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Challenges Facing Management of Family Business

Challenges Facing Management of Family Business

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Published by Frank Kenyan
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Categories:Types, Research
Published by: Frank Kenyan on Feb 23, 2012
Copyright:Attribution Non-commercial

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02/23/2012

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CHALLENGES FACING FAMILY BUSINESS MANAGEMENT
Family business is defined in terms of ownership, authority and responsibility. Majority ownership of a familybusiness is by one or more family members who have the authority and responsibility for its day to daymanagement as well as its mission and strategies. The management team may include some people unrelatedto the family business managers.Some of the challenges that managers of such establishments face are:
Control:
 
Without the influence of outsiders, however, decision making is less objective, governance can bevariable, reporting often is weak, and thinking is unchallenged. There no clear company goals,decisionlines,measure of performance or laid down procedures. The owning company may carry business in a wantonmanner since there are no clear rules to govern that,and the rules that are there are easily bent.
Family-business separation:
Family businesses mix business and family which might be quite difficult to handleconsidering the emotional attachment involved. For example, family business meetings can involve more familytalk than business talk. Family problems and decisions are mixed with business problems and decisions.Solutions to problems are rarely pure business or pure family in nature so attempts at complete separation arecounterproductive.
Human resources
:Most family businesses take up family members as employees. Such employees are hard tomanage due to their egos since its their family business. They may also not have the required skills for their jobssince there is no strong pool to choose from. There is also lack of motivation among the employees due to thelimited career development opportunities,such as promotion. There is high turnover among top non-familyemployees due to unfair work conditions.
Succession:
Family business involves passing on of the business from generations to others. The head of thebusiness at any given time may to a large extent. This may happen if he holds the managerial role where his ownprowess determines the nature of management. Otherwise,the manner in which he deals with management alsomatters a lot. The process of succession is also a touchy issue which shold be managed well,else it blows thebusiness apart.
Family Wrangles:
Infighting among family members may to a large extent curtail on the running of a familybusiness. Being a business based on the institution of family,wrangles among the owners themselves can serveas doom for the company,hence for the management team. This happens mostly if the cause of the wrangles isrelated to the running of the business.
The role of the founder
:The founder as the most influential person in the organization sets the tone formanagement of the business and most decisions are made by him/her,which might not always be the best for thebusiness. This curtails the leadership of the qualified managers,hence rendering their influence useless.If thefounders' schools of thought are not relevant in the current business and technology era,it may createprofessional friction.
Fund Accessibility:
The ceiling may be too low on the amount of money that can be spent without permissionfrom too many members. Unrealistic or unnecessary clearance procedures may result in missed opportunities forincreased profits, such as failing to take advantage of a good price on raw materials or sales inventory.
Informality of purpose:
In the absence of strategic planning and written mission statements, each member ofthe management team is allowed to generate her or his own reasons for being in business. Conflicting strategiesfor success, misallocation of resources and failure to deal with management purposefully then characterize thebusiness. This thus compromises on critical strategy decisions.
Mistrust:
Within a family-run business, distrust of outsiders seems to be a primary influence. Family membersmay not trust the management team,especially if they are outsiders,to run the business properly-or as they deem
FRANKLINE MWENDA KIBUACHA,2012 www.frankmwenda.com

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