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Overview

The main assignment for this course sends you “out into the field” to investigate a family business and business family of your own choosing. Your task is to find someone who is willing to provide you with details on his/her business and family, and to then develop a report on the business and how you could help them. Undergraduate student can work on their own or a group of two.

If you are part of a family business the report can be about your business or a business of your choice. Last term’s students learned a lot by selecting their own family businesses for this assignment. For those of you who are not part of a family enterprise, I strongly encourage you to approach a business you find intriguing. I encourage you to tie the business you choose with your Field Interview assignment.

Please note that if you plan on conducting any interviews for this assignment, you must be approved beforehand and that you complete a Consent Form beforehand

Written Report

Part A represents a summary of the past and present of the business. It should include two components:

Situation description

an overview of your chosen family enterprise (e.g., founding date, major products/services, extent of family involvement in terms of ownership and employment)

an identification of the organization’s stage of development on all three dimensions of the conceptual framework discussed in class (i.e., ownership, family, business)

a description of the key issues or problems currently facing the firm and/or family members (there need not be an issue/problem for each dimension)

Problem/issue

diagnosis

an analysis of the underlying cause(s) of the current issues or problems facing the firm or family members

one or more of the different conceptual frameworks covered in in class

in analyzing the business family, you should consider any family characteristics discussed in class that you deem relevant to your analysis (e.g., enmeshment-disengagement, communication patterns, conflict resolution patterns, sibling rivalry, life stage, etc.)

Part B represents the conclusion to your report, the present to future, and should include two components:

Recommendations

specific suggestions for addressing the problems/issues identified in Part A of your analysis (and/or for addressing any new problems/issues that have emerged since writing Part A)

Supporting Rationale

a discussion of why your specific suggestion make sense, given the key constituents and dynamics within the ownership, family and business spheres of your focal family enterprise

The total report should be

10 to 15 pages

in length, plus

relevant

appendices (if applicable).

