Introduction
The fact that decision making in a family owned organization is greatly influenced by family members who can be linked to the company either by ownership or leadership makes the affairs of the organization quite complex. Family businesses have had quite a negative perception- squabble over inheritance, small or midsized and unprofessionalism. Well, this is a reality in some organization but not in any way a general description of family run businesses. Relationship between the family and organization comes with both good and bad. The world cannot ignore nor fail to appreciate the contribution to the economy. 30% of all companies have multigenerational running and ownership structure (Kachaner 201). In this paper I am going to discuss the structural and running variance between professionally ran (entrepreneurial) firms and family firms based on my attachment experience in two firms. I will also discuss politics of leadership in both family and professional company.
Family company
Family businesses have structures the makes them prolific but sometimes holds them back from proactive changes. Families that ran companies may own them either in full or in a big percentage of shares usually 18% or above. They have the appointing power of top executive and partake in major decision making. Although most family owned businesses focus on local market, some are multi-national organizations. Sizes range from Conner shops to multinational organizations. Family members may not be well-informed of ownership structure where large organization is the subject. Family members may hold leadership position and or influence decision making. There have been expectations that the hereditary principal of family companies would fade but not yet in reality. Family businesses have managed to stand their ground despite changing times of technology and their dynamics. Families raise capital and pull talented individuals to work in the company. In the recent past, the increased presence family owned companies in the global dimension have been notable. 19% of fortune 500 companies are family owned.
Since the year 2008, family owned companies have grown by 7% in sales compared to professionally run- 6.2% this fact shows that not all theories that are out about the models and effectiveness of family owned companies are exceptionally effective. Politics in family owned company (Kachaner 97).
Problems which are unique to family owned company.
Conflict of interests- interest of family members sometimes go against those of the business. A family member wanted a position as product manager. He just graduated and I knew unless business blood is rolling in his veins then the problem at the product positioning sales level will only worsen. Family members who are identified with the company hardly accept to work under some people. Some family members hold positions that are sensitive and failure may cost the company. At a glance, one might perceive a big problem in leadership since rationality and equality are not considered in appointment. Family members have powers to appoint or discharge someone from duties. Conflict of interest is not a common phenomenon and it is clear that family members have the interests of the company at heart in most occasions. A signor manager who is a family member recommends the sanctioning of another family member working in sales department. This shows as much as he wanted to help his sibling make a living, the company has to prosper.
Conflict between the interests of the entire family may go against the good of the business. There are circumstances where the interests of the family may deny the company competitiveness. Family may want the company to pay higher dividends and retirement funds but the company may need such funds to handle competition.
Interests of one family member may not be in line may not be in line hat of another member of the family. For instance, top manager who is family member will not support the liquidation, mergers and amalgamation of the company with other companies or any decision that will compromise his position while a family member who is an owner may want the company to be sold to maximize returns and capital gains. When such scenarios arise the focus on the good of the company is diluted by individual interests (Carlock 55).
Family feud- a characteristic that is common to family company is the involvement of family members in the running of the business. Sometimes workers who are family members may not be able to separate personal aspects with company aspects. Personal rivalry between siblings is usually extended to work place. A good course that infringes interests of one member is usually met with protest and claims of feuds. A signor member sectioned another family member and the course of his action was lost in the midst of and eventually making it personal.
Feuds make the achievement of common goals quite impossible. Family Businesses try not to see this emerging by early training and sometimes involving older family members to solve such problems. Feuds may also lead to demoralization of family members who are working for the company. Workers loose respect on each other and this eventuate to insubordination and malice (Carlock 55).
Loosing employees who are not family members- employees who are not family members are usually not committed to their work but they work in the company to gain experiences and letter work for professionally run companies. The mistakes the sales officers make were simple to correct if commitment were present. Non family employees work with the mind that there is no future in the company and they will eventually not be promoted instead of a family member. Resignation by family members can be linked to feud and nepotism.
In some instances, families may only be interested in the social capital that means less to the company. Business has been viewed as a source of dividends and a family unifying tool.
Succession is another problem. Top managers in a family owned company akin to let a family member inherit the position. Some prospective successors are under qualified and their appointment may lead to protest.
The good side of a family owned company.
Family owned companies have surpassed expectation. Their unique structure has enabled them to perform better those other companies during the down fall of economy. They are able to access capital since investors’ expectations are met because of short term generation of profits.
