believed to be family-owned. The compositions are made up of numerous combinations, such as husbands and wives, parents and children, and extended family members, who occupy different roles like stockholders, board members, partners, advisors and employees.

According to the Managing Director, Peacegate Oil & Gas, Mr. Ayorinde Adedoyin, an entrepreneur with a family business background in the popular Doyin Group, owned by his father, family-controlled businesses have a number of common challenges that require creative, rather than generic solutions.

He notes that growth limitations, family issues, lack of clear-cut policies and business norms for family members, lack of outside input on how to operate the business, lack of written strategy, poor succession planning, and resistance to change are among the major problems facing family businesses.

Adedoyin bemoans a situation, where many family businesses in Nigeria are waxing stronger and expanding from one sector of the economy to another, while some others have waned in influence.

FOB experts argue that the difficulties faced by family businesses often lead to their downfall. That is why only one-third of such businesses survive in the hands of sons and daughters, while only one-tenth of such continues through a third generation.

The ugly trend in Nigeria, whereby family businesses collapse after the demise of the founder, according to these experts, calls for serious attention. They say family businesses, regardless of their sizes, face significant challenges of continuity, longevity, and ultimately, success.

In view of these hurdles, finding ways to ensure their sustenance has generally been agreed upon by FOB experts as very essential.

According to the Group Executive Officer, Research & Marketing Services Limited, Mr. Adeola Tejumola, there is nothing wrong with a family business, if it can be managed dispassionately. He says it is not compulsory that a family member should manage the business, especially when such a member lacks the right skills.

He notes that lack of capital and resistance to re-investment in the business or pursuit of outside resources have often been known as two major factors that stultify growth in family business.

Proffering practical solutions, he says, ”A family business may grow out of its area of competence but the business can only be sustained by opening up and allowing capital and the right competences to come into the business from available outside sources. By opening up, you allow an array of opportunities to come into the business. Opening up does not mean you lose your stake.”

Citing his firm as an instance, Tejumola says, ”In 30 years, RMS has experienced three transitions; from when the chairman was running the business to his son, and now to a publicly owned company, with the merger with TNS, the world‘s number one marketing research company that is quoted on the London Stock Exchange and Nasdaq. We are going into an era, whereby the company is no more owned by the Tejumola family, although we are still a significant shareholder. The company will now be called TNS RMS in Africa.”

In what seems a piece of advice for SMEs, Tejumola submits that every small business has the potential to become big. Hence, he says, conflict among children of business owners must be nipped in the bud. The best way to achieve this in his view is to ensure that the children of FOBs are raised in a closely knitted manner, affording them the right training and education.

On the right kind of management that ensures success, he says effective communications, strong leadership (from the top), dispassionate and objective decision making are essential recipes for sustaining family businesses.

Strategies for keeping the peace in a family business

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Every family has its share of issues. Combine the emotional elements of family relationships with the demands of running a business and it's no surprise that turmoil is a common outcome in family businesses. However, with the right approach, you can help keep your family business free from explosive situations. A well-managed family business boasts numerous benefits, including:

1. Decreased start-up costs.

2. Potential tax savings.

3. Employee loyalty.

4. A shared vision.

5. A long-term commitment to success.

Action Steps
The best contacts and resources to help you get it done

Outline job qualifications and requirements

Giving a family member a job simply because they're a relative is sure to create problems within your organization. Without proper qualifications, family employees are doomed to fail, creating tension and frustration. Avoid trouble by insisting that family members be qualified for their jobs with the proper education, training and experience. And hold them accountable for their job performance.

I recommend: The Job Results Management Institute provides forms that can help you pinpoint job qualifications, conduct performance reviews and measure performance. Find performance measurement resources from the Zigon Performance Group.

Define roles

Snuff turmoil by giving family workers clearly defined roles within the company. By outlining the specific parameters of each person's job, your family employees will understand the scope of their responsibilities and will be less likely to tread on each other's toes.

I recommend: SBA.gov provides tips on how to write a great job description. Get a look at some common duties included in various job descriptions in Monster.com's job profiles.

Compensate fairly

Just because someone is family doesn't mean they should be paid an exorbitant salary. This can lead to tension among the ranks of your non-family employees.

I recommend: Use Salary.com's free Salary Wizard to find average salaries, including bonuses, for dozens of job categories. Job valuation reports that give you a complete look at salaries, bonuses and raises for a variety of positions are also available for a fee from Salary.com.

Schedule family meetings and retreats

To make sure that all family members are on the same page in terms of business strategies, operations and future plans, hold regular family meetings. Consider an annual retreat to encourage family bonding, which plays an important role in the ongoing success of a family firm.