Overview
The main assignment for this course sends you “out into the field” to investigate a family business and business
family of your own choosing. Your task is to find someone who is willing to provide you with details on his/her
business and family, and to then develop a report on the business and how you could help them. Undergraduate
student can work on their own or a group of two. Graduate students must work on their own.
If you are part of a family business the report can be about your business or a business of your choice. Last term’s
students learned a lot by selecting their own family businesses for this assignment. For those of you who are not part
of a family enterprise, I strongly encourage you to approach a business you find intriguing. I encourage you to tie
the business you choose with your Field Interview assignment.
Please note that if you plan on conducting any interviews for this assignment, you must be approved beforehand and
that you complete a Consent Form beforehand
Written Report
Part A represents a summary of the past and present of the business. It should include two components:
Situation description
•
•
•
Problem/issue
diagnosis
•
•
•
an overview of your chosen family enterprise (e.g., founding date, major
products/services, extent of family involvement in terms of ownership and
employment)
an identification of the organization’s stage of development on all three
dimensions of the conceptual framework discussed in class (i.e., ownership,
family, business)
a description of the key issues or problems currently facing the firm and/or
family members (there need not be an issue/problem for each dimension)
an analysis of the underlying cause(s) of the current issues or problems facing the
firm or family members
one or more of the different conceptual frameworks covered in in class
in analyzing the business family, you should consider any family characteristics
discussed in class that you deem relevant to your analysis (e.g., enmeshmentdisengagement, communication patterns, conflict resolution patterns, sibling
rivalry, life stage, etc.)
Part B represents the conclusion to your report, the present to future, and should include two components:
Recommendations
•
Supporting Rationale
•
specific suggestions for addressing the problems/issues identified in Part A of
your analysis (and/or for addressing any new problems/issues that have emerged
since writing Part A)
a discussion of why your specific suggestion make sense, given the key
constituents and dynamics within the ownership, family and business spheres of
your focal family enterprise
The total report should be 10 to 15 pages in length, plus relevant appendices (if applicable).
Content
Situation Description (e.g., breadth, depth, clarity & vividness of coverage)
Problem/issue diagnosis (e.g., relevance, breadth, depth, clarity & soundness of analysis)
Recommendations (e.g., clarity, specificity, relevance, creativity, feasibility)
Supporting Rationale (e.g., breadth, depth, clarity, soundness)
7.5 marks
7.5 marks
7.5 marks
7.5 marks
Format
Professionalism (e.g., concise, clear organization, good grammar, relevant appendices)
Creativity (e.g., original writing style, report/page format, graphics)
5 marks
5 marks
Managing the Family
Enterprise
6.2 Succession: the Conspiracy
The Succession Conspiracy
(Lansberg 1988)
â–ª What is the conspiracy?
â–ª To stop or hold off the succession
â–ª all stakeholders have reasons and reactions to thoughts of succession
â–ª Founders: new roles, loss of status, face their limitations
â–ª Family: roles change,
â–ª Owners: issues of who will own what
▪ Outside Stakeholders: will the new leader be capable, will the stakeholders’
status change
Non-family Stakeholders part of the
Conspiracy
(Phil)
• Trust: Bankers know the Incumbent is good for the loans, will the
Successor be?
• Knowledge: the Incumbent has been there and done it all, is the
Successor equally capable, do they have the ‘right’ knowledge?
• Connections: Are the social network transferable? Are any new
networks useful?
• Resentment: Why not me?
The Incumbent Perspective
(Jay)
• Their self-identity
• Not ready to rest
• Their retirement fund
• Their sunk costs
• “The firm is not worthless even if we have been loosing money. You need to
consider that we are the last firm that has survived and remained
independent. And, I have been working hard, weekends, long hours, and
dedicating my life to the business. “Don’t tell me it is worth nothing.”
The Incumbent Perspective
• The two big Incumbent Questions
• Am I financially ready to let go?
• Can I afford to retire?
• Do I want to burden my children with the purchase cost?
• Am I mentally ready to let go?
• What will I do after I retire
• How will I handle having nothing to do?
“How the transition goes is largely up to the
main shareholder”(Lynch 2001)
Why is it hard to let go?
Founder’s Decease: Fear of Redundancy
“I had only one interests, shoes” (Aleven)
The business is the main identifier in their life
Boomerang CEO:
without a new role the fonder is either going to stay put or keep coming back
Their Financial Trap
they don’t think of their financial future and forget to become independently wealthy, to some
extent, from their business
The Successor Perspective
(Claire)
• Can we work together?
• Family discount for purchase price?
• Can I afford the entrance price?
• They are ready to run?
Incumbent & Successor: Tensions
Incumbent
Successor
Tend to act in a backward-looking manner Tend to act with a forward thinking
manner
Tired
Full of energy
Focused on threats and preservation of
achievements
Focused on risks and opportunities of
change
Ample experience running the firm
Little experience running the firm
Losing control and responsibilities
Gaining control and responsibilities
Facing declines in social standing
Facing increases in social standing
Strong emotional ties to the firm
Weaker emotional ties to the firm
Values the firm based on past
achievements and efforts
Values the firm in terms f future
opportunities and risks
(Zellweger, 2017)
Incongruent Hierarchies
Phase
Life Cycle Crisis
Resolution
Old Age
Integrity v Despair Wisdom
Adulthood
Generative v Stagnation
Care
Adolescence
Intimacy v
Isolation
ID v ID Confusion
School Age
Industry v Inferiority
Competence
Play Age
Initiative v Guilt
Purpose
Early Childhood
Autonomy v Guilt
Self-control
Infancy
Trust v Misstrust
Hope
Young Adulthood
Love
Fidelity
Erikson, 1950
What helps?
• Succession Framework
(Zellweger 2017)
6. Structuring
the tax & legal
setup
5. Financing the
Succession
4. Valuing the
Biz
1. Clarifying
goals &
priorities
2. Reviewing Biz
Strategy
3. Planning the
transition of
responsibilities
Relay Race and Succession Parallels
Race
Organization
Sequence: order of team members,
attributes of runners
Organizational context and design
-selection process for new leader
-Organization’s stage and type of leader needed
Timing

(Dyck et al 2002)

