Here is a recent case from India, about a well-known family owned business in the IT sector, the Satyam Computer Systems.

It was the biggest Fraud in the nation and also in the corporate world. It was hard to believe that one of the largest IT companies, Satyam Computer Systems, had undergone such a huge fraud case. Two brothers, Raju and B. Ramalinga Raju, who were the founder of Satyam Computer Systems were arrested in the Satyam fraud case. do u think these fraudulent activities in family busiensses are made easier due to some characteristics of the business itself? if yes and why and maybe someone could contribute articles about it.

A background into how this family business was setup can be viewed in the link to the article given below: http://blogs.hbr.org/cs/2009/01/satyam_and_indian_family_busin.html

The Satyam Computer Systems was considered to be one of the leading outsourcing companies in India and it was among the top five IT companies in India. Ramalinga Raju, who was the Chairman of his company, resigned after revealing that he had systematically falsified accounts as the company expanded from a handful of employees into a back-office giant with a work force of 53,000 and operations in 66 countries. The company listed about 50.4 billion rupees in cash and bank loans as assets, that ended in September and were nonexistent. Revenue for the quarter was 20 percent lower than the 27 billion rupees reported, and the company’s operating margin was a fraction of what it declared.

The revelations from this case caused a major shake-up in India’s enormous outsourcing industry and many large companies were investigated and they had to revamp their back offices.

“This development is going to have a major impact on Satyam’s business with its clients,” said analysts with Religare Hichens Harrison.

In the four-and-a-half page letter distributed by the Bombay stock exchange, Raju had described a small discrepancy that grew beyond his control. “What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” he wrote. “It was like riding a tiger, not knowing how to get off without being eaten.”

Speaking of a “deep regret” and a “tremendous burden,” he sincerely apologized to shareholders and employees and asked them to stand by the company. “I am now prepared to subject myself to the laws of the land and face consequences thereof.”

Learning Points:

· As seen in this case, producing fake records by one member of the family not only caused a major loss to the business but also affected the reputation of the entire family and their business.

· The consequences of using such wrong measures in family business also affect the next generation of the family. As in this case, Raju’s son who was into the estate business, had to go through a series of problems in managing his own business and making up for the financial loss caused to the family.

· Since Satyam Computers was such a big business in India, this fraud case had affected the other IT companies in India as well, as their records were being investigated and countries were being cautious when dealing with the IT companies in India.

Therefore, it is always advisable to do the right thing in the family business or it can have long term consequences for both the business and the family’s reputation.

Pawan, Shaan, Sofia and some of you were considering the possibilities of how you might encourage the establishment of useful CG practice in your FBs during my lecture on the subject this week.

Here’s an article that demonstrates how one FB implemented a new IAD (Internal Audit Department) as part of its general review of CG issues. Note the effect of legislation (in this case US-based Sarbanes-Oxley Act) forcing FBs to consider changes to their management and ways of doing business!

Bring your opinions (through your in-line remarks box) and resources to the table…ie this post!

Since our topic for this week is Family Firm Governance, here is an article about how governance and management help in successful running of family businesses. It talks about how governance is developed over time by family discussions and family visions, as its development is very important for proper functioning of the business.

The article also highlights the importance of having a family creed or constitution and how it can be framed according to the family business requirements. In order to  review the proper functioning of the business and the constitution, the article talks about having regular family meetings and councils. these meetings can be helpful for many other reasons, such as, involving the younger generation into the business, providing for interactions among the various governance departments.

Here is the link for a full access to this article

http://www.slideshare.net/guestd224927/governance-and-management-3476757

If there are any other aspects of governance and management that can aid in successful family business do add them here..!

http://hbswk.hbs.edu/item/2630.html

John Davis in his article points out three components of Family governance:

According to the article, basic governance structure of the family business system is illustrated by the following scheme:

Also Davis gives his vision of the coordination of the family council and family assembly with management and the board on some key plans affecting family companies:

Structures and Plans to Govern a Family Business System

The article “When corporate governance is a family affair” by Robert Zafft, which you can find here recognizes the difficulties in trying to introduce CG into a family firm. Zafft explains that most people try to sell CG in order to gain more capital sources, but this should not be the driving force. In my FB, it is true that it seems the owner and the managers are sitting on opposite sides of the table - as explained in this article. But what happens when the owner is the manager? CG is of paramount importance when trying to impose tight controls on management, however the other important reason for CG is that external shareholders would not invest in a company with bad governance, so the price of capital for many FB’s goes up, making them less competitive. Finally, the most important reason why CG does sell to FB’s is not a matter of capital, but for management succession. The founder will die, as hard as it is to accept sometimes. And whether he can formulate a functioning succession plan is difficult to say, however a structured CG can solve this problem, and keep the family harmony. So mixing CG with the family is necessary!

Finally, to show how firms do not always follow the table above - I have highlighted 2 boxes, which I know my FB does not follow the same way. The top management do not make the strategic plans, the CEO and founder (both family) do. The CEO does and will not make the succession plan, he may counsel and support it - but the founder will generate it.

I found an article about How to manage effective family business meetings. I decided to attach it to this post, since it’s related to the management topic.

http://www.kansasruralcenter.org/publications/FamBusMMG.pdf - here you can find the full article. It considers the example of agricultural business, but the findings could be implemented in any kind of family business meetings.

The major rules of providing effective family business meeting are the following:

1. Choose a meeting facilitator. Begin with someone, either outside or within the family, who naturally has the respect of the family. Later this role can be rotated among family members to broaden the leadership. The facilitator makes sure discussions stay on topic, the meeting keeps flowing, everyone gets to participate and individuals listen to each other. This person helps the family separate business from family issues and problem solving from making decisions.

The facilitator must help the group constructively resolve conflicts.

2. Set an agenda. The purpose of family meetings is to improve communication and understanding about the business. These meetings also can develop the values and policies that will guide the business. Family meetings need to create a safe environment to have conversations about the crucial issues. Meetings can also organize activities to share family news, family history, family memories, and enhance relational skills. Set realistic time allotments with each agenda item. Make sure everyone gets the agenda in advance so they can adequately prepare for the meeting.

3. Invite the right people. Depending on the agenda of the meeting, invite family members who are old enough to participate, in-laws and family members who have a stake in the business. Sometimes it helps to have an outside facilitator, a business advisor or key employees.

4. Plan family retreats. Retreats should balance discussion about the firm with activities that build relationships. Include fun activities such as games, plays, tournaments, talent shows, exercise, music, recognition of achievements, family rituals, and food. Family retreats should happen away from the distractions of the firm.

5. Set ground rules. These help maintain healthy interactions. Some examples are suggested below.

• Be on time and come prepared.

• Listen to understand and then speak to be understood.

• All relevant information should be shared openly with each other.

• Accept and support group decisions.

• Issues should not be shared beyond the family except by common agreement.

6. Keep a record. Delegate someone to record important decisions and discussions. This documentation should be filed so that your family remembers what was decided and why.

7. Organize the next meeting. Ask for suggested discussion topics for the next family meeting. Set a date, time and place. Rotate meeting roles and responsibilities among family members to build leadership and teamwork.

So, on the one hand, this article points out obvious things, but, on the other hand, we can see, that it mentions some important issues that we discussed in class: such as the necessity of involving non-family members in meetings or the importance of written documentation.