I recommend: The Family Business Consulting Group, authors of Family Meetings: How to Build a Stronger Family and a Stronger Business, offers family business meeting resources to ensure that you get the most out of your meetings.

Select an advisor or consultant

Since family enterprises face unique challenges, it may be beneficial to hire a family business expert as an advisor or consultant. Outside advisors can assist you in making sound business decisions while taking into account the emotions and personal relationships involved in a family endeavor.

I recommend: The Family Business Consulting Group outlines the benefits of working with a consultant. Review questions to ask a potential advisor at theFamily Firm Institute, which also offers links to consultants who specialize in a host of family business topics.

Create a succession plan

A succession plan can help ensure the smooth transition of your business to the next generation. By choosing a successor and communicating your succession plans with all family workers, you can avoid power struggles.

I recommend: SuccessFactors.com offers success management software and succession planning Webinars. Familiarize yourself with the documents necessary for transferring the business, such as buy-sell agreements.

Tips & Tactics
Helpful advice for making the most of this Guide

· In spite of your efforts to keep the peace, conflicts may arise. Your best bet is to deal with them head on rather than hope they go away on their own.

· Encourage family members to keep business and personal lives separate.

· Bonuses and incentives should only be given if predetermined objectives are met.

· Non-family members performing the same work as family members should be paid equally.

· Provide opportunities for advancement for non-family employees to avoid frustration and improve employee retention.

Family, Business, The Human Givens

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The Human Givens approach says that each of us has both essential physical and emotional needs, and if healthy all the resources within to meet them, no matter our race, background or culture.

These needs and abilities are what make us human. They have evolved over eons and are incorporated into our anatomy, which in part determines how we relate to the world. This is why they are referred to as 'Givens'.

When our innate needs are met we feel valued, happy and fulfilled, but when unmet, or we are using our resources inappropriately we distress ourselves and those around us.

Most of us would agree that our emotional needs are for:

Security and safety, including a home and family life that allows us to fully develop
The need to receive and give attention
The ability to freely choose who we are, what we do, and how to live our lives
To connect to another emotionally, as well as physically and for personal gain
To belong to an identified community such as a family, a business, a country, or a social network
To receive unconditional acceptance for being from a number or sources, even when our actions are not as good as our innate qualities
A means to retire, reflect, consolidate our experiences in private
A sense of who we are perceived in relation to others
The ability to recognize our achievements, and for others to recognize our competencies
Challenges to provide us with a sense of meaning and purpose

Biologically and mindfully we are given the ability to meet these needs for example each of us, when healthy, possesses:

A memory within which we can remember distant events and re-author our stories and history
Communication patterns with which to build a language and relate to others
A logical mind and imagination with which to build concepts and solve problems
The ability to recognize patterns and to create metaphors with which to solve problems, and also communicate concepts
The ability to see ourselves through the 'third person' position and thus correct some of our behaviours
The gift of nightly dreams, which subtly re-program our minds from one day to the next whilst adjusting our endocrine system by meeting unresolved expectations from the immediate past

The Human Givens Approach is rooted in the very latest understandings from psychobiology, as well as some ancient wisdom and inspiration.

The Human Givens Approach is described by many as 'the missing heart of positive psychology'. By adopting it we become inclusive in our approach to family and business matters, and offer ourselves freely to people from all races and cultures, whilst also learning from them.

Their Strengths and Weaknesses of Family Businesses

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In September 2007, the New York Times reported on a study that sheds light on this question. Citing a study by the London School of Economics on 700 manufacturing companies in four countries, including the USA and UK, the Times reported that "the survey found no difference between a family-run company and the typical one," based on various performance measures.

This study tells us that family businesses can compete on the same playing field against non-family businesses, and that family businesses can be as strong (or as weak) as its competitors. It all depends on how that business manages its strengths and weaknesses. When it comes to family businesses, a company's strengths and weaknesses are usually the opposite sides of the same coin.

There are eight areas where a family business tends to differ from a typical business: infrastructure, roles, leadership, family involvement, time, succession, ownership/governance and culture. How a family business manages a certain area determines whether it is a strength or weakness.

Family businesses usually have an informal infrastructure. This allows strong family businesses to be flexible innovators and entrepreneurs. On the other hand, the informal infrastructure makes weak family businesses indecisive and resistant to change. Some of them don't even have organization charts, which makes boundaries unclear and adds to the overall confusion in the organization.

