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A family business is primarily characterized by significant ownership of family members which provides such family, control of the business’ over-all operation and decision-making. This set up has served many successful companies along the way proving that there is an advantage in having family members cooperate in running a business. However, because of the very nature of a family business, problems often arise especially when the interest of one does not coincide with the other.
Conflict often arises when the competence of family members do not match the degree of responsibility that his or her position requires. Another cause for conflict is the personal interest of a family member in relation to the business. A clear case in point here is the situation where family members holding positions in the family business also act as suppliers through their personal businesses. Serious differences in management styles can also result to highly stressful situations that directly affect the family business.
One way of eliminating or avoiding problems of this nature is professionalizing a family business. This would require bringing in professional advisers who are not family members to look into the possible weaknesses in the prevailing system. Outsiders are typically needed to provide an objective view of the business situation since these people are not expected to obtain personal gain from the transaction except of course to be paid for their professional and unbiased services.
The most controversial issue in family-owned business is the issue of succession. Conflicts regarding this can be avoided if a clear system is in place about management positions and the competence level required. Family businesses that have allowed for professionalization to come in have cited positive outcomes in increased competitiveness and business coverage expansion.
Originally posted on October 30, 2012 @ 11:06 am