Family-Owned Business
- Cindyta Meidiana
- Maharani Kirana D.
- Titha Monita
- Wildan Azam
A family company is a company owned, controlled and run by members of a family or managed by members of his family. However, it does not mean that all workers in the company must be family members. Many family companies, especially small companies, employ other people to occupy lower positions, while high positions (top managers) are held by people in the family of the company. For example, the owner of the company is his father, the director is the first child, and the deputy director is the second child. Many family companies have had great success, for example, Maspion group, Ciputra, Nyonya Meneer, Sidomuncul, and Meco.
Family
participation in the company can strengthen the company because usually family
members are very loyal and dedicated to the family-owned company. However,
problems often arise in managing family companies, especially in terms of
leadership changes. Often clashes arise between family interests and company
interests. For example, a company will tend to retain a family member to work
even though he is less competent in his work so that it will endanger the
survival of the company.
In business
terminology, family companies are divided into two types. The first is the
family owned enterprise (FOE), which is a family-owned company but managed by
professionals from outside the family circle. Families only act as owners and
do not involve themselves in operations in the field. A company like this is an
advanced form of business which was originally managed by the family who
founded it.
The second
type of family company is the family business enterprise (FBE), which is a
company owned and managed by the founding family. This type of company is
characterized by the holding of key positions in the company by family members.
This type of family company is widely available in Indonesia.
Another
limitation about the company was given by John L. Ward and Craig E. Arnoff.
According to him, a company is called a family company if it consists of two or
more family members who oversee the company's finances. Whereas according to
Robert G. Donnelley in his book "The Family Business" an organization
is called a family company if there is at least two generations of involvement
in the family and they influence company policy.
A family
business is a commercial venture in which family members are involved. A family
business can include many possible combinations, such as parents and children,
husbands and wives, multiple generations, and extended families taking the
roles of board members, stockholders, advisers and employees. There are some
benefits associated with a family business, but there are also some detriments
associated with undertaking a business venture with your family.
Advantages
of family businesses :
1. Loyalty
Family-owned businesses are theoretically ideal because
family members form a grounded and loyal foundation for the company and because
family members will often exhibit more dedication to their common goals. Having
a certain level of intimacy among the owners of a business can help bring about
familiarity with the company and having family members around provides a
built-in support system that should ensure teamwork and solidarity. Other
benefits of a family business include long-term stability, trust, loyalty and
shared values. Families also tend to be more willing to make sacrifices for the
sake of the business.
2. Flexibility
Families tend to be more lenient and forgiving when it comes
to work schedules, work-related decisions and judgments, and even mistakes. In
a family business, there may be more leeway to work a flexible or part-time
schedule, or to choose your own hours, so you can tend to your children,
parents or other family members in need.
3. Decreased costs
Family members may be more willing to make financial
sacrifices for the sake of the business. For example, accepting lower pay than
they would get elsewhere to help the business in the longer term, or deferring
wages during a cashflow crisis. You may also find you don't need employers'
liability insurance if you only employ close family members.
4.
Stability
Knowing you're building for future generations encourages the
long-term thinking needed for growth and success - though it can also produce a
potentially damaging inability to react to change.
5.
Common values
You and your family are likely to share the same ethos and
beliefs on how things should be done. This will give you an extra sense of
purpose and pride - and a competitive edge for your business.
6.
Possible Inadequacies
In a family business, business owners may sometimes
automatically promote family members or give them a job even if they do not
have adequate skills for the position. Just because the person is a family
member does not mean he will be best suited to a given job, and a company that
hires only relatives may end up having some bad apples. Sometimes skill and
work experience may be neglected. Business owners also cannot expect all family
members to love the business.
Disadvantages
of family businesses :
1.
Conflict
Family businesses bring up a lot of challenges. They can be a
source of difficulty when it comes to issues on succession, sibling
relationships, and identity development. Succession is one of the most
difficult challenges that family businesses face and can become a challenge
when the older generation does not permit the younger generation the needed
room to learn, develop and grow. On the other hand, sometimes no one in a
subsequent generation even wants to assume the leadership position in his
parent's business. Oftentimes, relationships between parents and children, or
among siblings, tend to deteriorate due to lack of communication within the
family. This dysfunctional behavior can result in judgments, criticism and lack
of support.
2.
Lack of skills or experience
Some family businesses will appoint family members into roles that they
do not have the skills or training for. This can have a negative effect on the
success of the business and lead to a stressful working environment.
3.
Family conflict
Conflict can arise in any business, but it’s important to consider that
disputes within a family business can become personal as the staff are working
with the people closest to them. Bad feelings and resentment could destabilise
the business' operations and put your family relations at risk.
4.
Favouritism
Can you be objective when promoting staff and only promote the best
person for the job whether they are a relative or not? It is important to make
business decisions for business reasons, rather than personal ones. This can
sometimes be difficult if family members are involved.
5.
Succession planning
Many family business owners may find it difficult to decide who will be
in charge of the business if they were to step down. The leader must determine
objectively who can best take the business forward and aim to reduce the
potential for future conflict - this can be a daunting decision.
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