Based on Davis, J. 1996. Bivalent attributes of the family firm. Family Business Review, 9(2)

Some thing else I stubbled upon when reading on this topic:

“In the context of this work, corporate governance refers to the organization of strategic leadership and control of the business and the family. It aims at balancing the interests between the involved stakeholder groups. By means of extension of the business system around the family system, the business system becomes spotlighted by the corporate governance regulations. One of the involved stakeholder groups is explicitly the family of the business in its peculiarity as a family. The internal distribution of and the essential structures aiming to assure the predictability and responsibility of the acting persons need to be equally  applied to the family members as for others that take over special tasks within the context of management. Therefore, corporate governance in family businesses comprises in addition to the classical business-governance also the family-governance as an integral part.” (Klein S.B, 2010)

to discuss Governance and Management in Family Business, especially small family firm, the categries of small family business around world is different, it based on culture environment.

from the article,Entrepreneurial management and governance in family firms: an introduction. author try to describ the categries of the Governance and Mangement in FB, here is the key three question need to think about:

1. What are the contingencies and contexts wherein family-based approaches to organizing have an advantage over non-family firms?

2. What are the succession processes and procedures that enable family firms to survive in the long term?

3. Given the advantages some family groups are able to establish and maintain over time in rent-seeking societies, which institutional contexts nurture the creative destruction necessary for innovation and entrepreneurship?

http://www.entrepreneur.com/tradejournals/article/118107663.html

You have now been engaged with learning about Family Businesses and related concepts for 9 weeks.

Below please embed 1 concept map which captures the essence of Family Business for you. Capture all your learning about the various themes, issues, topics and their respective sub-categories into ONE MAP…not multiple Maps

That is 1map/individual...make sure you identify yourself as the map creator- by including your name in the central bubble. This is not optional as it will be considered by Azam Ali and myself as part of your Individual learning portfolio.

Below is sample of a concept map that I have derived from my lecture slides about FB..ie from the lecture on ‘Definitions’ and the lecture on ’succession’…this is just the start.

Ψ Yours needs to look more like the second Concept Map on the subject of Innovation.

You are required to provide comprehensive and rich (pictures, colours, etc) maps such as the second sample that depicts your understanding of the weekly themes and sub-themes. The key themes could form your initial parental branches and then sub-themes branch outwards, etc, etc. Please make sure you embed the images here….this map will also be included in your individual learning portfolio submission.

Below the maps I have provided links to MindMapping sources (free software)- do not feel obliged to construct your maps by using the software- feel free to hand draw, scan and embed:

Useful Concept Mapping Freeware- you do need to sign on for some:

1. Freemind

2. Mind42

3. You also have a great mapping tool called Inspiration available through the college’s Citrix applications resource.

Hello! I have created a hand-made, colorful map that depicts the key learning I have gathered during the semester. I tried to cover as many relevant concepts, since my main goal was to create something useful, practical and fun to look at. I hope you will like it as much as I do. Enjoy!

Hi Guys, here are some mindmaps that I made for the articles used in class. One is about the strategic process in family firms and the other outlines the effects of family and unrelated CEO on firm performance:

Hi, Mindmap

NO idea why its in black, should be in white.

Hey all, here is my mind map….. hope you like it… :

Hey Guys this is my mind-map

here is the mind map…

this is my mindmap:

Here is my mindmap:

 Hi,

Pls click on the link to view. I had problems uploading because it was in pdf format. Thanks

familybusinessbymonique12

So far we have concentrated our learning about managerial and related lessons FOR FBs.

Some of these inputs have come from other well established field of management thinking

….the Family Generational/Succession Life-Cycle for example, and

….some of the models drawn upon from ‘Strategy’ thinking.

Have a read of this article and then contribute to the idea that:

“although FB as a field of study and formal practice is in its embryonic phase, FBs have many lessons to teach other types of businesses and inform ‘received wisdoms’ in mainstream business school thought.”

The article provides one with many useful insights which make one realize that FBs have a lot to contribute to the mainstream business school thought:

1) long-term strategy- widely held public companies see a dramatic rise in CEO turnover, this is often because there is no single institution guding them to focus on the long term strategy even though short term turnover may suffer, where the instituition will back them up. FB like ayala in the article on the other hand structure partnerships that can agree on long-term vision and provide stability at the board level.

2) Market volatility: FB with controlling shares have better chances of riding out a financial crisis. The article provides us with an example of the Asian financial crisis, where Globe, The FB was able to insulate the company from the volatility of the markets, due to a stable and supportive board and put I equity for some aggressive expansion plans.

3) Foreign-debt pressures- the article provides an example of Ayala, the FB based in the Philippines which had accumulated debt of nearly $1 billion. Even thought he company’s revenues were mostly in pesos, it went offshore for funds. Had the business been under pressure to deliver on quarterly earnings targets like public companies, it might’ve hesitated on its leveraging decisions, and great opportunities for value creation wouldve slipped by.

e.g. this Interview argues the case that the conglomerate form of FB is highly valuable, relevant and robust despite most economic, investor and business school thinking suggesting that the conglomerate structure of business strategy (ie unrelated, diversified firms) destroy value, dislocate resources and diversify risks inefficiently.

What other examples can you find of lessons FROM FBs TO other types of organizations AND theory/thinking?

Edit and post here…use your inline remarks box to give opinion and the main body to provide linked resources and references.

According to this article (http://www.bi-me.com/main.php?id=40748&t=1&c=34&cg=4) ”Some 95% of businesses in Asia, the Middle East, Italy and Spain are family-controlled. So are over 80% of companies in France and Germany, and between 60%-70% of those in the US.”

For this reason, research about family businesses is increasing rapidly. Lessons that can be learned, always according to the article, are:

- Long-term prespective (as shaloo pointed out)

- Value driven decision making

Another important characteristic of family firms is stewardship, which comes as a natural thing for family firms.

Source: Shellie Karabell (2009) What makes family businesses unique, and what can we learn from them?

________________________________________________________________________________________________

10 Lessons Learned in 22 Years of Bootstrapping

The author, who runs a family owned business, shares what he learned from his business. In the following way.

1) We made lots of mistakes – View mistakes as learning experiences, Always document mistakes so that they can be referred to in the future.

2) We built it around ourselves – Build business around values capabilities etc.

3) We offered something other people wanted – Don’t follow your passion unless your passion produced something other people will pay for.

4) We planned – Keep a developing business plan, don’t set everything in stone

5) We spent our own money. We never spent money we didn’t have – Don’t take on debt unless you need it cash injection

6) We used service revenues to invest in products – Money should be kept revolving and reinvested into other offerings or businesses

7) We minded cash flow first, before growth – We rejected ways we might have spurred growth by spending first to generate sales later

We put growth ahead of profits – Traded profits for growth

9) We hired people slowly and carefully

10) We did for employees’ families what we did for ourselves

Berry, T., 2009. 10 lessons learned in 22 years of bootstrapping. [Online] Available at: http://smallbiztrends.com/2009/06/10-lessons-learned-in-22-years-of-bootstrapping.html [Accessed 5 April 2010]

Contributing to the main idea of this post, I would like to say that, in my opinion, the link between family business and theories related to other types of business is the following: lessons from mainstreem business studies could be implemented in family business, but not vice versa. Family business has its very specific implications. these lessons often do not fit other types of business.