In strong family businesses, family members have multiple and flexible roles, which allows them to quickly close ranks to face problems and make quick decisions. On the other hand, having multiple and flexible roles can lead to confusion in a weak family business, which results in nepotism, finger-pointing and things not getting done. Having dual roles can also blur a family member's objectivity and constrain his decision-making. It can also lead to unqualified people being appointed to sensitive posts simply because of their position in the family.

Families with creative, innovative, ambitious and entrepreneurial leaders often have a strong family business. Families with autocratic leaders result in a weak family business with weak systems and structure. These poor leaders often refuse to step down even when the time has come and have little regard for succession, which further weakens their organization.

When family members are professional, hard working, loyal to their company and committed to excellence, their family business is strong. These family members also tend to have a strong family spirit, are proud of their family name and share a family dream as well as a sense of mission and vision. On the other hand, weak family businesses are run by people who can't separate family issues from business issues. They lack objectivity and make decisions based on emotion. They think in terms of what is best for themselves and not for the company.

Family members in a strong family business have a long-term perspective and are patient with capital. They have deep ties with their employees, customers and other principals, which have been built over time. Meanwhile, family members in a weak family business are tied to tradition and find it difficult to change and adapt. Their family history has a strong influence on their decisions. Once they are disappointed early in a relationship, they find it difficult to build trust.

Strong family businesses are concerned with succession, and possible successors are trained early and mentored throughout their life. When the time comes, the head of the family business leaves graciously, with full confidence in his successor. In a weak family business, the family is unprepared for succession and often struggles to select the right successor. Also, the head of the family refuses to step down.

In terms of ownership and governance, strong family businesses are usually closely held and the family has a high degree of control over the organization. Weak family businesses often do not answer to stockholders or to an outside board of directors. There's a tendency to sacrifice growth to gain greater control of the organization.

Strong family businesses have a culture that is informal, efficient, creative and easily adaptable. Weak family businesses have cultures that are inefficient, resistant to change and highly emotional. Innovation is often stifled by tradition.

In the final analysis, there are three qualities that determine whether a particular area is a strength or a weakness for a family business: (1) the quality of internal systems and processes; (2) the ability of the company's principals to separate family matters from business matters; and (3) the flexibility of family members and their ability to adapt and learn the prevailing trends within their business and industry.

If a family business can address these three areas effectively, there is no reason why it cannot prosper and perform better than its competitors.

Ensure Your Legacy with a Family Foundation

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Faced with the prospect of being constantly bored and moping around the house endlessly with so much time on his hands, the retiring head of the family business instead resists his retirement. Or, if he has already retired, he decides to “un-retire” and regain his old position in the company. Both scenarios can upset any well-laid family succession plans and provoke heated emotions.

But there’s a valuable instrument that can overcome these fears and provide a channel for the retiring family member to continue to contribute to society. That’s the family foundation. In this instance, a family foundation refers to a non-profit, non-government foundation, usually in a family member’s name, that is devoted to doing civic or charity work within the community.

Take the case of Andrew Jordan, who founded of a convenience store chain in Seattle 30 years ago. For the last three years since Andrew retired, his son, Eric, has been at the helm of the family business and has ushered in a period of great success. Meanwhile, Andrew and his wife Emily, who are both in their seventies and in excellent health, continue to lead active lives. A few months ago, Andrew got tired of traveling, fishing and playing golf. He has also spent so much time puttering around the house that he has run out of things to do.

After speaking with Emily, Andrew decided that it was a good idea to return to the family business. Otherwise, he was afraid that he would lose his mind out of sheer boredom. Andrew felt it was an excellent idea, but his son Eric was not exactly jumping for joy. Eric felt he had done a good job running the family business, which indeed he had, and that it was simply was unfair for his father to get back the chairman’s seat. There were no heated words exchanged but Eric was clearly disappointed and his father naturally concerned.

Andrew called a family meeting with Eric, his three younger brothers and other family members who also held positions in the family business. After several days of discussions, the family understood that Andrew and Emily needed an outlet for their creative energy. The family was deadlocked about what to do and Andrew did not budge from his desire to return to his old position.

The next day, one of the younger sons had a suggestion: why not set up a family foundation to help families in Seattle to deal with leukemia. Andrew and Emily had lost their youngest son to this disease so the foundation stood for a cause that was close to their hearts. The pain of losing a son was still etched in Andrew’s heart. He felt it would be a labor of love to help other families cope with the same problem. He and Emily could dedicate the foundation’s efforts to their late son.

In an instant, Andrew knew the foundation was a good idea. His attorneys and accountants loved the idea as well, especially since it meant some significant tax savings and would jump-start the estate planning process. It was a go.

Once the foundation had been set, Andrew and Emily had another pleasant surprise. This new endeavor had rekindled their deep love for one another and had brought back the sense of excitement and challenge that they had felt when they were starting the family business. The foundation added new meaning to their relationship.

