Strengths and Weaknesses of Family Business

The definition of family business is, “a family business is one that, quite simply, is influenced by a family or by a family relationship, and that perceives itself to be a family business.”[1] Given below are a list of strengths and weaknesses in a family business.

STRENGTHS

• Family Business Culture and Value

In India, a family business can be seen as the external demonstration of a family’s value system. Put simply, values, or rules for living, sustain a code of behavior that builds and supports family vision and business mission. Behavior of the family is created to reinforce what the family stands for and why they are in business together. During times of challenge and transition, their business is supported by the belief in a set of values, but where there is no relevant vision to unite the family, opportunities for conflict can arise. The next generation must reinterpret and revitalize the family’s value system to keep up with today’s changing views of life.

• Predictable Problem Resolution

In a family business it is always possible to resolve a range of tomorrow’s problems, simply because, for the most part they can be identified in advance. Usually, in a family three types of issues present themselves in family businesses;

1)    Personality issues - when a person is impossible, unreasonable, illogical and irrational.

2)    Structural issues – something’s are not working in the structure of how the family relates to the business, which undermines family dynamics and decision making.

3)    Business issues – the business is going downhill and nobody is quite sure whether commercial factors lie behind this or if his family factors are causing the underperformance.

• Commitment

People who set up their own businesses, nurture it and watch it grow; they tend to have a strong bond with their business their whole life. This bond translates into dedication and commitment, which extends to all the family members who contributed to the success of the company. They have a natural sense of responsibility towards the company and ensure no conflicts arise and everyone is happy. Family enthusiasm develops added commitment and loyalty from the workforce.

• Knowledge

Any family business have certain ways of doing things, like a special technological or commercial ‘know-how’ which are not possessed by their competitors; knowledge of certain products or materials are kept a family secret and passed on over generations to continue their tradition. Knowledge is passed on, and the next generation grows up learning about the business, and when the time comes for them to step in, they already have a thorough understanding of what the business is all about.

• Flexibility in Work, Time and Money

Essentially this comes down to putting the work and time into the business that is necessary and taking out money whenever it can afforded. So, if works needs to be done and time spent in developing the business, then the family puts in the time and does the work- there is no negotiating of overtime rates or bonuses for a rushed job. The same flexibility applies to money, and here lies another important distinction between entrepreneurial and non-business families.

• A Stable Culture

Successful family businesses tend to be stable structures. They are often durable, low-profile, profitable, and niche enterprises. The leader of the family businesses has usually been around for many years and the key management personnel are all committed to the success of the company, and they too are there for long term. The firm has enough time to build relationships and stabilize as everybody knows how things are done.

The weaknesses will be posted tomorrow, so tune in for more on family business..!