As example I can provide the article “Family Business: Lessons from 100-Year-Old Family Enterprises” written by Arnold Aitken and Stephen Bray. http://thefamilybusinessschool.com/node/75

Lessons pointed out by this article are the following:

1. Remain small: small family businesses have a greater chance of passing the test of time than large ones. Of the

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.

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.

All these recommendations are based on successful family business experience, but, as you can see, they are not appropriate for other types of bysiness.

In the past, especially in India, due to the orthodox nature of the indian society as a whole, womens role in family owned businesses had always been limited. However, in 2005, that all changed.

The Hindu Succession (Amendment) Act of 2005 removed gender discrimination with regard to inheritance in Hindu joint families. Previously, only the male line, to great-grandson, had inheritance rights. The trend of daughters inheriting family businesses picked up steam after 2005 when the HUF succession norms were amended and girls were allowed to inherit equal shares in family businesses.

The change in regulation, along with the fact that women were receiving more and more education meant that the CEO’s of the family businesses had to start taking them more seriously and allowing them the right to have an input into the business.

However, the change in regulation is not the only factor that has resulted in the increase in women in family businesses,  Globalization and Liberalization have had a very large part to play. The westernization of India means that more and more people are fighting for the same freedom that western women receive.

There is also greater recognition that women can not only do just as well as men, but can also do better. This is connected with the fact that Indian families are increasingly becoming smaller and have found a new found respect for daughters.

To access the full article

Check out this argument regarding the evidence on the factors influencing the decision as to whether adult children, like ourselves, should decide to launch into a new business venture with our FB parents.

1. Search out other positions and arguments regarding the decision to launch into a new venture with parents, provide resource links for all of us to learn from AND

2. ALSO look at previous work into the factors influencing adult childrens’ decisions to join the FB regardless of a new venture.

This latter decision is referenced in the argument I’ve linked here.

Use this post to discuss your experiences as FB inheritors or FM members to reflect on the factors presented in these papers.

For too many people, staying in the family business is the easy wayto worm out of the difficulties of adult life: finding a place where you fit in, discovering what you love to do and living with the fear of rejection.

Especially today, with a dried-up job market, the family business is a way of avoiding a difficult job hunt.

I worked in a family business – a shoes stores and factory just for my holiday. I started when I was 12, selecting new collections for teenagers, and by the end of college I was a member of the company having a power to influence them on their choices because I could see the needs of their target. After so many years, I was a member of the designers in the factory but I wanted to do something else. I just wasn’t sure what and I decided to challenge myself and avoid the easy way of life.

After living in many countries and having enough experience, I am certain that there are three things you should do before you decide to settle down with your family business for the long haul:

1. Figure out your dream job.

Don’t worry about being realistic. Rock star, movie producer, politician: everything is fair game. Then decide if you want to go down the path to fulfill that dream. Don’t feel bad if the dream is impossible. Many dreams are not realistic, but they contain gems of truth. For example, someone who dreams of being a rock star probably wants to be creative at work. The exercise of dreaming helps you to figure out your core needs. Once you know these needs, take an honest look at the family business. If you cannot fulfill your core needs in the family business, you should leave.

2. Get a job.

Even if you are sure you’ll stay in the family business, get a job outside of the business. Job hunting is awful, which is why you should do it. The process is humbling and scary because on one level, you are asking someone to pay you to work so you can eat; at another level, job hunting requires understanding yourself well enough to talk about your dreams, your strengths and your weaknesses. You need to experience what it is like to ask for a day off from someone who doesn’t love you. Working for someone outside your family helps you to interact effectively with all people outside your family. This process is a rite of passage, and if you don’t go through it, you risk stunted growth

3. Take a large risk.

If the entrepreneur is on the high end of the risk-taking scale, the kid who stays in the family business is on the low end. At the end of life, the thing people most often say they regret is not taking enough risks. Make sure that staying in the family business will not make you wish later that you were a risk taker. If you take a large risk early on, then you can be more certain that you are not staying in the family business because you are scared of taking risks. Risks are different for everyone. A mountain for one person is a molehill for another. Find something that scares you and do it.

Adult life is about learning what matters to you and creating a life that reflects your values. To know what’s important, though, you need to see the world.

Take time to establish yourself independently from your family, at least for a while, so you can see yourself more clearly. Whether you stay in the family business or go somewhere else, you’ll be a happier person for making the decision honestly.

I have read an article in Business Week called: Should you Join the Family Business? written by James Olan Hutcheson

http://www.businessweek.com/smallbiz/content/sep2006/sb20060928_575514.htm

The author firstly advises that there is never a right or wrong decision but he does recommend that if one does decide to join one´s parents business one should have:

a) First had work experience (non family related) because this helps build a business judgment and allows one to bring some new perspective and new ideas to our parents’ company

b) Have undergone several work interviews as one day one might be required to interview and hire employees for the family firm. This helps us become more sensitive and able have a better sense when undertaking interviews ourselves.

If having the previous two experiences and deciding to join the Family Business Hutcheson recommends:

“1. Make sure that you have a real desire and passion for the business. Do you like what the company sells? Are you proud of the reputation? Do not join the family business just because your mother or father told you to.

2. Fill out a job application and go through the interview process. Starting work should be a deliberate step and not your father saying, “Come on in tomorrow and start.”

3. Make sure your father or someone else in a senior management position gives you a list of your specific job responsibilities and the criteria by which your performance will be measured.

4. Start your career by reporting to someone other than a family member, if possible.

5. At all costs, avoid taking advantage of your family relationship as it may relate to pay and benefits.” (Hutcheson, 2006)

I also tend to believe that whilst one is younger one tends to seek a path of one’s own. At least in my case I felt I I should not work for my parents after I finished my undergraduate, hence I moved to Caracas, Venezuela´s capital and achieved several years of work experience.

Due to family circumstances I had to leave my job in Caracas in year 2004 and take care of my father´s business which I knew well as I worked in it whilst undergoing my undergraduate. I found that I could see and understand things in a different way, my approach was different and also my passion for it had increased.

If I do go back and live in the same city my parents live I would certainly engage in their businesses as I feel not only passion for my parents but also for what they do and would try to bring in “new blood” into their businesses and profoundly enjoy new work experiences along with them.

The adult child’s decision as to whether or not to join his or her parents to start the business is certainly one of the milestone events.

1) Birley (1991) identified factors such as pressure from parents, interest in the managing business, certain industry characteristics and demographic factors as predictors of adult child’s decision to join the existing family business.

2) The Starvou and Swiercz (1998) model identifies certain family factors, bsuienss factors, personal factors and market factors (like the ones Haithem already mentioned).

A study conducted to determine the factors which influence an adult child’s decision to start a new family venture, came up with the following results:

1) The decision of an adult child to join a new family business with his or her parents will depend on the relative roles of the parties in the new venture, but not which the parent was involved in.

2) The role of the adult child in the new venture is a bigger factor in the decision to enter the business than the opportunity to be involved with a specific parent or both parents without consideration of relative hierarchical roles in the new venture.

3) Hence in summary the adult child’s decision to join a new venture with his or her parents will primarily depend on whether the relative roles the child and parents will occupy in the management of the venture will be substantially equal.