Moreover, their son Eric also loved the leukemia foundation, not only because it helped him retain his position in the family business, but also because he knew that, when it was his turn to retire, he had a place to go to.

The lesson is that, unless a retiring family member has something worthwhile to move to, he may resist his retirement and refuse to leave the family business. In this instance, it is clearly not the title or the sense of authority that the retiring family member wants to cling to. He simply wants a place he can be passionate about, a place that gives him a strong sense of accomplishment.

In the final analysis, the goal of the family foundation is to provide the retiring family member with the same things the family business provided: a venue for his creative energy where he can have an impact on the lives of others.

No one wants to retire and lose the thing that defines him in the family and in the community. Who truly wants to retire and have nothing to do but twiddle his fingers and watch time go by? Having a family foundation solves both these problems. It also provides a lasting legacy for future generations of the family.

Family Business And Family Therapy

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It’s not just your family who gains from a family consultation, your employer, school, and local community will benefit too. This is because you will feel able, and want, to contribute more, which in time will bring you public esteem and this will benefit you.

Successful families have always been networked into their communities. In the past this meant their village, or local neighborhood, but today we live in a global village and the better connections you have, both locally and internationally the more your family will prosper.

Unfortunately not all families, or branches of families, know how to communicate effectively, and for business families this spells disaster.

Powerful families become examples and models for others. These may, of course, be either positive or negative. Even successful families at times come under pressure to conform and adopt behaviors that aren’t necessarily in their best interest.

Everything changes but not everyone likes change. Change sometimes presents challenges to families who are forced to adapt to new environmental conditions such as: market forces; climatic and political change; as well as the widening interests of the members of whom it is comprised.

No one knows who started the first family business. Tribal society bartered but we believe money was first used in Cappadocia 2250 B.C. in the form of silver ingots. The earliest coins were made in Lydia . Both are now areas of modern Turkey the home of ‘The Family Business School’.

Even in societies where much of commerce was nationalized small family businesses thrived. This even put many family members at risk due to the political climates in which they operated their businesses, yet they persisted, why?

Quite simply because people will always require personalized goods and services, which frankly large conglomerates and state controlled industries are unable to supply. Over 75% of worldwide business today is, according most estimates, family business.

Trading has long fueled communication, diplomacy, and understanding between nations and people. The ancient Phoenicians traded with the Celts of the area comprising the modern British Isles before the Roman invasion of A.D. 43. The Silk Road has brought oriental luxuries from China into Europe for thousand of years.

Not all family business is healthy business. Once profitable enterprises, such as slavery, and modern trading in illicit drugs, is usually enmeshed in violence, corruption, and an unhealthy lifestyle for the families controlling those businesses.

But where families have traded openly, offering useful goods, or services, whole communities have prospered as a result.

It is a truism that most of us prefer to buy from people rather than base their purchasing upon rational decision-making processes. Major brands are associated with people, for example the Virgin brand is associated with the British Billionaire Richard Branson, although he sold the Virgin record label to EMI in 1992. Microsoft is associated in the mind of people with its founder Bill Gates, and Steve Jobs of the rival company Apple Computing another example. For an older generation IBM was thought to be the embodiment of Tom Watson Junior’s philosophy.

Marketers capitalize upon this, so today we are swimming in a world of such brand names as: Lacosté, Benetton, Armani, and Tommy Hilfiger. Such branding ascribes to products ‘human virtues’ and customers identify with these.

A successful family business will be a themed business, probably rooted in the personality of the founder and formed in the first years of its operation. This is a virtue and a problem as the company grows and diversifies. The founder may be long dead but his spirit may haunt the organization like a ghost in a machine. Symptoms of this frequently include a lack of willingness to step beyond the founder’s original methods into new technology, or attempts to completely break with tradition that fail because they are based upon rebellion rather than innovation.

Such difficulties require careful management and knowledgeable guidance. The involvement of trained family business consultants may benefit family companies suffering multiple symptoms as a result of these maladies.

The Oldest Family Businesses in the World

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A case in point: is there any human enterprise that has lasted longer than 1,400 years? That's how long Japan's Kongo Gumi company was in operation before it closed its doors in 2006 after 14 centuries. This Japanese temple builder was founded in 578 AD and recorded revenues of $67.6 million in 2004 before it collapsed due to excessive debts.

When it comes to family businesses, the Kongo Gumi is by no means an aberration. The following is a list of the oldest family businesses in the world.