Stable environments and mature companies can have more time for
the process
In hostile or hyper competitive environments timing needs to be quick
Baton Passing and technique

incumbent willing to let go?
new leader’s willingness/readiness to grab on
Agreement between incumbent, successors and stakeholders
Communication & Teamwork

-Trust!!!
clear communication
removing disagreements on goals, strat., and process
Preparation
oWhen does preparation start?
oWho, how, what
o Who can succeed?
o How will the successors (possible successors) be prepared
o What are the criterion?
In any business preparing for succession should always be in mind and be
worked on.
This is the longest stage of the process.
This stage forms the foundation for what comes after.
Discussion & Timing
• No one knows what the other person is thinking until they are
asked questions!
• Multiple people (many more than the Incumbent and Successor)
need to be involved
• Incumbent and Successor timing may not match
• This stage builds on the preparation stage
• the details and specifics are negotiated and set
Passing the baton technique
• The incumbent must release power and the successor must
demonstrate their worthiness to take over and lead
• it is easy to give up formal titles, not so easy giving up power
• recognize that management responsibility is not the same as ownership
responsibility and control
Communication
• The key part
• So much of succession outcomes depends on communication
• Family communication allows for shortcuts
• shortcuts can also bite you when you don’t expect it.
Letting Go Plan Pt. A
Imagine you are advising a friend’s family on easing the
Incumbent’s transition. What suggestions would you make?
help them keep them busy
Occupy their pride and the status they are accustomed to
Make sure they are financially safe.
Letting Go Plan Pt. B
Imagine you are advising a friend’s family on easing the
Successor’s transition. What suggestions would you make?
Establish their legitimacy
in management
as a responsible owner
Communicate with rest of family
Communicate with rest of the business
Make their mark
Managing the
Family Enterprise
8.1 Family Business Strategy
Is Strategy Different for
Family Firms?

Yep?

Nah?

No one is interested in the answer


•
Values
•
Guide how you act with others
•
Will Resonate with you
•
Define your culture and beliefs.
Vision: describes the future, as you see it. It should:
•
What Inspires you
•
What motivates you
Family Vision
•
Develops from family processes, their rituals, their stories,
their shared history
How Strategy Might Differ for
Family Firms


How

Family Structure

Long-term orientation

access to capital

desire to maintain control

informality

family succession

desire for family harmony and family employment
Affects?

Mission

Industry

Structure

Strategic choice

Internationalization

Strategy Implementation?
The Family Effect
(http://www.campdenfb.com/article/how-strategy-different-family-businesses)

Family factors influence several dimensions of strategy
including:

strategic product-market orientation;

competitive capability;

organizational design;

company culture;

leadership structure;

resource allocation.
How family affects strategies
(http://www.campdenfb.com/article/how-strategy-differentfamily-businesses)



Structure:

Branch office expansion or new market expansion to accommodate family

design ownership or leadership roles around the ages of the next generation or in
consideration of their gender.

Keeping the business private of going public.
Character

Perhaps the best possible strategy is achieved when there is powerful,
reinforcing consistency between business strategy and family beliefs.

“For example, a family that is inflexible, but close-knit, is likely to prefer a
vertical integration strategy requiring limited drive, rather than a diversification
strategy that stretches both the family and the business.”
History

strategic decisions were influenced by the past experiences of the families.

a history of broken partnerships shape the design of the organization and its
leadership.

a family’s memory of past decisions, such as coping with recession, creates a
competitive advantage over other firms that discard institutional memory.
The Family Business House
(Klein 2002)
The Fam Biz
Structure
The Fam Biz’s Strategy
Strategic
Options
Clients
Fam Biz
Resources
Vision for the Family Business
Family’s Shared Vision
Family’s Values
Family Biz Strategic Option
Concealing or Revealing the Family (Micelotta & Raynard 2011)

Look at the oldest family businesses public presence to identify
their Corporate Brand Identity

Familiness (Habbershon & Williams, 1988)

a bundle of resources that are distinct to the firm and are a result
of the family’s involvement in the firm

in marketing this may mean persuading customers to make
purchasing decisions based on:

the values, beliefs, & norms attributed to family and family business

Family Brand Name may be useful in developing social capital with
stakeholders (Dyer, 2006).