This article is called:

‘Entrepreneurial opportunity exploitation and the family: relationship-based factors that effect the adult child’s decision to jointly participate with parents in anew venture’, (Leaptrott, McDonald, M., 2008)

It can be viewed on:

http://findarticles.com/p/articles/mi_m1TOL/is_13/ai_n32103088/pg_8/?tag=content;col1

_________________________________________________________________________________________________

Most and Least Important Reasons for Which Offspring Choose or Do Not Chose Employment in the Family Business

The above table visually represents the reasons found by Stavrou (1999) that offspring give to join or not join the family business. The information is based on the findings of her study titled Succession in the family business: Exploring the effects of demographic factors on offspring intensions to join and take over the business. The above reasons were all picked by offspring. The data analysis and more information can be found in her study here

Stavrou, Eleni T., 1999. Succession in Family Businesses: Exploring the Effects of Demographic Factors on Offspring Intentions to Join and Take over the Business. Journal of Small Business Management, Jul99, 37, pp. 43-61.

Fleming, Q.J., 2000. Excerpt from keep the family baggage out of the family business. Businessweek. [Online] 18 February. Available at: http://www.businessweek.com/smallbiz/0002/bk000218.htm. [Accessed 5 April 2010]

in china, a part of the second generation of family business did not follow their parents way to join the FM immediately. they choose launch a new venture by their own. However, a lot of them can get the fund from their parents.

according the chinese academic article” the research of the second generation of chinese family business”

it mention that the start-up fund of second generation is occuied 98% total.

In the side of parents, chinese father and mother does not their child involed FM earlier, because of the one child policy in china, in general, parents perfer do all the work by themselves, they always coddle their child.

on the other hand, child do not join the FM earlier, because they need more personal life, they do not want work under their their parents. so they perfer launch a venture by themselves.

http://www.gmw.cn/content/2010-02/09/content_1053080.htm

Being the eldest son in my family I found this McKinsey article totally offensive and true.

Source: Dorgan, Dowdy, and Thomas (2006), ‘Who should and who should not run a Family Business?’, McKinsey Quarterly; 2006, Issue 3, p13-15

Not only does it establish a case for outside management and leadership of the FB, it also suggests that I am totally inadequate when it comes to taking over from my parents!!!!!

What do you think?

Ladies, have a field day.

Gents, especially, the eldest sons amongst you, start eating humble pie….businesses suffer under our leadership according to this evidence.

 the decision of an adult child to join the family business impacts the parents relationships with their daughters and sons.

this article is very interesting as it points out that father-son relationships generally perceived to be more profitable than a father-daughter family business, is actually not the case. this is because:

1)      while men in theory think ownership and control are best left to them, when women are involved in decision making and control, it might actually be greater benefit.

2)      By including a female member in the family in the management and ownership of family firms, most employees feel more included, collaborate better, and to some extent, experience greater loyalty.

3)      Often sons are forced to join the business and not given the freedom to dispute their involvement, women are given more freedom and option to choose. Hence when a female family member, like the daughter decides on joining the family business, there is far lesser degree of hostility and resentment within and among other family memebers.

this article is called ‘when adult children join the family business’ by Christine Cadina, 2007.

can be accessed here:

 http://www.associatedcontent.com/article/434691/when_adult_children_join_the_family_pg2.html?cat=25

The two articles used were Kongo Glumi and Meritocracy

Please use inline remarks for opinions and credible argument, data, examples and sources for your position about who should/shouldn’t run FBs.

Hyperlink back to previous articles and posts if they serve your argument better.

_________________________________________________________________________________________________

Examples of a billion dollar firms being handed down to eldest son:

Formosa Group Taiwan

Common guys, add on some more example!!!

[ Kuratko et al., 1993. Family Business Succession in Korean and U.S. Firms. Journal of Small Business Management, Apr93, Vol. 31 Issue 2, p132-136, 5p ]

Hi everyone,This week the Green Team’s Skit on Women In Family Business.

http://www.slideshare.net/guestd224927/women-in-business-presentation-green-team-w-11-3465746

PRESENTATION KEY POINTS

Women & Men Entrepreneurs in Family Business by Lall. M and Sahai. S, 2001.

· Differences between man and women entrepreneurs in skills, business goals, management styles, business characteristics and growth rates

· Man and women approach business in a different way

· Women in business have lower self-steam and less entrepreneurial intensity

· Women entrepreneurs experience:

o Gender discrimination

o Limited access to capital

o Difficulty in competing for government contracts

o Lack of information

o Need to work harder to prove their competence

“Women as managers in family firms by Cromie and O’Sullivan”

· Women in business face many problems:

o Hostile environments: dominant masculine culture make women feel excluded

o Organizations are essentially patriarchal

· Women have adopted some strategies to overcome difficulties

o Training opportunities in women-only settings

o Seek mentors to acquire knowledge and political skill and build networks

o Supporting programmes of action such as “Opportunity 2000)

o Promote notion that “female traits” and values such as sensitivity and power equalization are what modern organizations need.

o Delay marriage and having children

· In family businesses:

o Family members have advantage versus non family members to expand their careers and this can be applied to women also

o Access to owners and senior managers provides easy mentoring, training and network opportunities

o Generally, earning and status will depend on the role executed and not on gender

o Women in family firms usually do one of the following

§ Put career first

§ Combine family and career roles

§ Limit attachment to firm and commit to family matters.

MICA REPORT GREEN TEAM

Here is the report on Tai Po Fruits:

http://www.slideshare.net/lelecosti/mica-green-team-report

http://www.slideshare.net/guest0dd42ee/women-in-family-businessppt-3447046

Women have come a long way in family business. A stereotype can no longer depict Dad tinkering with some widget in the garage while Mom tries to balance the company books by serving the kids macaroni and cheese. Today, spouses might share executive and caretaker roles.

Back in the 1940s, the outward division of labor in “family business” seemed to be split along semantic lines–the family part belonged to the wife, the business part belonged to the husband. Mom formerly focused primarily on meeting the needs of the family–needs for care, intimacy, and a sense of belonging. Whether mom, spouse, caretaker, sounding board, negotiator, or bookkeeper, the woman typically was unrecognized and uncompensated. Was she an employee or stockholder? Neither, but surely women were stakeholders in terms of risk, effort, and commitment to the enterprise. Roles for women and men in family business were largely defined by societal norms: Dad sustained and directed the business, feeding the bottom line and maximizing return in his venture.

In the 1980s, articles about women in family business focused almost exclusively on past barriers and resistance–a perspective that implicitly compared female accomplishments in the present to those of business men in the past. More recently, reports have emphasized the remarkable accomplishments of women who are shaping the future. Today, women perpetuate relationships and accomplish feats that deserve wide recognition because they challenge our concepts of stakeholder, successor, manager, policymaker, owner, and family in business. To examine these changing concepts descriptively, we asked several women involved with family businesses to share their experiences.

You have now been engaged with learning about Family Businesses and related concepts for 9 weeks.

Below please embed 1 concept map which captures the essence of Family Business for you. Capture all your learning about the various themes, issues, topics and their respective sub-categories into ONE MAP…not multiple Maps

That is 1map/individual...make sure you identify yourself as the map creator- by including your name in the central bubble. This is not optional as it will be considered by Azam Ali and myself as part of your Individual learning portfolio.

Below is sample of a concept map that I have derived from my lecture slides about FB..ie from the lecture on ‘Definitions’ and the lecture on ’succession’…this is just the start.

Ψ Yours needs to look more like the second Concept Map on the subject of Innovation.

