Over 80% of all US businesses are family businesses and they contribute 50% of the US Gross National Product also providing work to half of the workforce. Due to the unique nature of these businesses and the specific problems they face, only about 10% of them survive to the third generation due to the unique problems they face.
Family Businesses can be defined as: “businesses where two or more family members work in the business and share or expect to share ownership, and want to pass ownership on to the next generation”. Dennis T Jaffe
The organizational structure of the business depends on the size of the business and the communication within the company, concerning the decision making and the responsibility.
Family entrepreneurship is very challenging, because the family life and the business life are very different and are also contradicting to each other. What is effective for the business is not always good for the family and things good for the family can be disastrous for the family business. The overlap of family and business and ownership concerns can cause confusion to the organizational structure and the people within the organization. To effectively manage a family business, communication and decision making within the family, the business and the ownership groups is required.
Having a family business, one should consider succession planning and estate planning to protect the business from unforeseen things that may happen in the future. Succession planning is a process that enables the organization to identify talented employees, to train them and to develop their skills and abilities, so they are prepared for promotion and higher more challenging positions.
Estate planning is the process by which the real and personal property of an individual is distributed by a trust or will to the individual’s heirs. It is usually done in anticipation of death.
The financial well being of the family businesses is done by hiring a business and financial consultants. In that way the family business is protected by some family members and an objective and expert opinion about the business situation of the company is given. These experts are very important when the business is in transition from small to larger business.
Young family members sometimes do not want to be part of the family business, sometimes they become uninterested in the business and no desire to participate in its management in the future. They very often take the business for granted, that it will always be there to support them financially.
Not all family members have to remain with the family business. Children should be encouraged to pursue their passions and only if they want to enter the family business, they should be encouraged to do so. Young family members that have worked for other companies often come back to the family business to reach their full potential.
In a family business succession occurs when the CEO passes away or retires. Usually the successors of the family business are the heir of the founder or a member of the family, but not necessary. It is good to have a succession and continuation contingency plan in case of a tragic accident.
Family business is unique, due to its close family connections, experience and expertise. In order to keep its uniqueness, the future of the business should be planned early and carefully, so successors can be chosen from the family.
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