M-5
Introduction
A family business is a business in which one or more
members of one or more families have a significant ownership, interest and significant commitments toward the business overall well-being. Family Business is one which owned and controlled by the members of a single family. Majority ownership by a single family and direct involvement by at least two members in its operations. Members of one family owns enough voting right to control the strategic policy and tactical implementation
Importance
Trust lowers transaction cost
Small, nimble and quick to react Information as a source of advantage
The authority conferred by this controlling interest permits the family to determine objectives, methods and policies to achieve them.
It requires an active participation by at least one family member in the top management of the company so that one or more family members have ultimate management control
It requires an active participation of one family member in the board of directors of the company so that one or more family member have at least a high level of influence over the companys direction ,
business and ownership system in to the definition of the family business system. Each of these system interacts with others and influence their membership, goal and dynamics. 3 circle model has become the established system model for the family business field. It consist of three systems: Family i) The business system ownership ii) The family system Business iii) The ownership system
to read and ask questions about the income statements and balance sheet of their company. Attend shareholders meeting Understand board member qualification and participate in the screening board members
suggestions to management Be a positive emissary for the company Publicly support management decision Keep appropriate management information in strict confidence Generates business leads Provides additional investment capital
organizational changes and the companys basic financial status The ability to participate in the election of board members Fair policies that protect shareholder's interest but also require their interest and risk taking Acceptable economic performance by the company, including reasonable dividend and capital gains
towards the business Family council meeting Discuss the current issues, ownership, family issues and directions and keep the family informed about these Help the family reach decision and speak with one voice about its goal A family constitution Corner stone of the familys leadership efforts. It articulates familys vision for itself and business, the familys core values and policies and guidelines that regulate how the family will relate to the business
Contingency plan
afford Business valuation is a critical elements of succession planning Funding is often a hidden or non- recognised cost of succession planning
Lack of professionalism
Inability to separate the familys interest from the
Good management
Ability to change Have a strategic plan Have an active board of directors
Training
Accountability
Addressing the issues Creating shared vision