You are required to provide comprehensive and rich (pictures, colours, etc) maps such as the second sample that depicts your understanding of the weekly themes and sub-themes. The key themes could form your initial parental branches and then sub-themes branch outwards, etc, etc. Please make sure you embed the images here….this map will also be included in your individual learning portfolio submission.

Below the maps I have provided links to MindMapping sources (free software)- do not feel obliged to construct your maps by using the software- feel free to hand draw, scan and embed:

Useful Concept Mapping Freeware- you do need to sign on for some:

1. Freemind

2. Mind42

3. You also have a great mapping tool called Inspiration available through the college’s Citrix applications resource.

Hello! I have created a hand-made, colorful map that depicts the key learning I have gathered during the semester. I tried to cover as many relevant concepts, since my main goal was to create something useful, practical and fun to look at. I hope you will like it as much as I do. Enjoy!

Hi Guys, here are some mindmaps that I made for the articles used in class. One is about the strategic process in family firms and the other outlines the effects of family and unrelated CEO on firm performance:

Hi, Mindmap

NO idea why its in black, should be in white.

Hey all, here is my mind map….. hope you like it… :

Hey Guys this is my mind-map

here is the mind map…

this is my mindmap:

Here is my mindmap:

 Hi,

Pls click on the link to view. I had problems uploading because it was in pdf format. Thanks

familybusinessbymonique12

Here is a recent case from India, about a well-known family owned business in the IT sector, the Satyam Computer Systems.

It was the biggest Fraud in the nation and also in the corporate world. It was hard to believe that one of the largest IT companies, Satyam Computer Systems, had undergone such a huge fraud case. Two brothers, Raju and B. Ramalinga Raju, who were the founder of Satyam Computer Systems were arrested in the Satyam fraud case. do u think these fraudulent activities in family busiensses are made easier due to some characteristics of the business itself? if yes and why and maybe someone could contribute articles about it.

A background into how this family business was setup can be viewed in the link to the article given below: http://blogs.hbr.org/cs/2009/01/satyam_and_indian_family_busin.html

The Satyam Computer Systems was considered to be one of the leading outsourcing companies in India and it was among the top five IT companies in India. Ramalinga Raju, who was the Chairman of his company, resigned after revealing that he had systematically falsified accounts as the company expanded from a handful of employees into a back-office giant with a work force of 53,000 and operations in 66 countries. The company listed about 50.4 billion rupees in cash and bank loans as assets, that ended in September and were nonexistent. Revenue for the quarter was 20 percent lower than the 27 billion rupees reported, and the company’s operating margin was a fraction of what it declared.

The revelations from this case caused a major shake-up in India’s enormous outsourcing industry and many large companies were investigated and they had to revamp their back offices.

“This development is going to have a major impact on Satyam’s business with its clients,” said analysts with Religare Hichens Harrison.

In the four-and-a-half page letter distributed by the Bombay stock exchange, Raju had described a small discrepancy that grew beyond his control. “What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” he wrote. “It was like riding a tiger, not knowing how to get off without being eaten.”

Speaking of a “deep regret” and a “tremendous burden,” he sincerely apologized to shareholders and employees and asked them to stand by the company. “I am now prepared to subject myself to the laws of the land and face consequences thereof.”

Learning Points:

· As seen in this case, producing fake records by one member of the family not only caused a major loss to the business but also affected the reputation of the entire family and their business.

· The consequences of using such wrong measures in family business also affect the next generation of the family. As in this case, Raju’s son who was into the estate business, had to go through a series of problems in managing his own business and making up for the financial loss caused to the family.

· Since Satyam Computers was such a big business in India, this fraud case had affected the other IT companies in India as well, as their records were being investigated and countries were being cautious when dealing with the IT companies in India.

Therefore, it is always advisable to do the right thing in the family business or it can have long term consequences for both the business and the family’s reputation.

Being the eldest son in my family I found this McKinsey article totally offensive and true.

Source: Dorgan, Dowdy, and Thomas (2006), ‘Who should and who should not run a Family Business?’, McKinsey Quarterly; 2006, Issue 3, p13-15

Not only does it establish a case for outside management and leadership of the FB, it also suggests that I am totally inadequate when it comes to taking over from my parents!!!!!

What do you think?

Ladies, have a field day.

Gents, especially, the eldest sons amongst you, start eating humble pie….businesses suffer under our leadership according to this evidence.

 the decision of an adult child to join the family business impacts the parents relationships with their daughters and sons.

this article is very interesting as it points out that father-son relationships generally perceived to be more profitable than a father-daughter family business, is actually not the case. this is because:

1)      while men in theory think ownership and control are best left to them, when women are involved in decision making and control, it might actually be greater benefit.

2)      By including a female member in the family in the management and ownership of family firms, most employees feel more included, collaborate better, and to some extent, experience greater loyalty.

3)      Often sons are forced to join the business and not given the freedom to dispute their involvement, women are given more freedom and option to choose. Hence when a female family member, like the daughter decides on joining the family business, there is far lesser degree of hostility and resentment within and among other family memebers.

this article is called ‘when adult children join the family business’ by Christine Cadina, 2007.

can be accessed here:

 http://www.associatedcontent.com/article/434691/when_adult_children_join_the_family_pg2.html?cat=25

The two articles used were Kongo Glumi and Meritocracy

Please use inline remarks for opinions and credible argument, data, examples and sources for your position about who should/shouldn’t run FBs.

Hyperlink back to previous articles and posts if they serve your argument better.

_________________________________________________________________________________________________

Examples of a billion dollar firms being handed down to eldest son:

Formosa Group Taiwan

Common guys, add on some more example!!!

[ Kuratko et al., 1993. Family Business Succession in Korean and U.S. Firms. Journal of Small Business Management, Apr93, Vol. 31 Issue 2, p132-136, 5p ]

Check out this argument regarding the evidence on the factors influencing the decision as to whether adult children, like ourselves, should decide to launch into a new business venture with our FB parents.

1. Search out other positions and arguments regarding the decision to launch into a new venture with parents, provide resource links for all of us to learn from AND

2. ALSO look at previous work into the factors influencing adult childrens’ decisions to join the FB regardless of a new venture.

This latter decision is referenced in the argument I’ve linked here.

Use this post to discuss your experiences as FB inheritors or FM members to reflect on the factors presented in these papers.

For too many people, staying in the family business is the easy wayto worm out of the difficulties of adult life: finding a place where you fit in, discovering what you love to do and living with the fear of rejection.

Especially today, with a dried-up job market, the family business is a way of avoiding a difficult job hunt.

I worked in a family business – a shoes stores and factory just for my holiday. I started when I was 12, selecting new collections for teenagers, and by the end of college I was a member of the company having a power to influence them on their choices because I could see the needs of their target. After so many years, I was a member of the designers in the factory but I wanted to do something else. I just wasn’t sure what and I decided to challenge myself and avoid the easy way of life.

After living in many countries and having enough experience, I am certain that there are three things you should do before you decide to settle down with your family business for the long haul:

1. Figure out your dream job.

Don’t worry about being realistic. Rock star, movie producer, politician: everything is fair game. Then decide if you want to go down the path to fulfill that dream. Don’t feel bad if the dream is impossible. Many dreams are not realistic, but they contain gems of truth. For example, someone who dreams of being a rock star probably wants to be creative at work. The exercise of dreaming helps you to figure out your core needs. Once you know these needs, take an honest look at the family business. If you cannot fulfill your core needs in the family business, you should leave.

