Introduction
Simply put, a family business is a corporate entity that has members of the same lineage managing its affairs. In this arrangement, members from outside the family outfit are not allowed to engage in any form of dealings formally or informally. Every family member has a role to play to the extent of each role is allocated. While it is not obvious that every member of the family may have a role to play, each must have a say with respect to how the business is run. This in essence means that consultations in this arrangement must be key in ensuring that a level of success is achieved. However, it is critical to note that family businesses face major challenges (Fishman, 2009 p. 4).
One of the challenges faced by family businesses is that every individual has different objectives and goals. While one may want the business to expand, the other may think that such a move may drain the company. Businesses should have clear goals and objectives to ensure that the vision is achieved. Family businesses have the challenge of agreeing on goals and objectives (Khanka, 2010 p. 145). The fact that everyone has own way of looking at issues brings about disharmony. Bringing the family members to agree on the goals and objectives is a serious challenge that if not addressed amicably may lead to the downfall of the business entity. It is, therefore, informative to note that the conflicting goals and objectives inherent in every member of the family is a challenge.
Work ethics in the family business are a big challenge. The original founders of the family dedicate time and effort to ensure that the business gets to some level that is convincing. The family members of the family who start the business usually have a vision and ambition with respect to where they would love to see the company to be. In so doing, they dedicate resources and time to ensure that they achieve the predetermined goals. It is their availability to work and spend time in the business premises that ensures that the goals are achieved. A challenge is posed when the button is passed on to the next generation. When the other family members come into the business after the original founders; vision and dreams are unfortunately not shared. This in essence means that the people taking over the business have no dedication to the extent that they are not able to spend time and resources to ensure the businesses goes to the next level. Younger people are associated with being radical. This means that they always want to try different things all at the same time. While this happens, they are not able to concentrate with the family business (Rhodes & Lansky, 2013 p. 49). At some point, the business may close down because people are not available either to work or to supervise the operations going on.
In a family business, members of the family are ever looking forward to get employment in the place. One may wonder why that is a challenge. Merit and competence are very critical in ensuring that the business meets the set objectives. Some members may not be having the necessary skills to work in the family business. Others may have skills that are not relevant to the business. These are challenges that are critical that are sometimes difficult to address (Poutziouris, Smyrnios, & Goel, 2012 p. 320). A business may not be able to accommodate a certain number of people working at the same time. Some members of the family may never understand this leading to a tussle. In this regard, accommodating all the members of the family in the business may not be practical as the only a few may be needed for the sake of maximization of profits.
Since family members do not allow outsiders to meddle in the affairs of the business, it only works to the disadvantage of the business. Diversification is a critical aspect in any business entity. Research has shown that businesses do well when fresh and different ideas are injected into the business. In family businesses, nothing new is invested in the business in terms of ideas. When diversification is not enhanced in the business, failure is ever eminent because the business is only used to the old tricks and methods and not the new ones. Family members may not be alive to the introduction of a new idea in the sense that they are comfortable with the status quo (Leach & Bogod, 1999 p. 11). For instance, there may be a need to introduce technology into the business; other members of the family may not be alive to the idea. Introduction of the ideas into the business is the essence of diversification. When such is not allowed, it proves to be detrimental to the family business.
In every business, there is always an element of compensation. Compensation means that an employee is rewarded for extra performance or an affliction related to the business. Some members of the family may misuse the element of compensation to the extent losing the element of the business. Other family members may want to be compensated for a non-issue. Some may seek compensation way above what is stipulated in the policy of the family. In such cases, the agenda is always to further a personal agenda. The notion of ownership may drive members of the family to mess up with the element of compensation. This is a major challenge that has to be addressed for if not dealt with as appropriate; the family could suffer serious consequences.
Decision making in family businesses is challenging. When making decisions, consultation is key. Some members of the family may not be available at a time when a decision is to be made. This in essence means that decision-making may be postponed or otherwise aborted since there may be a lack of quorum with respect to availability of the family members. Consequently, decisions have to be made as an issue arises. This means that there is no clear action plan as to what should be done when an issue arises. For instance, there could be a need to employ more employees to supplement the amount of workflow. To make the decision as to whether to employ or not, the respective members of the family should be available to decide on the action plan. In the event that the members of the family are not available to make the necessary decisions, it becomes a challenge to the part of the business with respect to decision-making (Au, Craig & Morris, 2011 p. 104).