1. Hoshi Ryokan
Founded: 717
The Hoshi Ryokan is listed in the Guinness Book of World Records as the oldest hotel still in operation (ryokan is Japanese for traditional inn). Located in Japan's Ishikawa Prefecture, the hotel began as a spa on an underground hot spring which was built by the Hoshi family because, according to legend, the god of Mount Hakusan ordered it. Today, the Hoshi Ryokan has 100 rooms and can accommodate 450 people.

2. Chateau de Goulaine
Founded: 1000
Located in Haute Goulaine, France, the Chateau de Goulaine is a historical castle that is owned by the Goulaine family and open to the public for weddings and other functions. It has a renowned museum on its premises as well as a collection of rare butterflies. On most days, hundreds of butterflies can be found flying freely to the delight of visitors. The Chateau de Goulaine is also famous for its vineyards and elegant wines.

3. Fonderia Pontificia Marinelli
Founded: 1000
This bell foundry was founded by the Marinelli family in Agnone, Italy, a small town in the Appenine hills. The Fonderia Pontificia Marinelli still uses traditional techniques to create its bells: they first make a bell out of wax then overlay it with metal. Some of the company's bells can be found in Jerusalem, New York, Beijing, Korea and some places in South America. The foundry currently employs 20 people, including five Marinelli family members, led by managing director Pasquale Marinelli. There is also a museum beside the foundry that showcases the sculptures of Ettore Marinelli, Pasquale's brother.

4. Barone Ricasoli
Founded: 1141
Located in Siena, Italy, Barone Ricasoli is a producer of wine and olive oil. It was founded by the Ricasoli family on their Brolio Estate, which now spans over 3,600 acres, most of which is devoted to wine production. Its most notable wine is the top quality Chianti Classico. The elegant Castle of Brolio provides a stunning backdrop to the vineyards and hosts its own fine dining restaurant. The company is currently run by the 32nd Baron of Brolio, Francesco Ricasoli.

5. Barovier & Toso
Founded: 1295
Founded by the Barovier Family on Murano Island near Venice, Italy, Barovier & Toso is a glass production company that specializes in crystalline glass and mother-of-pearl glass, especially for drinking glasses, chandeliers, wall lamps and other decorative fixtures. The Barovier family entered into a partnership with the Toso family, also renowned glassmakers, in 1936.

If you're wondering about the oldest family business founded in the United States, that distinction goes to Turtle Farm in Dover, New Hampshire, which was believed to have been built between 1635 to 1638. It was founded by Englishman John Tuttle, who was shipwrecked near Maine in 1635 before arriving in Dover. The farm covers 240 acres and grows strawberries and vegetables.

Meanwhile, the oldest family business in the United Kingdom is John Brooke & Sons, founded in Huddersfield in 1541. The company supplied fabrics for the uniforms of military personnel, including British, French and Russian troops. Today, its old buildings have been transformed into an entrepreneurial development park by Mark Brooke, who represents the 15th generation of Brookes to run the company.

How To Deal With Family Feuds

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Many people have the misconception that successful family businesses are those that have family members who share a common view of the company's objectives and how to attain them. This isn't the case. In fact, in most cases, it's actually the opposite that is true. Like most families, even successful family businesses have their share of disagreements, but these are talked about and resolved using a range of procedures.

Successful family businesses have learned how to deal with their disagreements and feuds. They have learned the importance of dialog to their family business success. And although some tension may still remain among certain family members, they have learned not let it affect the day-to-day operations of the business.

For example, Fred and Victoria are the owners of a third-generation business, with sales of over $6 million a year. They have four adult children who hold senior positions in the business. Everyone attends a formal family meeting every month where each person delivers a progress report on his area of responsibility and gives updates on action items from the previous month's report. The family also takes up new proposals and has discussions and debates on new issues and ideas. At times, no decisions are reached on key issues, but the family members agree to continue the discussion at a later meeting when more information and research is available.

Fred and Victoria are very pleased at the way these family meetings work. They have every reason to be since these meetings are a prime example of a family working together harmoniously in the best interests of the family business. However, this wasn't always the case.

There was a time when Fred and Victoria dreaded the monthly family meetings. It seemed like nothing positive ever came about. The family generally feuded about this thing or that and people would lose their temper and engage in screaming matches, insulting each other viciously. It came to the point that Fred and Victoria wanted to stop these family meetings because they felt that it was only tearing the family apart. They had even thought about selling the family business because they could not see it being run effectively by their children after they had retired.

One night, after one particularly emotional family meeting, Fred and Victoria sat down at home and wondered where they might turn for help with their feuding problem. They spoke with their accountant who advised them to engage a family business consultant with background training in family therapy.