2. Get a job.

Even if you are sure you’ll stay in the family business, get a job outside of the business. Job hunting is awful, which is why you should do it. The process is humbling and scary because on one level, you are asking someone to pay you to work so you can eat; at another level, job hunting requires understanding yourself well enough to talk about your dreams, your strengths and your weaknesses. You need to experience what it is like to ask for a day off from someone who doesn’t love you. Working for someone outside your family helps you to interact effectively with all people outside your family. This process is a rite of passage, and if you don’t go through it, you risk stunted growth

3. Take a large risk.

If the entrepreneur is on the high end of the risk-taking scale, the kid who stays in the family business is on the low end. At the end of life, the thing people most often say they regret is not taking enough risks. Make sure that staying in the family business will not make you wish later that you were a risk taker. If you take a large risk early on, then you can be more certain that you are not staying in the family business because you are scared of taking risks. Risks are different for everyone. A mountain for one person is a molehill for another. Find something that scares you and do it.

Adult life is about learning what matters to you and creating a life that reflects your values. To know what’s important, though, you need to see the world.

Take time to establish yourself independently from your family, at least for a while, so you can see yourself more clearly. Whether you stay in the family business or go somewhere else, you’ll be a happier person for making the decision honestly.

I have read an article in Business Week called: Should you Join the Family Business? written by James Olan Hutcheson

http://www.businessweek.com/smallbiz/content/sep2006/sb20060928_575514.htm

The author firstly advises that there is never a right or wrong decision but he does recommend that if one does decide to join one´s parents business one should have:

a) First had work experience (non family related) because this helps build a business judgment and allows one to bring some new perspective and new ideas to our parents’ company

b) Have undergone several work interviews as one day one might be required to interview and hire employees for the family firm. This helps us become more sensitive and able have a better sense when undertaking interviews ourselves.

If having the previous two experiences and deciding to join the Family Business Hutcheson recommends:

“1. Make sure that you have a real desire and passion for the business. Do you like what the company sells? Are you proud of the reputation? Do not join the family business just because your mother or father told you to.

2. Fill out a job application and go through the interview process. Starting work should be a deliberate step and not your father saying, “Come on in tomorrow and start.”

3. Make sure your father or someone else in a senior management position gives you a list of your specific job responsibilities and the criteria by which your performance will be measured.

4. Start your career by reporting to someone other than a family member, if possible.

5. At all costs, avoid taking advantage of your family relationship as it may relate to pay and benefits.” (Hutcheson, 2006)

I also tend to believe that whilst one is younger one tends to seek a path of one’s own. At least in my case I felt I I should not work for my parents after I finished my undergraduate, hence I moved to Caracas, Venezuela´s capital and achieved several years of work experience.

Due to family circumstances I had to leave my job in Caracas in year 2004 and take care of my father´s business which I knew well as I worked in it whilst undergoing my undergraduate. I found that I could see and understand things in a different way, my approach was different and also my passion for it had increased.

If I do go back and live in the same city my parents live I would certainly engage in their businesses as I feel not only passion for my parents but also for what they do and would try to bring in “new blood” into their businesses and profoundly enjoy new work experiences along with them.

The adult child’s decision as to whether or not to join his or her parents to start the business is certainly one of the milestone events.

1) Birley (1991) identified factors such as pressure from parents, interest in the managing business, certain industry characteristics and demographic factors as predictors of adult child’s decision to join the existing family business.

2) The Starvou and Swiercz (1998) model identifies certain family factors, bsuienss factors, personal factors and market factors (like the ones Haithem already mentioned).

A study conducted to determine the factors which influence an adult child’s decision to start a new family venture, came up with the following results:

1) The decision of an adult child to join a new family business with his or her parents will depend on the relative roles of the parties in the new venture, but not which the parent was involved in.

2) The role of the adult child in the new venture is a bigger factor in the decision to enter the business than the opportunity to be involved with a specific parent or both parents without consideration of relative hierarchical roles in the new venture.

3) Hence in summary the adult child’s decision to join a new venture with his or her parents will primarily depend on whether the relative roles the child and parents will occupy in the management of the venture will be substantially equal.

This article is called:

‘Entrepreneurial opportunity exploitation and the family: relationship-based factors that effect the adult child’s decision to jointly participate with parents in anew venture’, (Leaptrott, McDonald, M., 2008)

It can be viewed on:

http://findarticles.com/p/articles/mi_m1TOL/is_13/ai_n32103088/pg_8/?tag=content;col1

_________________________________________________________________________________________________

Most and Least Important Reasons for Which Offspring Choose or Do Not Chose Employment in the Family Business

The above table visually represents the reasons found by Stavrou (1999) that offspring give to join or not join the family business. The information is based on the findings of her study titled Succession in the family business: Exploring the effects of demographic factors on offspring intensions to join and take over the business. The above reasons were all picked by offspring. The data analysis and more information can be found in her study here

Stavrou, Eleni T., 1999. Succession in Family Businesses: Exploring the Effects of Demographic Factors on Offspring Intentions to Join and Take over the Business. Journal of Small Business Management, Jul99, 37, pp. 43-61.

Fleming, Q.J., 2000. Excerpt from keep the family baggage out of the family business. Businessweek. [Online] 18 February. Available at: http://www.businessweek.com/smallbiz/0002/bk000218.htm. [Accessed 5 April 2010]

in china, a part of the second generation of family business did not follow their parents way to join the FM immediately. they choose launch a new venture by their own. However, a lot of them can get the fund from their parents.

according the chinese academic article” the research of the second generation of chinese family business”

it mention that the start-up fund of second generation is occuied 98% total.

In the side of parents, chinese father and mother does not their child involed FM earlier, because of the one child policy in china, in general, parents perfer do all the work by themselves, they always coddle their child.

on the other hand, child do not join the FM earlier, because they need more personal life, they do not want work under their their parents. so they perfer launch a venture by themselves.

http://www.gmw.cn/content/2010-02/09/content_1053080.htm

Hi everyone,This week the Green Team’s Skit on Women In Family Business.

http://www.slideshare.net/guestd224927/women-in-business-presentation-green-team-w-11-3465746

PRESENTATION KEY POINTS

Women & Men Entrepreneurs in Family Business by Lall. M and Sahai. S, 2001.

· Differences between man and women entrepreneurs in skills, business goals, management styles, business characteristics and growth rates

· Man and women approach business in a different way

· Women in business have lower self-steam and less entrepreneurial intensity

· Women entrepreneurs experience:

o Gender discrimination

o Limited access to capital

o Difficulty in competing for government contracts

o Lack of information

o Need to work harder to prove their competence

“Women as managers in family firms by Cromie and O’Sullivan”

· Women in business face many problems:

o Hostile environments: dominant masculine culture make women feel excluded

o Organizations are essentially patriarchal

· Women have adopted some strategies to overcome difficulties

o Training opportunities in women-only settings

o Seek mentors to acquire knowledge and political skill and build networks

o Supporting programmes of action such as “Opportunity 2000)

o Promote notion that “female traits” and values such as sensitivity and power equalization are what modern organizations need.

o Delay marriage and having children

· In family businesses:

o Family members have advantage versus non family members to expand their careers and this can be applied to women also

o Access to owners and senior managers provides easy mentoring, training and network opportunities

o Generally, earning and status will depend on the role executed and not on gender

o Women in family firms usually do one of the following

§ Put career first

§ Combine family and career roles

§ Limit attachment to firm and commit to family matters.

