Managment Issues in the Global Family Business - Essay Example

 Management Issues in Family Businesses Introduction A family business refers to ventures in which more than one family member has the ownership of a business and most of the members intend to maintain the business in the family. Family businesses are a common method of carrying out business that has been present for a long time. Most private firms all over the world are usually owned and controlled by one family or two families. Although family businesses have been common for a long time, they have only started attracting the attention of organizational studies and policy discussion recently. Scenarios such as that of the Italian Family Blackmailing have commanded the attention of many who are willing to devise solutions for issues that cloud family businesses. This reflective essay aims at illuminating the characteristics, challenges that face family companies, with reference to the Italian Family Business, and some of the measures that can assist in averting such problems. Characteristics and Issues It has been said that most family businesses do not last more than two generations and that wealth barely lasts more than three generations (Lee 2008, p.8; Paisner 2007, p.7). Paisner (2007) notes that less than thirty percent of family owned businesses have sustained their activities for more than two generations before shifting management, and even fewer businesses have managed to maintain their activity to the third generation. This implies that thousands of family businesses wrestle with myriad issues. Successor development, management transition, ownership transfer, creativity, and future focus are some of the issues that becloud the success of family businesses. The Italian Family Business presents some of the key characteristics that determine the success or failure of family ventures all over the world. Muluti, the owner of the restaurant, has to grapple with management issues and fights tooth and nail to prevent Guido from taking away the family business, something that many other similar businesses are grappling with. A look at the major characteristics of entrepreneurial businesses illuminates some of the gaps that might have landed Muluti and his family into trouble. Creativity There is an unspoken misconception that creativity is only reserved for musicians and writers. This belief is commonplace in most family businesses. In others, there is an underlying conception regarding the usual manner of conducting business. Both mind-sets can stifle business creativity, which is an antecedent to innovation, making it hard for family businesses to survive beyond two generations. Creativity that exists in myriad forms, the ability to come up with multiple methodologies to solve a particular problem, heightens the awareness and perceptions of people making them see things differently. From the actions of the trainee accountant and the entirety of the business, it is evident that there is a lack of creativity to solve problems. The members also lack this creativity as it takes them a long duration to realize that there is an issue in the first place. After Guido realizes that the accounting books have serious flaws, it takes the family several days to decide on the way forward. Many family businesses fight hard to find a good balance between creativity and passion in the people that run them. Rather astoundingly, and this is the case for most family businesses, success, or even the complacency that often gradually sidles along with it, is a major cause of the hibernation of creativity. A business is analogous to a person’s childhood; they are both characterized by imagination and energy. However, as success seeps in, the temptation for a person or business to sit back and depend on the winning formula, which stifles creativity, heightens. Many businesses fall this way, as complacency has no place in a thriving enterprise (Genasi & Bills 2003, p.27). Such is the case for the Italian Family Business, with Jasmine as the best example of complacency. She reflects the true picture of what is taking place in the business. She lacks both creativity and passion for her accountancy position. Unfortunately, she highlights this problem a little too late when Guido has already devised his blackmailing plan. Growth Orientation Hardly are members of family businesses motivated to pursue a novel area of growth for their enterprises. Many family businesses have members who lack motivation to follow strategic opportunities for growth. A family entrepreneurship ought to be opportunistic and prudent, as both characteristics are important in spurring growth. Moreover, if a family has long-term commitments, then they will set long-term business strategies and consider long-range investments. This is essential in establishing integrity and continuity in the corporate and management policies of the company. In most instances, family businesses are said to lack professionalism, especially in the manner that members conduct business and deal with problems (Flören 2002, p.33). Sadly, this is not evident in Muluti’s case where the members of the family lack motivation to pursue strategic opportunities. Lack of prudence in the business put the whole family in a hard predicament of having to decide among jail time, selling out, or profit negotiations with Guido. Another factor that affects the growth orientation of a family business is their inward orientation, which is marked by high levels of secrecy. Most of the managers, as is the case with Muluti, are usually not aware of the business proceedings and results (Flören 2002). No wonder Guido takes the family by surprise when he reveals to them the malpractices that have been taking place in the company. The manager or owner of the company did not know of the incompetence of her own daughter, let alone the accounting flaws she was accumulating. Market economies require teamwork and encourage the same to companies that want to expand. However, distrust and secrecy inherent in family businesses and the lack of concern with quality and competitiveness can cause constraints to the booming of entrepreneurial talent (Lalkaka 2006, p.4). In the Italian Family Business, both distrust and secrecy are evident in the running of the business. Employing Relatives In family businesses, entrepreneurs usually employ people who are related to each other, and this could be lead to the development of a host of novel issues. Most of the problems usually arise because shareholder employees usually have high sets of expectations. It is clear that the family members in the case study have different sets of expectations (Jurinski & Zwick 2002, p.23). When the family business was burdened by the tough decision, some worried about how they would not be able to buy clothes with a 30 percent cut, while the manager worried of what the other members in the family business would think if he makes the wrong decision. Still, others expect that mistakes as the one that Jasmine go unpunished by virtue of the employee being a family member. Jurinski and Zwick, 2002, state that family members are usually unwilling to demote or remove a certain employee non-business reasons. Firing strangers is easy as they never get to come back, but firing a family member destroys more than a business relationship. Self-Determination Great entrepreneurs usually have the fortitude to win or succeed. Wal-Mart, LG Electronics, Ford, and Mercedes-Benz are all examples of family businesses whose entrepreneurs had the determination to succeed (Lee 2008, p.8). These entrepreneurs have done everything that has been required of then to succeed. However, parents are at times bad entrepreneurs because of their natural intention to take care and protect their children. Unfortunately, the parental obligations can stifle the entrepreneurial spirit. In the scenario, it is seen how the entrepreneur cares for his daughter, Jasmine, despite the fact that she does not act in line with the vision and the policy of the organization. To succeed, entrepreneurs need to encourage self-determination among employees regardless of their position in the family. Entrepreneurs ought to assess employees to establish whether they take initiatives that will enable the company to reach its goals. Conclusion Family businesses are common all over the world. At one time, most of the leading businesses were family ventures. Despite their popularity and existence for ages, family businesses are usually bundled with myriad problems that, at times, threaten to force them into receivership or closure. This essay presents the different challenges that weaken family businesses, which, if not taken care of, can lead to their termination. From this analysis, it is clear that family businesses have to consider creativity, growth strategies, and self-determination to succeed. In addition to that, good stakeholder-employee relations will ensure that these companies succeed. Reference List Flören, R.H., 2002. Tackling Succession in Dutch Family Businesses, Gorcum. Bills, T. & Genasi, C., 2003. Creative Business: Achieving Your Goals Through Creative Thinking and Action, Palgrave Macmillan. Jurinski, J. & Zwick, G.A., 2002. Transferring Assets in Family Business, ALI-ABA. Lalkaka, R., 2006. Technology Business Incubation: A Toolkit on Engineering Innovation, Science & Technology, UNESCO. Lee, D.J., 2008. Wealth Does not Last Three Generations: How Family Businesses Can Maintain Prosperity, World Scientific. Paisner, M.B., 2007. Sustaining the Family Business, Basic Books. Read More