Family Business Management ENTR 2200 Overview

Family BusinessAn overview : 

Family BusinessAn overview Domenick Celentano

Domenick CelentanoBackground : 

Domenick CelentanoBackground Celentano Bros Inc. Key positions over 30 years Consultant to numerous Family Business Teach Family Business Management Fairleigh Dickinson University

Family Business Facts : 

Family Business Facts 35% Fortune 500 50% GDP 48% of Workforce 90% of All businesses

Family Business Facts : 

Family Business Facts Ford Motor Anheuser Busch Ikea (Kamprad family, Sweden) Motorola Mars (M&M) Walmart (Walton Family)

Family Business Facts : 

Family Business Facts Family Business Average CEO Tenure = 24 years Public Company Average CEO Tenure = 6 Years

What Is a Family Business? : 

What Is a Family Business? Family and Business are similar in the beginning… Headed by one or two people with Autonomy Family has controlling interest Two or more members of the same family are directly involved A firm whose ownership passes from one generation of a family to another (succession)

Two types of Family Business : 

Two types of Family Business Single Generational Beginnings Work in Business Cross line Major Responsibility Ownership Cross Generational Complexities Abound Modify Parent Child Relationship Peers Preparing to take over leadership Business and Life Cycles In Synch Out of Synch

For The Early SuccessorBeing Part of Next Generation : 

For The Early SuccessorBeing Part of Next Generation Family business defines identity Grow up sooner… learning earlier Family = Harmony Career and Wealth connected Entitled to a job

The Three-Circle Model of Family Business : 

Exhibit 5.1 The Three-Circle Model of Family Business Interdependence of the Family and Business System The parts effect the whole… Everything affects everything else Combining Family and Business Makes Life More Complex

Life Stage & Business Stage Transitions : 

Life Stage & Business Stage Transitions 17-22 Transition to Early Adulthood 22-28 Entry into adult world 28 -33 Age 30 Transition 33-40 Settling Down 40-45 Midlife Transition 50–55 Age 50 Transition 55-60 Beginning mid adulthood 60-65 Late Adulthood Late Adulthood Individuation Startup Growth Renewal

Core Question For Families In Business : 

Core Question For Families In Business Why Does This Family Have This Business? What Benefit Does The Family Derive From The Business? No Easy Answer A key area we help define

Core Question For Families In Business : 

Core Question For Families In Business Why Does This Business Have This Family? What Benefit Does The Business Derive From The Family? Assessing Human, Intellectual and Economic Capital No Easy Answer A key area we help define

Developing Credibility & MarketabilityKey Issues for Successors : 

Developing Credibility & MarketabilityKey Issues for Successors Credibility Legitimate Self Confidence Validated By Others Marketability Marketplace values your: Skills Credentials Experiences To Pursue and Succeed in a Career CHALLENGES Lack of positive pressure Mistakenly think you don’t need them Incorrect Parental Perception

Family vs. BusinessKey Differences : 

Family vs. BusinessKey Differences FAMILY Permanent Relationships Unconditional Love Role based on Relationship Maintain Harmony Power… Hierarchy Fairness is equality BUSINESS Temporary Relationships Conditional Approval Role based on Function Maintain Productivity Power… Performance, Title Fairness = performance/equity

Family vs. Business Overlap : 

Family vs. Business Overlap Family Concerns Care and nurturing of family members Employment and advancement in the firm Loyalty to the family Business Concerns Production and distribution of goods and/or services Need for professional management Effective and efficient operation of the firm

Advantages of a Family Business : 

Advantages of a Family Business Shared Value Common Goals Family Spirit Family Name Organization… family also owners Flexible… less hierarchy Familiarity Strong motivations of family members for business to succeed Long Term View

Disadvantages of a Family Business : 

Disadvantages of a Family Business Fighting… infiltration from Family into business Role Confusion Lack of Objectivity Nepotism Succession Problems Isolation Boundary Problems Empowerment

Dual Identity of Family BusinessThe Problems : 

Dual Identity of Family BusinessThe Problems Family Business The Family Carry-Over Role Confusion Identity Formation Credibility/Marketability Enmeshment Supervising Family Members Nepotism

Golden Handcuffs : 

Golden Handcuffs

Challenges for Successors : 

Challenges for Successors Improve Social Intelligence Handling Wealth & Power Earn Credibility vs. Entitlement Writing Your Own Script Planning Your Career Include Family Business In Your Education Avoid Golden Handcuffs Get Objective Feedback

Succession in a Family FirmIncreasing the success rate : 

Succession in a Family FirmIncreasing the success rate A sound, profitable business Stable, healthy family relationships Advance planning for leadership succession Positive family leadership and a team-oriented management structure Presentation of career opportunities without pressure Open communication on family business issues

Evolution of Family Business : 

Evolution of Family Business Entrepreneurial Personal Goals Intuition Hard Work Trial and Error One Man Band Managerial Outside Expertise Financial Systems Structure Tension between Entrepreneur & Managers Professional Market Driven Strategic Planning Mgmt Development Goal Setting Add’l Structures & Systems Growing Pains Focus - Entrepreneur Focus - Family Focus – Business not Family

A Model of Succession in a Family Business : 

Exhibit 5.4 A Model of Succession in a Family Business

Family Business ManagementKey Aspects to manage : 

Family Business ManagementKey Aspects to manage Business Continuation of Family Boundary Confusion Interlocking Systems Systems Differences Closeness or Independence Hierarchy Triangles Family Rules

TriangulationKey communications issue : 

TriangulationKey communications issue Family Business Son Daughter Mom Dad

Interlocking Systems Challenges of melding all three systems : 

Interlocking Systems Challenges of melding all three systems FAMILY Emotional Support Security Fun Inward Focus BUSINESS Tangible Outcomes Task Oriented Productivity Outward Focused Ownership Creates The Plan Vision Future Growth Conflict

Interlocking Systems : 

Interlocking Systems FAMILY Son Father BUSINESS Son Father Ownership Father Sibling Parent Communications Am I the son or manager ? Am I the Father or the boss? Am I the majority stockholder… the boss… the father?

Boundary ManagementA continuing challenge : 

Boundary ManagementA continuing challenge Something That Indicates A Border Or Limit’. Everything Is Defined By A Boundary Keeps Entities Intact True To Their Integrity Function As They Were Meant

Rules and Birth Order : 

Rules and Birth Order Family Rules Myths Birth Order Incongruent Hierarchy

Challenges of Family Business : 

Challenges of Family Business Two mistakes Caring is enough to carry the business Family Business is like any business Dual work & family relationship

Challenges of Family BusinessA Healthy Family = Healthy Business : 

Challenges of Family BusinessA Healthy Family = Healthy Business What is the structure to organize family What does the family want Good communications Does business plan align with family plan

Challenges of Family BusinessStewardship : 

Challenges of Family BusinessStewardship Stewardship Ownership for Preservation for the next generation

Family Growth vs Business GrowthFinancial issues not covered in the text books : 

Family Growth vs Business GrowthFinancial issues not covered in the text books Business needs to accommodate growth of family Families grow exponentially Businesses don’t always

Thank Your for viewing Family Business an Overview : 

Thank Your for viewing Family Business an Overview Domenick Celentano Contact me at: 908 866 1366 dom@domenickcelentano.com