MICA REPORT GREEN TEAM

Here is the report on Tai Po Fruits:

http://www.slideshare.net/lelecosti/mica-green-team-report

Women have come a long way in family business. A stereotype can no longer depict Dad tinkering with some widget in the garage while Mom tries to balance the company books by serving the kids macaroni and cheese. Today, spouses might share executive and caretaker roles.

Back in the 1940s, the outward division of labor in “family business” seemed to be split along semantic lines–the family part belonged to the wife, the business part belonged to the husband. Mom formerly focused primarily on meeting the needs of the family–needs for care, intimacy, and a sense of belonging. Whether mom, spouse, caretaker, sounding board, negotiator, or bookkeeper, the woman typically was unrecognized and uncompensated. Was she an employee or stockholder? Neither, but surely women were stakeholders in terms of risk, effort, and commitment to the enterprise. Roles for women and men in family business were largely defined by societal norms: Dad sustained and directed the business, feeding the bottom line and maximizing return in his venture.

In the 1980s, articles about women in family business focused almost exclusively on past barriers and resistance–a perspective that implicitly compared female accomplishments in the present to those of business men in the past. More recently, reports have emphasized the remarkable accomplishments of women who are shaping the future. Today, women perpetuate relationships and accomplish feats that deserve wide recognition because they challenge our concepts of stakeholder, successor, manager, policymaker, owner, and family in business. To examine these changing concepts descriptively, we asked several women involved with family businesses to share their experiences.

Dear all,

I am including here the main learning key points that we have from the articles we used to prepare our skits and presentation today.

Here is the link to our presentation that supported our skit:

http://www.slideshare.net/guestd67dcc/women-in-business-presentation-green-team-w-11

ARTICLE:  Lall, M. and Sahai, S. (year unknown) Women in Family Business. Retrieved from: www.isb.edu/FamilyBusinessConference/WomeninFamilyBusiness.pdf

· Differences between man and women entrepreneurs in skills, business goals, management styles, business characteristics and growth rates

· Man and women approach business in a different way

· Women in business have lower self-steam and less entrepreneurial intensity

· Women entrepreneurs experience:

o Gender discrimination

o Limited access to capital

o Difficulty in competing for government contracts

o Lack of information

o Need to work harder to prove their competence

ARTICLE: Cromie, S., O’Sullivan, S. (1999) Women as managers in family firms. Article retrieved from Emerald

· Women in business face many problems:

o Hostile environments: dominant masculine culture make women feel excluded

o Organizations are essentially patriarchal

· Women have adopted some strategies to overcome difficulties

o Training opportunities in women-only settings

o Seek mentors to acquire knowledge and political skill and build networks

o Supporting programmes of action such as “Opportunity 2000”

o Promote notion that “female traits” and values such as sensitivity and power equalization are what modern organizations need.

o Delay marriage and having children

· In family businesses:

o Family members have advantage versus non family members to expand their careers and this can be applied to women also

o Access to owners and senior managers provides easy mentoring, training and network opportunities

o Generally, earning and status will depend on the role executed and not on gender

o Women in family firms usually do one of the following

§ Put career first

§ Combine family and career roles

§ Limit attachment to firm and commit to family matters.

MORE INFO about the OPPORTUNITY 2000 initiative

A business-led initiative launched in 1991 which aims “to increase the quality and quantity of women’s employment opportunities in both private and public sector organizations”. By the end of 1995 there were nearly 300 organizations in membership, these are predominantly large organizations who between them employ over a quarter of the workforce. Organizations which join Opportunity 2000 (and pay a fee to do so) undertake to set goals for improving women’s representation and to monitor progress towards those goals. Goals may be quantitative targets or merely statements of general intent. Members are not monitored against any required standard of achievement. The organization regularly surveys participating organizations and reports on policies and practices. It seeks to make the “business case” for being an equal opportunity employer , demonstrating how equal opportunities can benefit the business and thus encourage voluntary action. In 1995 a similar campaign was launched to boost the economic participation of Britain’s ethnic minority population, called Race for Opportunity.

Source: Eurofound (2009). Information retrieved from the website: http://www.eurofound.europa.eu/emire/UNITED%20KINGDOM/OPPORTUNITY2000-EN.htm on March 16 2010.

http://www.slideshare.net/guest0dd42ee/women-in-family-businessppt-3447046

Hey group

Shaan has uploaded very interesting article about family business.

I decided to put you in a brief picture of russian family business.

For a long time in Russia there are family traditions thanks to which, secrets of the professional skill, the capital accumulated in the years and life experience are from generation to generation transmitted. Trust, respect and pride of the family, - here the basic signs of the Russian family business which, together with development of market relations, left on a new degree of quality in our country.

At the heart of family business lies so-called fiduciary, - personally-confidential relations. From the point of view of the right fiduciary contracts it is much more reliable and more progressive than treaty obligations. In relations such it is not necessary to append the signature, to make promises, to collect the information on the partner. Interaction of the parties is under construction on trust, is thus based not on risk, as for example obligations between the founder and the confidential managing director, and on parent communications. We care of the close people: we show attention, we give gifts, we trust the thoughts and ideas. The same processes occur and in family business when the son, the wife or the brother in combination are business partners. Here where that constructibility in the decision of every possible problems and business matters is observed. The parties in such relations absolutely accurately represent for themselves an ultimate goal, - moral and material welfare of a family. Mutual understanding level in such families exists in the order a sign language and sights.

Now family business in Russia endures new boom of development. It is connected by that the majority of so-called family companies, i.e. the legal bodies as which holders relatives act, are subjects of small business. A small-scale business as world experience testifies, plays a special role in market economy development. Formation of small business in modern Russia is a necessary condition of the decision of a complex of the most complicated social and economic problems, involving in enterprise sector of a significant part of the vacant population, reorientation credit and a fiscal policyy on stimulation of development of production, transition to innovative type of economic development.

That fact testifies to significant potential of a small-scale business that for years of reforms - from the end 80 to the middle of 90th of XX century is there was the most fast-growing sector of economic activity, and its formation occurred in the most complicated conditions. Efficiency of small enterprises is advanced by a number of their advantages in comparison with major concerns:

The small enterprise ensures market demands in those goods and services which averages and large firms to make and render is inexpedient for economic and other reasons, for example because of the limited requirements of the local markets;
Higher capital turnover;
Small enterprises often prove as innovators.

The most typical legal form of organisation of large family business in Russia is the joint-stock company. Thus, under certificate McKinsey, in the West joint-stock companies have passed through economic depression, wars and other crises, saving the family control over business. Therefore experience of such companies is of great value for the Russian family business which worries the first alternation of generations from the beginning of 90th years and for the first time has faced a problem of preservation of the control of a family over business.

First “surprise” expected “the family” companies in which the family had a controlling interest in the property, - their forecasts for long-term success have not justified. Already the second generation of a family following founders of firm which operated business thanks to the sharpness and enterprise, frequently has no these qualities and does not insist on independent management of the company. The majority of the circulation in our board behind reception of a professional legal aid occur during this moment when in the extended family there is a conflict of interests, struggle for influence and dividends, and also for a role of the company executive.