A good corporate culture: stake holders who are not family members are well handled and this has given the companies held by families a head start. from customers to investors. Emotional honest, solidarity and trust may make things work better for family owned company. Workers that are drawn from the family are emotionally attached to the company and naturally motivated. Deep rooted traditions are usually good in upholding good values of the company.
Members of the family also benefit from the company by employment or dividends or even in terms of social capital.
Professionally run companies
These companies are founded by reason or transiting family owned company not a sheer possession of money as most claims the result of family companies. Professionally run companies have received much credit in the past in terms of their structure, organization, and processes. It is how ever a finding out of my work experience that politics is not an exception to family owned company. A bigger percentage of companies in American and Crop are professionally. Appointment is based competitiveness and actual qualification. The intention of most interns is to eventually get absorbed to the company work force.
Workers in a professionally company act professionally and tend to be motivated but a little chat with employees show that workers perform to impress their bosses and if there were jobs that are immeasurable then they would sit and get paid. Politics demoralize workers, some quite some persist. Social networks that act as a tool to force changes also exist in a professionally run organization and perhaps stronger compared to family company. People seek to achieve some influence in the organization and access some benefits.
Some politics in professionally run companies go the length f manipulating people. Other challenges include gossip. Companies have devised ways to deal with such issues but most issues are not known to the management since they are kept by the employees.
Non family companies assume that they exist in a hostile and highly competitive environment where it is very difficult to keep afloat. Mistakes can be corrected and sometimes the employees are reluctant to resolve what they know already. For instance, my work supervisor probably already knows the problem that exists but did not implement the solutions.
The aspect of limited liability gives the shareholders space to worry about other things not the liabilities that may result from the company operations. Family companies to some extend luck the separate person concept and the downfall of the company means the downfall of the family. This is one reason why companies change from family owned to professionally run.
Non-family firm’s Perceptions that are potentially dangerous.
During my intern in non family firm, I learned that employees feel secure and quite certain about the environment. They tend to tolerate terrible mistakes that may negatively affect the firm.
Social networks and cooperation are important to the company. Much time spend on connecting with other firms would mean more if it were spend on employee motivation and solving internal problems (BADEN 78).
Communication and management systems
Non-family businesses adopt a complex communication and management system that guides decisions to the extent that the decision maker has few options t choose from. Such systems may be disadvantageous because employees are left with a limited space to apply their expertise. The system has also been used to justify mistakes. When freedom is taken away the first day and your recommendation are not considered, you get demoralized and unwilling to do more research (BADEN 78).
Existence of an elaborate communication system don not works if the employees are not motivated.
Undue appointment is also common in non-family run businesses. The company loose employees when their colleges are promoted without explanation because every employee in a non-family organization expects fairness in promotion and remuneration and anything against this is not well received. Some firms have changed from family controlled to professionally run because they want to expand their scope of operation and to access more capital. It is hard to tell the limitations that block family firms from attaining capital. Family firms focus much on local markets while professionally run firms are open to international market (this does not represent all family controlled companies) (Toth 21)
Conclusion
Challenges facing family owned companies cannot be denied. Such challenges are not big as they are usually depicted though. The greatest job all challenge is the conflict of interests. Balancing family interests with company’s interests is quite difficult sometimes but without emotion and good judgment, optimality can be strike and family owned businesses will be successful. Operations, structure and policies of family owned companies are superior and quite effective. Taking emotion out of critical aspects is an art that has been perfected by the company I had time with. There are good managers out that family organization cannot employ for the fear that it may bring organizational and integration problem. The fact that top sits are reserved for family members is not welcomed by non family employees.
Despite challenges, family owned companies are able to attract and keep the best talents through competitive remuneration and better working condition. The fact that, top sits are reserved reduces clash and stake holders including employees seem to be prepared with the succession by a family member.
There is no ownership that gives a firm advantage over others but out, of my observation, family companies are prolific than professionally ran companies. The level of motivation in a family owned company is surprisingly higher despite the fact that top most posts are reserved.
Perception of the management on the on the external problem the way employees handle issues. For instance employees in a non-family controlled organization can make serious sales mistakes since they think that they have time to correct on them. Some even quit if their superiors are hard on them. Family company sales the perception that one pretty mistake can send them home and employees are kin not to make mistakes as they feel part of the company,. The company is important to them than the pay they get. The perception that there is an opportunity out there because of their academic qualification also contributes to the loosing of employees by professionally run business. Family owned companies are more promising in terms of carrier ad expansion.
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