Often as family businesses grow, they build boards with outside professionals. Usually those external professionals assume that total shareholder return is the ultimate goal — and advocate choices consistent with that goal. But those choices may also be inconsistent with family values. You start defining yourself and your family through money. People who know the Pasin family know they stand by their word.
It is defined by the many handshake agreements honored throughout their history. Sometimes, however, family business owners start defining themselves through their money and fame, lending their name to buildings, parks, and other public areas. There can be lots of good civic reasons to support local causes, but if the underlying motivation is about showing off your money, the family has started down a slippery slope.
When the need for outsider adulation dominates decisions, those outsiders start defining your values, rather than your own family. Profit becomes your primary motive. Academics and thought-leaders have been telling us for years that the purpose of a corporation is to maximize shareholder value.
That may be true for public companies, but family businesses are free to be different. They have an advantage in that the owners can choose what to prioritize — be it profit, family harmony, social responsibility, or some other dimension. When family businesses choose to over-emphasize profit to the detriment of their customers or the communities within which they live, they can find themselves heading down the wrong path.
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Carl Weber’s The Family Business
Noodle defence. UPS enhances asia trade connectivity as region looks towards growth. A genogram is an organization chart for the family. It is an enhanced family tree that shows not only family events like births and deaths, but also indicates the relationships close, conflicted, cut-off, etc. It is a useful tool for spotting relationship patterns across generations, and decrypting seemingly irrational behavior. Family myths—sets of beliefs that are shared by the family members—can play important defensive and protective roles in families.
Myths help people cope with stress and anxiety and, by prescribing ritualistic behavior patterns, will enable them to establish a common front against the outside world. They provide a rationale for the way people behave, but because much of what makes up a family myth takes place deep beneath the surface, they also conceal the true issues, problems, and conflicts. Although these family myths can turn into a blueprint for family action, they can also turn into straitjackets, reducing a family's flexibility and capacity to respond to new situations.
See also: Family nexus. All businesses require planning, but business families face the additional planning task of balancing family and business demands. There are five critical issues where the needs of the family and the demands of the business overlap—and require parallel planning action to ensure that business success does not create a family or business disaster.
Fairness is a fundamental issue in family business decision-making. Solutions that are perceived as fair by the family and business stakeholders are more likely to be accepted and supported. Fair process helps create organizational justice by engaging family members, whether as owners and employees, in a series of practical steps to address and resolve critical issues.
Fair process lays a foundation for continued family participation over generations. The challenge faced by family businesses and their stakeholders, is to recognise the issues that they face, understand how to develop strategies to address them and more importantly, to create narratives, or family stories that explain the emotional dimension of the issues to the family. The most intractable family business issues are not the business problems the organisation faces, but the emotional issues that compound them. Many years of achievement through generations can be destroyed by the next, if the family fails to address the psychological issues they face.
Applying psychodynamic concepts will help to explain behaviour and will enable the family to prepare for life cycle transitions and other issues that may arise.
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Family-run organisations need a new understanding and a broader perspective on the human dynamics of family firms with two complementary frameworks, psychodynamic and family systematic. When the family business is basically owned and operated by one person, that person usually does the necessary balancing automatically. For example, the founder may decide the business needs to build a new plant and take less money out of the business for a period so the business can accumulate cash needed to expand.
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In making this decision, the founder is balancing his personal interests taking cash out with the needs of the business expansion. When the second generation sibling partnership is in control, the decision making becomes more consultative. When the larger third generation cousin consortium is in control, the decision making becomes more consensual, the family members often take a vote.
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In this manner, the decision making throughout generations becomes more rational. The assets that are owned by the family, in most family businesses, are hard to separate from the assets that belong to the business. Balancing competing interests often become difficult in three situations. The first situation is when the founder wants to change the nature of their involvement in the business. Usually the founder begins this transition by involving others to manage the business.
Involving someone else to manage the company requires the founder to be more conscious and formal in balancing personal interests with the interests of the business because they can no longer do this alignment automatically—someone else is involved. The second situation is when more than one person owns the business and no single person has the power and support of the other owners to determine collective interests.
For example, if a founder intends to transfer ownership in the family business to their four children, two of whom work in the business, how do they balance these unequal differences? The four siblings need a system to do this themselves when the founder is no longer involved.
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The third situation is when there are multiple owners and some or all of the owners are not in management. Given the situation above, there is a higher chance that the interests of the two off-spring not employed in the family business may be different from the interests of the two who are employed in the business. Their potential for differences does not mean that the interests cannot be aligned, it just means that there is a greater need for the four owners to have a system in place that differences can be identified and balanced.
There appear to be two main factors affecting the development of family business and succession process: the size of the family, in relative terms the volume of business, and suitability to lead the organization, in terms of managerial ability, technical and commitment Arieu, Potential successors who had professional experience outside the family business may decide to leave the firm to found a new one, either with or without the support of the family. Instead, successors tend to be characterized by professional experience only within the family business.