Practice shows that the majority of “family” disputes are allowed within the limits of conflict pretrial stage. Those personally-confidential relations thanks to which, it is possible to reach the general understanding of a situation and a finding of the mutually acceptable decision in this case affect. Moreover, some family companies independently could avoid a fate of similar disputes thanks to the initially competently constructed policy of management of firm. On the basis of the conducted consultations and conversations with chiefs of the Russian financially-stable legal companies, I have received general idea how business in such firms is organised. The strong government and strict hierarchy were a key to their survival and success: unwritten laws of conducting the businesses passing from generation to generation, and exact awareness that means the vested interest the company had great value. The property right - simultaneously blessing and a damnation - gives the chance to a family to destroy business the same as and to give it the accurate form and to enjoy profit. For this reason families- business owners have created systems which limit and counterbalances in the basic three measurements of family business: properties, the supervisory board and management.

The mess in oral and written arrangements - both official, and informal - concerning family business is usually observed:

As operating advice of the company and as it is selected is formed;

In what cases decision-making requires a consensus, special majority or interaction of shareholders;

What conditions, at which members of the family can (or cannot) to work in the given business; as shares can (or cannot) to sell inside and outside of the company;

Other elements of corporate and financial strategy.

Similar agreements on which working out one decade can leave not, help to avoid difficulties at transition of the power from one generation to other and form a basis for fulfilment of two main conditions of long-term success of family companies: professional management and continuous management of business of members of the family.

The organisation of holding structures with rather independent branches became the tendency of last time for the Russian family business. Last also can be in the property at the state though basically family holding companies completely supervise most important of affiliated firms. Saving the companies as private, the family avoids pressure from outside external share holders of the enterprise for fast and effective work. It allows the company to carry out diversification strategy for achievement of a sustained profit and a survival in the conditions of the changed market. Such approach does not play a role for the investor, but for families which assume to carry out the control throughout several generation, other party of a medal is visible also.« We wish to ensure a diversification in our business so that our shareholders should not withdraw money and could carry out a diversification independently », - one of chiefs of a family firm has told to me.

All this sort of companies see themselves as conglomerates, as the companies leading not one kind of business. But, in spite of the fact that some firms have a wide spectrum not connected among their businesses, nevertheless the majority of them are concentrated to four main spheres. All of them search for the compromise between business with high brave indicators and business which ensures more or less stable inflow of money resources. Many of them supplement a core business with a venture capital and a private property in which it is put from 10 to 20 % of their capital.

Possibility fast to react to possibilities which arise in a network of family business, is very important. 5 million in time invested a decade ago $ have come back to the companies fifty billions. Strategy consists in constantly to update the portfolio. To update so that the company could protect itself correctly made investments, smoothly redistributing means from stable sector to a beginner to develop. In the majority of family companies new possibilities are clear: transparent business has for them preference as such firms lead reserved investment policy. It distinguishes «family business» from the open companies which have access to the capital and in the mid-nineties frequently preferred growth to the detriment of to incomes.

Today the Russian family business taking a special niche on a competitive market, is attractive possibility to exist without re-structuring and expansion, and as a coordination of a financial policy with brave strategy. A reinvesting - unique possibility for expansion of family business which does not wish to manufacture new shares or to increase debts. For many families it means necessity not to spray and spend means, and to pay attention of the primary activity. The such enterprises are focused on special culture of business dealing and such quantity indicators as growth of the company and profit earning.

Family corporations, undoubtedly, bring also non-economic benefit: respected position in company, pride and feeling of an accessory to family traditions. Also it and possibility for one members of the family to work in business, and for others – to achieve the purposes with a support on this business. The majority of holders of family business try to transmit the business to children or relatives, trying to motivate in every possible way them for this purpose: hold family meetings, have together a rest, solve all questions of the company together in formal and informal conditions. They consider, what exactly at such meetings the young generation can understand importance of family business.

It is necessary as to notice that all organisation-legal forms of the Russian family business are attractive to diligent participants of a turn-over who are ready to lead entrepreneurial business, risking all property. That the given forms have received more a wide circulation granting is necessary for subjects of family business of certain privileges, in particular, in the field of tax and credit relations.

(Dont think you need reference as all the information is taken from russian sources)

The Danger of Doing Business in Russia

Russia’s ability to attract foreign investors is being compromised by a new problem: reiderstvo, or “raiding,” a term that describes the illegal tactics used by criminals to seize businesses and land their owners in jail.

Russian lawyer Sergei Magnitsky, imprisoned on tax evasion charges, told Russian Interior Ministry investigators that he was being denied medical care and subjected to “inhumane and humiliating conditions” in Moscow’s notorious Butyrkajail. The treatment, he said, resulted from his refusal to give false testimony against himself and others. A month later, Magnitsky, 37, was dead.

  You can find the article here http://www.syntone.ru/library/books/content/3095.html 

It’s in Russian, but I’ll write here the main ideas that are related to the topic.

Main characteristics distinguishing Russian family business from the world one:

• lack of family corporations and big family firms;
• existing family firms are comparatively young;
• family business is mainly focused on trade and service sectors;

History of family business in Russia:

The history of Russian family business starts from times of Kievan Russia. It’s related to the process of trade development.

First famous family dynasties of Russian entrepreneurs started to form in times of Ivan the Terrible.

New stage of family business development is related to the the reign of Peter the First, when there was a range of support programs for family business. Mainly, family enterprises were established in trade sector.

The year 1917 was fatal for Russian family business. Started revolution stopped its development more then for 70 years.

In later 80s some families managed to establish their small cooperatives and then start again their family business.

Hello Ed, I am not sure if we are allowed to create a post on an individual basis, but this is something I thought would be interesting to discuss and it didn’t seem to fit within the existing posts.

While doing some research about women in family businesses I came across the following Abstract:

“Psychological contract theory (Rousseau, 1995) suggests that women and those with family responsibilities may negotiate new psychological contracts that include family-responsive benefits such as flexible work hours. Relationships of gender, family responsibility, and flexible work hours to organizational commitment and job satisfaction were examined among 160 matched male and female managers in a cross-organizational study. Results revealed that women who perceived their organizations offered flexible work hours reported higher levels of organizational commitment and job satisfaction than women who did not. Also, flexible work hours were related to higher organizational commitment and job satisfaction for those having family responsibilities. Implications of these results for future research and organizational policy are discussed”

http://www.jstor.org/pss/3100183

I was wondering if any of you agree that in a family business context, a “psychological contract” that includes family-responsive benefits is relevant or if you think that this is normally taken for granted. Perhaps this is something family businesses need to consider when hiring or integrating new family members in the business.

This is a graph that clearly states how the psychological contract fulfillment affects motivation and therefore job satisfaction

From the source: http://www.emeraldinsight.com/fig/0500230101001.png

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Since this post talks about Physiological contracts I was drawn to do some reading on the subject. In doing so I came a across a book by Denise M. Rousseau titled Psychological Contracts in Organizations: Understanding Written and Unwritten agreements. From a quick skim, the book looks into these contracts in organizations in general rather than just family businesses.

Key point from the article:

1) Contracts both written and unwritten tend to change when put to the test

2) Contracts are thought to be a pervasive aspect of organizational life

3) Contracts are not well understood because of their intuitive nature

4) Psychological contract is individual belief, shaped by the organization

5) Psychological contracts have the power of self-fulfilling prophecies

Read More Here