Strengths and Weaknesses of Family Business
WEAKNESSES
Family businesses are prone to some serious and prevalent problems as well. Family businesses are particularly vulnerable to these potential shortcomings. Many of the problems hinge on the intrinsic conflicts that can arise between family and business values.
- Resistance to Change
in a family business it is all too easy to find ourselves doing the same thing, in the same way, for too long in a family business. In a family business behavior becomes ingrained and businesses become tradition-bound and unwilling to change which may cause a business to decline if it does not innovate and keep up with today’s time.
- Modernizing Outdates Skills
Often the skills possessed by a family business are a product of history and, as a result of developments in technology or a change in the market place; these skills can quickly become obsolete. Issues don’t necessarily arise by drastic changes, they arise from changes of emphasis in product manufacture or marketing that can be just as damaging if they catch an unresponsive, tradition-conscious family business off balance.
- Managing Transitions
this challenge is a make or break for a family firm. A typical example in many companies an be the owner is getting on in years and the heir apparent is convinced that things need to be done differently. Transitions can prove even more difficult if the next generation is viewed as less competent than the current one. This can cause uncertainty among employees, suppliers, customers etc.
- Raising Capital
Unquoted family businesses sometimes have a problem with the very concept of raising money from outside sources for setting up new projects or a new division of the business etc. it also shows reluctance to go to outsiders for bank overdrafts or other short-term funding that would help the firm through minor cash flow shortfalls. If funding from the family’s own resources means skimping on important projects or inefficiently struggling on through short-term crisis, then the healthy development and even the survival of the business can be threatened.
- Succession
The passage of a family business from one generation to another and the change of leadership it involves is a process that can be fraught with difficulty. Selecting a successor can often mean choosing between children who, until now, have all been harboring their own secret ambitions of succeeding when the founder retires, and founders themselves are ambivalent about succession because they are worried about their children’s abilities and how to select a more competent one at the expense of others. Hence, succession represents a major transition, with the fortunes of the firm resting on how successfully it is negotiated and this is why considerable attention is devoted to succession planning.
- Leadership
Another difficulty for family businesses that is worth highlighting is leadership, or rather the lack of it, in situations where there is no one within the organization empowered to take charge. This becomes extremely critical when the business has reached the second generation and so on.
In short, family businesses have many things going for them-they tend to be flexible, reliable, proud etc, but they can also carry a daunting set of disadvantages they can be rigid, unresponsive, inward-looking as well. It is a mix of costs and benefits, strengths and weaknesses.