In a family, people are born different. Some are sharp and talented while others are way below average in terms of intelligent capacity. This is a major point of rivalry and envy in the business. To this end, family businesses are faced with the challenge of leveling the massaged egos of members of the family. The smart and talented family members may be the reason why the business is relevant with respect to meeting set objectives. Some members of the family who do not have the same intelligent capacity may not like the effort invested by others in the company. In a sense, there could be a slow down because the hard working members of the family may not feel appreciated. This is a serious affront to the business and could be the reason why the outfit flops. Contest of egos is a challenge that faces family businesses (Khanka, 2010 p. 145).
Giving directions to a family member with respect to what is to be done in the family business in a serious challenge. For instance, an older member of the family may not find it comfortable taking instructions from a junior family member. Directions are critical for they help in streamlining the affairs of the business. It is, therefore, a serious challenge to family businesses when it comes to how instructions should be given and how the others are to respond. It is critical to have instructions adhered to by every member working in the business entity. A place of work should not be a place where family considerations are fronted. Instructions and directions should be for anyone who has is affiliated with the business. Family members should be ready to take instructions from whatever department or person. As it stands, it is a challenge on how directions and guidelines are to be instituted in a family business.
Family businesses cannot, however, be condemned wholesale for the challenges. There are other benefits that are associated with family businesses. Family members have a deeper understanding of one another. Each person's ability and to perform a duty is known and therefore, it becomes relatively easy to allocate duty based on ability. Consequently, the members of the family have a bond that binds them together and that helps in boosting the working relationship with the business.
Members of a family always want to continue the legacy from where the founders left it. To this end, members of the family are very committed to ensure that they are committed to ensuring that success is achieved. Other business entities usually have a problem with commitment. Since they have no attachment to the business, their only motivation is salary and not the success of the company. Family businesses score big in terms of commitment and this to some extent makes the businesses flourish (Stewart, Lumpkin & Katz, 2010 p. 248).
There are no sophistications with respect to the structure of the business. The structure is usually basic and understandable. The leadership structure sometimes is defined by seniority or academic qualifications. When the button is passed onto the next generation, there is always an individual to which the leadership of the business is trusted. The person left in charge has to define the people with whom he shares responsibility. This makes the leadership structure to be very simple and easy to manage (Collins, Grisoni, Tucker, Seaman, Graham, Fakoussa, & Otten, 2011 p. 11). Those in leadership are well known to the people working in the business entity. Challenges arising during the running of the company with respect to leadership are quite manageable. To this extent, this feature makes family businesses to be of an advantage.
Research has shown that family businesses have low failure rates compared to the other mainstream businesses. The need to extend the legacy to the next generation makes members of the family to be more committed and dedicated to ensuring that success is maintained. Through the life of businesses, the rate of failure is generally high due to some factors that are not foreseeable. Proper working relationships, trusted leadership, commitment, dedication and better understanding, family businesses literally walk into success (Kaye & Astrachan, 2005 p. 143). Well laid down structures by the founders makes it easy to manage the business and take it to the next level. To this end, chances of family businesses flopping usually have a slim chance. This is not to insinuate that the family businesses do not fail. They just like other businesses have challenges that could lead to their failure. Over and above, family businesses are associated with success more than the other mainstream businesses.
Conclusion
Family businesses face challenges that are many and diverse. From family rivalry to incompetence, family businesses are ever faced with a mirage of issues that if not addressed, could bring the business down. This means that family members should endeavor to put their differences aside and work for the good of the company. The differences are not healthy for any business outfit. While the challenges are a major emphasis, it is critical to note that family businesses are associated with a number of success stories. Pundits have noted that family businesses have the ability to succeed and stay long in the business compared to the other businesses. However, to this extent, a notable fact is that family businesses face major challenges.
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