In the event they engaged Jack Woodlander. Jack had spent his early years in banking before changing careers and obtaining a Master’s in psychology. During his second career he worked with families in hospitals treating such conditions as eating disorders with family therapy skills. Jack’s career in the hospital ended at retirement but Jack felt himself to be too young to stop working, and ‘waste’ his skills. He therefore studied family business consulting and had recently ‘hung his shingle on his door’ when he was consulted by Fred and Victoria.

Fred and Vera had three things at the end first meeting with: (1) A better understanding about how each of them was misunderstanding the other: (2) A list of rules that everyone should follow at family meetings; and (3) A decision to bring in an outside party into the monthly meetings to ensure that the rules were followed. The couple agreed that the outside party had to be someone everybody respected. They agreed to bring in Uncle Harry, the brother of Fred's father who was also a highly respected lawyer in the state.

Fred and Victoria agreed that the biggest problem at the monthly meeting was that no one wanted to listen or give credence to other people's point of view. Hence, much of the rules revolved around that. The seven simple rules they discovered with Jack Woodlander’s help are:

1. Try to understand the point of view of other family members. Think before you talk.

2. Recognize that key decisions are reached one conversation at a time. Never raise your voice to prove a point or shoot someone else's point down.

3. If you disagree with someone, request for more information and insight from that person. Ask for examples that will help you understand his point of view.

4. In cases of strong disagreement, never forget that the family comes first and that our shared commitment to the common good is of the utmost importance.

5. As a group, agree on a "Rules of Behavior" that everyone swears to follow in order to avoid a lack of etiquette and boorish behavior.

6. Sarcasm is not allowed. Never ridicule or insult any other family member. Recognize that it is acceptable to have different opinions.

7. Set a time limit for debate. When that time limit elapses and no consensus is reached, agree to table the topic for further research and for discussion in a later meeting.

Everyone agreed to the rules and gave his commitment to abide by them. But this did not mean that changes came right away. Meaningful change rarely does. But in time and with everyone's total commitment to these seven rules, all the family learned how to have more effective meetings. Today, Fred and Victoria both feel that these monthly meetings are the backbone of their family business.

You may ask why Fred and Victoria didn’t ask Jack Woodlander, their family business consultant, to act as ‘umpire’ in the monthly meetings. Well they did, but Jack declined: “It’s not a family business consultant’s job to join the family firm,” he explained. “My task is to provide skilled specialized help when needed and enable your family to create your own solutions.”

Lessons from 100-Year-Old Family Enterprises

2011-05-26T00:28:00.000+06:00

Impressive, isn't it? But here's another set of statistics that will show you how difficult it is for a family business to succeed in the USA -- only 30% of family businesses transition successfully to the second generation, this figure drops to 12% from the second generation to the third generation and to a low of 3% from the third generation to the fourth generation. In a nutshell, only 3% of all family businesses ever make it to the fourth generation. That figure is absolutely startling.

Given those facts, what do you think are the odds of a family business making it past the 350-year mark? Near impossible, don't you think? That's almost true. But believe it or not, over 100 family businesses in the US have surpassed the 100-year mark, many of them dating back to the 17th and 18th century.

In 2003, Family Business magazine conducted a study on 102 of the oldest family businesses in the US, including 43 manufacturing firms, 25 service companies, 21 farms, 10 retailers and others. They businesses include the likes of Zildjian Cymbal Co. (founded in 1623), Shirley Plantation (1638), Barker Farm (1642) and Miller Farm (1684). The list is diverse and spread over 36 different states. But one thing they have in common is that all of them have been around for over 100 years.

After careful study, the magazine identified four key traits shared by many of the oldest family businesses in America. They can be considered vital lessons of success for family businesses that also desire to pass the test of time. They are as follows:

1. Remain small
It doesn’t seem like sound business advice, particularly in the light of modern-day expansion and globalization, but the numbers bear this lesson out: small family businesses have a greater chance of passing the test of time than large ones. Of the 102 oldest family businesses in the US, around half have less than 15 employees and many have less than 10. On the other hand, only seven of the 102 oldest companies can be considered large corporations, with revenues of over $3 billion. As Family Business magazine notes, there is sound long-range business sense in the Biblical saying, “The meek shall inherit the Earth.”

2. Avoid going public
Offering the company’s stocks to the public may be a tried and tested way of raising capital, but it also tempts takeover artists into pouncing on the business. On the other hand, keeping ownership of the company strictly within the confines of the family can help the family business last for over 100 years. To illustrate, only three companies among the 102 oldest family businesses are publicly traded corporations, and all three are at the bottom of the list – R.R. Donnelley at number 94, Anheuser-Busch at number 88 and Corning at number 65.

