🏢 What is a Family Business and its Characteristics

 From experience, I can mention that define what a family business is complex, especially because one of the many problems that exist in family businesses is the lack of an understanding of what they are, and proper allocation of roles, or see where you stand every member of the family within the company environment. It is known by those involved that the characteristics of a family business are in a somewhat different magnitude to another company.

Knowing what belongs to whom, and what activities should make such a person is important for harmony remains within the company and the family. If the company is in the stage of the founder, it is easy for him to have control over and decide how they will be allocated the resources generated by the company. But once the second generation begins to grow, and have a desire to continue with the company, it is important that the roles of each of those involved are defined.

To learn a little more to this complex world has added the following.
Defining what is a Family Business

Here I will mention some important concepts surrounding a family business.

Business

The company is guided by economic objectives organization formed by people who play very different roles (shareholders, managers, workers) interacting with other social organizations in their environment (customers, suppliers, financial intermediaries, and public administrations) and also has with objectives and specific challenges and is imbued with a particular set of values.

Family

Families are a group of people belonging to the same hereditary structure, assembled by genetic inheritance, biological ties and affinities. Its components include, in general, the direct descendants, spouses and cohabitants.

Such compounds elements generate the special bond that formed the family business.

family business

the concept of family business is used when the aspect to be emphasized is linked more to the family institution, the group of people who also share a family relationship, owns, controls and / or directs a particular business, assets or business organization.

Given what is a family business, you need to understand what they control. As the definition says, they run a business, property or business organization. The family business maintains relationships at various levels to professional and personal. The complexity of family businesses lies especially those relationships. Here are some definitions of expert added.

Definition of family business

“It is one in which the property and decisions are dominated by members of a group of emotional affinity.” (Carsud, 1996)

“The property control is allocated to a member or members of a single family.” (Barnes and Hershon, 1989)

“A company in which one family owns most of the capital and has total control. The family members are also part of the management and make important decisions.” (Gallo and Veen, 1991)

“The company that will be transferred to the next generation of the family to the command or control”. (Ward, 1995)

“Family business is one in which a family group is able to appoint the chief executive of the company, setting the business strategy of it all with the aim of generational continuity, based on the joint desire of founders and successors to maintain control of ownership and family management. ” (Crown, 2004)

“A family business is any business in which several family members assume management or active responsibility as owners. One has a family business if you work with someone from your family in a business belonging to the two or belong to them someday . the essence of a family business is that blood is shared, work and ownership of the company. ” (Jaffe, 1991)

Source: FUNIBER

The main characteristics of a family business: Company Property and Family

To understand more about what is a family business usually called the system of three circles was generated. Each of these circles represents the family, property and business. Previously it had defined what the company and the family, which in addition to these two elements, the property is paramount.

Property

“We define as a family company in which the majority of the ownership or control lies in a single family and two or more family members involved or participated in its time.” (Rosenblat, De Mik, Anderson and Johnson, 1985)

The model of the three circles

The three circles model was developed by Tagiuri and Davis (1982) for the purpose of describing the various situations that arise in all family businesses. This system is based on the company, property and the family, where each circle represents a group of people with particular characteristics in their relationship with the family business. At intersections of the circles you can be found people who own both or all features.

Model of the three circles

Groups 1,2, or 3 are people who only have a connection with family, property or business. 4, 5 and 6, with the mix of family-owned, company-owned and company-family. Finally, those who are at the intersection 7 are those with the three characteristics. Normally the founder is a person who has all three.

1. Family

It is the group of people is made up of family members who do not have any property or participating in the company.

2. Property

Are the people who have shares in the family business without family or work within it.

3. Company

Employees working within the organization who are not family members, or owns stock.

4. Family and Property

Family members holding shares, but who do not work within the company.

5. Property and Business

Are the people who are not family members who have a position and actions.

6. Business and Family

Those who work in the company with any position and are members of the family, but have no actions.

7. Family, Property and Business

At the intersection of the three circles those who have shares, some position and family ties are presented.

I share two simple steps required to locate those involved in the family business in the diagram.

Generate list of people involved with the company. They should include shareholders, employees of trust, family and children, siblings or parents.
Assign the number corresponding to the person. Example: If Antonio is a shareholder and member of the family but does not work in the company is assigned 4 (Family-Owned). Or if Martin works at the company, but not family and nor is shareholder is assigned 3. (Company) so on.
The question to answer, now what do I do with this list? Define the roles is only the first step of many to organize a family business. Get the roles within the diagram to identify where people are standing in the company. The dialogue and constant communication are important to not forget what position they are.
The development of these companies is much more complex than a simple list, so in the following items hope to continue complementing what is the world of the family business.

 

🏢 What is a Family Business and its Characteristics
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2 thoughts on “🏢 What is a Family Business and its Characteristics”

  1. Puede variar mucho según el perfil de la persona y la empresa. Por ejemplo si el 5 tiene un puesto directivo importante dentro de la empresa, es probable que sus decisiones sean tomadas en cuenta en comparación con un 4. Pero si el 4 es solamente familiar sin trabajar y socio mayoritario de la empresa, también sus decisiones tendrán gran peso.

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