Dependant on the ability of the family to personify itself in their
business


World’s Oldest Family Firms

Micelotta & Raynard Identified 3 Strategies



Family Preservation Strategy: intimate connection between
company and family

emits a sense of caring

linking the past to the present


Family Enrichment Strategy: family represents the perpetuating of
tradition

companies are enriched over time as new features are needed

emphasizing quality

Metzler (1674)
Family Subordination Strategy: family component downplayed

the organization carries identity

Beretta (1526)
Managing the Family
Enterprise
8.2: Family Business Entrepreneurship
Transgenerational Questions
1. Other than succession, what is necessary for family firms to last
long?
2. What is the role of entrepreneurship over generations?
3. How does Families as:
a) business owners
b) families in business
Affect their entrepreneurial activities?
Family Business, Entrepreneurship, and
innovation
• What do we mean by:
• Entrepreneurship:
• The pursuit of increasing value of business assets by seeking out and/or creating new
business opportunities (Uhlaner et al.)
• Innovation:
• a new, novel, way of accomplishing an end
Family Business, Entrepreneurship, and
innovation
• Do family businesses have advantages for being innovative or
entrepreneurial or do they have disadvantages?
Entrepreneurship, Innovation, and Family
Business
• Common perceptions of family businesses:
• Traditional, old-fashioned, stagnant
• Family goals are opposite to business goals
• Thinking goes that strong family orientation (interdependence,
security, stability, tradition, loyalty) may pull the business away from
an entrepreneurial orientation (Martin et al. 2006)
OR
• Strong family orientation and entrepreneurship can function side by
side (Lumpkin et al. 2008
Fam. Biz: Innovation & Entrepreneurship
Family businesses tend to prefer relationships with other family
businesses and long-term relationships
• Recognition:
• the nature of a social network influences information.
• Embeddedness in a network impacts information sharing
• Interpretation of Information:
• Tension within long-term orientation
• Tension within SEW
Fam. Biz: Innovation & Entrepreneurship
• Decision Making:
• typically family businesses can make quick decisions
• Limitations on desirability to invest in change
• limits on ability to make investments (cash or equity)
• Implementation:
• does the business have the necessary knowledge, skills, and abilities (KSA)?
• where will they find the KSAs?
Recognition
Interpretation
Decision
Making
Implementation
Threat
Overlook
Changes
Changes seen
as irrelevant
Protracted
Decisions
Low Flexibility
Fam. Biz
-Embeddedness in a
Advantages
network.
-Constant
environment
screening.
-Long-term
orientation
-Quick decision
making
-Intuitive,
independent
decisions
-Loyal employees
-Low resistance
in org.
Stamina
Fam. Firm
-Network
optimized for
what was.
-Emotional
attachments.
-Firm’s &
family’s identity
-Hesitance (or
limitations on)
investing large
sums.
-Limited external
knowledge.
-Reluctant to
cede
responsibility or
control
Disadvantages
(Kammerlander 2017)
Transgenerational Fam. Biz and
Entrepreneurship: German Example
:
Study of 21 German wineries, that averaged 11 generations old
• Three Drivers of Longevity
(Jaskiewicz, Combs & Rau 2015)
1. Strategic Education
•
High levels of general education + industry relevant education
2. Entrepreneurial Bridging
•
Successor implementing initiatives that are supported by the incumbent (rejuvenating
the firm)
3. Strategic Transformation
•
•
Involving successor’s in-law side
No stock buyouts
Shinose
Transgenerational Family business &
Entrepreneurship, The Japanese example
Values of
Long-standing Family Business
Customer
Employee
the First
Empathy
Family
Community
Authenticity
Craftsmanship
Public
(Higashide, 2017)
2017/11/11
Hironori Higashide, Katsushi Yamaguchi, Rihyei Kang
11
Next Week
• Professionalizing the business
• An important topic!!
• Case: Natural Ice Cream
• World’s oldest Family Businesses
• http://www.griequity.com/resources/industryandissues/familybusiness/oldes
tinworld.html

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