3. Stay away from major cities
Of the 102 oldest family businesses, only 27 companies were located in large metropolitan areas that had at least one major professional sports team. That’s just a little over 26%. Meanwhile, of the 50 oldest family businesses, only seven were based in major urban areas (14%).

4. Let a family member run the business
In general, family businesses that had a family member at the helm outlasted those businesses that were run by non-family members. Apparently, when it comes to business longevity, it’s not enough to tap a professional manager to run the family corporation if you want the business to be around for over a century. The family must be hands on. As the old cliché goes, “Blood is thicker than water.”

It seems then that if the goal of your family business is to create a leviathan then most probably your company will eventually pass out of family control, if not in your generation then like as not in the next. This may not be a bad thing for the business, and indeed your descendants may continue to benefit financially from their shareholding in the company you founded.

If, however, it is your desire for your business to remain totally within the control, and day to day management, of family members then small maybe beautiful after all!

How To Create Excellence in Family Business

2011-05-26T00:26:00.002+06:00

But what is it that moves? Who reaches out? What is the inspiration that leads to such creative impulses? Quite simply life has a desire to witness itself in many forms, and, as agents of life, each of us will thrive if we help with this task.

This secret is flow. All religions and most philosophies recognize it seems there is an energy that flows between us and between the objects in our respective worlds and ourselves. When this flows freely we are creative and healthy, but when we restrict this flow by holding on to the familiar until it has had its way with us, then we feel ill at ease, we become diseased.

The prophets of old are reported as hearing the voices of their gods commanding them. It has been suggested that humans lost this ability 10 - 15000 years ago when we developed rational thought and intuition.

Intuition is far closer in its nature to the guidance that our forefathers received than is rational thought. Rational thought provides us with free will at a price. Sometimes our rational mind urges us to abandon our ‘crazy’ intuitions.

This can interrupt the flow of energy between ourselves and our world with disastrous consequences because our bodies have to bear the strain of this constraint and we experience distress. This process in turn inhibits our abilities both to intuit and also to think rationally.

In commerce and industry we must listen to the hearts as well as the minds of employees at all levels of our businesses. We encourage them by offering training in both thinking and technical skills. We loan our people on charitable projects exposing them to new challenges and less certainty. When they return to us we find them refreshed, alert and with greater creative flair to add value to our businesses.

A little chaos is an aid to creativity. Building No. 20 was built at Massachusetts Institute of Technology as a temporary structure during World War II. It was finally demolished in 1998. The hut, built entirely out of wood was easy to personalize and customize. Researchers found inspiration from the piles of ‘junk’ left behind by previous experimenters over the years. This old equipment was often put to good use in later experiments. The building itself was so pitiful that no one ever competed for the space there. Building No. 20 boasts the spawning of more creative science than any other building of comparable size in the USA.#

Richard Semler CEO of the Sao Paulo manufacturing giant Semco actively encourages executives and employees to take sabbatical leave. They also have quiet and restful areas designated as ‘thinking rooms’, where people may escape from the urgency of production. Semler says:

1. The key to management is to get rid of the managers.

2. The key to getting work done on time is to stop wearing a watch.

3. The best way to invest corporate profits is to give them to the employees.

4. The purpose of work is not to make money. The purpose of work is to make the workers, whether working stiffs or top executives, feel good about life.

To feel good about life it is necessary to blend our energy with events and move with them. Using this philosophy Semler was able to increase Semco’s turnover from $35 million to $100 million in just six years.*

Semco has no receptionists, secretaries, or personal assistants. All employees, Semler included, receive their own guests, make their own copies, and draft and send their own correspondence. There are no private offices, workers set their own hours, and office attire is at the discretion of each employee. Semco has initiated a once a week dialogue session for women workers and regular women’s retreats. It has factory floor flextime, self-set salaries and a system for rotating the post of CEO, who is called a counselor.

Such creative solutions arise from listening and dialogue, rather than debate. We do not necessarily invest thousands of dollars upon the whim of an employee or ourselves. We must however recognize that failure to act on intuition and the inhibition of creative expression come at a heavy price.

Start Being More Creative Today:

1. Keep on the move and listen to whomever you meet.

2. Beware of fixed structures, a laptop or PDA and a mobile phone may be used anywhere.

3. If your job demands that you have a working space make it a light practical adaptable working space.

4. Train someone else to become creative. This will teach you more about your own creativity.

5. The more you try, the more you fail. If what you are doing is not working then, having given it a fair shot, do something else.

