It can be said that many of the large corporations of today have been started in a small way by individuals and their families. Due to hard work and vision, they have now grown to the status and size that one sees today. There are still many family owned firms that are profitable, and still classified as small and medium enterprises (SME). Many of them remain small or medium either because their owners choose to remain as such or due to a plethora of problems that plague such units. There is a saying that the father started the business, the son became rich, and the grandson ended up being poor. Even though an exaggeration in most cases, there is a lot of truth in this saying. This paper is an attempt to understand a typical family run unit and the circumstances by which they remain as such. This will be done through a review of literature (briefly) and mainly through an actual interview of a business family in Hong Kong. Research has often found that there are a set of standard problems that plague such units once they reach a certain stage where professionalism is required in their management. They include bringing personal emotions into business, informality, tunnel vision, confusion in roles, favouritism, nepotism, problems in succession, problems in communication, etc. (20 Challenges Faced by a Family Owned Business. 2007). There are also other “factors which can influence the continued success of family businesses in a potentially negative way.” (Some Mistakes That Family Entrepreneurs Make: Initiative for Families in Business). They include confusing family and business roles, dominance of the founder, difference in perception (generation gap problems) etc. Complacency in past success, succession issues, lack of passion, proper business analysis, legacy expectations are also factors that contribute to lack of growth. An article in BusinessWeek also provides some guidelines by which most businesses can solve these problems and continue to grow even into large multinationals. They include a passion for the business (by all members involved), good professional relationships, excellent communication, clarity of vision and fairness. (Hutcheson 2007, p.1).
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An interview with the Wan Chai Family Furnishings was conducted using a questionnaire that covered the issues and the suggestions mentioned above. The results are provided below. An analysis of the answers using the Mindset and Methods model will be done along with recommendations for the improvement of the business. The business in question was founded by the current owner’s father in 1935. The company is quite famous within the island for making custom made home furnishings and has the involvement of the present owner’s two sons and three nephews.
Answers, analysis, and suggestions
The Company has a turnover of 250,000 HKD annually and employs around 25 workers on a permanent basis and a further 55 on a part-time basis. The main product of the company was household furnishings like upholstery for furniture. Sales have remained stagnant for the past five years and maintaining it is getting more or more difficult. The current owner admits that he has little control over the operations of the business. The only thing that he has been able to maintain is the quality of the products. He liked his nephews and had given them charge of sales and marketing of the company while the sons are in charge of administration and production (helping the father). The inclusion of the nephews was resented by the sons especially the younger ones. He also has a business degree from a reputed university from Hong Kong while all others (including the owner) had only basic education and learnt whatever they knew by experience in the business. The son with the MBA degree wanted to be in charge of marketing so that new strategies can be evolved, but could not agree with his cousins on many issues. The nephews acted as if they were inside the family circle and even addressed the owner as uncle inside the office. Orders were maintained from existing customers who were requesting them to diversify into other furnishings as well. The nephews were content with things as they are and were not aware of the state the company was heading into. Competition was also increasing in the field.
It is clear that there is a lack of congruence between the mindset of the sons and nephews.
From its current position on the lower left hand corner of the grid, the first step is to move towards the upper left hand corner and, then on to the family enterprise domain in the upper right hand corner.
It is clear that the business has new opportunities for growth as indicated by the demands of the existing customers itself to diversify further into furnishings. The owner though averse to listening to his sons is not strong enough to counter his nephews because of the soft corner he has for them. The steps to be followed here are given below. The most important step is to create communication through dialogue without going into arguments. It is difficult to have effective business communication between family members. The initiative should be taken by the son who holds the MBA degree since he is technically sound with regard to areas like HRM. The sons (the two sons get along well with each other and share the same vision) should first talk to their father and after he comes around should talk with the nephews. If the talks fail, steps should be taken by the father to step into the issue. He should either convince them or remove them from the scene, even at the cost of family displeasure. The issue of the business and its employees is more important at this juncture. Moreover the nephews might come around once a strong threat is voiced from their uncle. If the dialogue is successful, the views can be made identical which is the second step in the process of congruence. The risk profiles should be matched or at the least adjusted by both parties (the owner and the sons) and an adjusted risk profile acceptable to both should be formed. Timing is of essence and the sons want to start diversification immediately while the father is more complacent about it. Both parties should adjust their comfort zones and come to a mutual time schedule. Creativity should be encouraged in the dialogue. Many pleasantly surprising suggestions and ideas may come up even from the father and the nephews (if they come around). Sixthly, a passion for the business should be developed among all the family members. At present only the sons and the father to a certain extent have it. The nephew’s view is more as a job and not as an ownership issues. The nephews should be made to understand that they are welcome to become partners if they share the common vision, understanding, and passion for the business.
- HUTCHESON, James Olan. (2007). Building a Family Business To Last. [online]. Business Week. 1.
- Some Mistakes That Family Entrepreneurs Make: Initiative for Families in Business.
- 20 Challenges Faced by a Family Owned Business. (2007). [online]. Lee Ivan Accumulated Experience. Web.