6. Vary your routines whilst maintaining your focus.

7. Write off log-jammed work and stay in the flow.

In this section of 'The Family Business School' web site we will be providing information and tools that help family business owners and managers increase their creativity, flexibility, and positive outlook, as well as critically reviewing their validity. Topics covered will include:

Emotional Intelligence
Lateral Thinking Methods
Neuro-Linguistic Programming
System Thinking
Quantum Thinking

Can Business Simulation Really Help?

2011-05-26T00:25:00.000+06:00

There was a knock at the door and Doris, his long suffering secretary, entered the room.

"Acme wants 50,000 more widgets by Tuesday", she exclaimed.

Mickey felt like his head was going to explode. He had no way of knowing if he could meet the order so, as usual, he delegated the decision to Doris. "Yes, please take care of it," he said gruffly.

Fortunately for Mickey, Doris had studied Management Science at Business School where she had been introduced to IndustryPlayer, a business simulation game that creates a virtual world of commerce. Players from all over the globe to compete against each other in a range of different scenarios. Indeed at any one time as many as 500 people may be found competing with each other, whilst learning the valuable lessons of business, and business simulation. Doris had once been addicted to it!

Doris knew that IndustryPlayer couldn't simulate the conditions of Mickey's company, but wondered if there was a reliable software application that might help her determine if the new order could be delivered on time, and importantly how many extra temps Mickey would have to employ to make it so.

She told Mickey what she had in mind and Mickey listened attentively. He slowly began to open his eyes to a slew of business possibilities.

Mickey's problem is that he was afraid to take risks. He felt that if he made a mistake, the entire business would crash around him. What's worse, it would not only be his personal failure. He would have failed his father and grandfather as well as other relatives who depended on the family business. Most of all, Mickey was afraid he would fail his wife and kids. He constantly worried about the future. This fear prevented him from focusing fully on the business. “If only there was a way to look into the future then I would be better equipped to manage the risks,” Mickey told himself.

Now, with Doris of all people showing him the way, Mickey discovered the answer to his prayers -- business simulation. By using the right business simulation software, he could see how his business would fare under different conditions and how his own initiatives would pan out.

Mickey scoured the market for what was available and studied his new business simulation program diligently. It took several weeks but Mickey finally felt he was ready to put what he had learned into action.

To be effective, Mickey knew he had to focus on the four key facets of business stimulation -- data warehousing; business analytics and data visualization; data, text and web mining; and business performance management.

Mickey held a series of meetings with his key executives and other company personnel. First, he concentrated on data warehousing or organizing the data in his organization with an eye towards making the company's best practices available to all in the quickest time possible. Collating all that data was a tremendous task, but also an invaluable learning experience for Mickey. He was surprised at the sources of some of his data, which came not only from his key people but from rank and file personnel as well, like Doris.

Next, he concentrated on business analytics, particularly monitoring his competitors' attempts to acquire and use competitive intelligence. Business analytics and data visualization allowed Mickey's company to measure itself against the competition and to pinpoint the strengths and opportunities that the company could tap and which others could not. Mickey felt that, for the first time, he had a firm grasp of the strategic considerations of his business. More importantly, he learned that he had a strong company on his hands, capable of competing against anyone else on equal footing.

Mickey also used his newfound knowledge of data, text and Web mining to find critical information from within his system and from the Internet. There were so many valuable nuggets of information that was found. Armed with stacks of valuable facts and figures, Mickey and his key personnel now had a clear-cut idea of the specific operational areas where he had an advantage over the competition. He was also able to identify the specific consumer niches in the market where the greatest growth potential could be found.

Finally, it was time to streamline the company through business performance management. Mickey was able to identify operational areas were wastage was high and were resources were poorly allocated. He was also able to effectively synergize the company's various departments to focus on the areas he identified for future growth. Through a compelling audio-visual presentation, Mickey presented to his key executives a corporate-wide scorecard which showed their strengths and their position in the marketplace. More importantly, his presentation showed everyone how to maximize their strengths and reinforce their position to meet the challenges of the future.

Eventually, Mickey also shared his business simulation software with his key executives. Now all of them are equipped to chart the possible course of the business. It’s also a lot easier to agree on strategies and tactics since everyone spoke the same language. Today, his executives are just as addicted to simulations of Mickey's family business as Doris once was to IndustryPlayer.

While everyone in the company realizes that business simulation has its limitations and cannot be relied upon totally to achieve business objectives, Mickey and his people have also recognized that business simulation is an invaluable tool in planning and strategy formulation.

Today, Mickey is slowly beginning to teach his younger relatives all about business simulation. As long as the family paid close attention to the lessons of business simulation, Mickey now feels confident that the family business will be in good shape to pass to the next generation.