Scenario Of Family Business Management Information Technology Essay

A family business is a business in which one or more members of one or more families have a significant ownership interest and significant commitments toward the business’ overall well-being.

In some countries, many of the largest publicly listed firms are family-owned. A firm is said to be family-owned if a person is the controlling shareholder; that is, a person (rather than a state, corporation, management trust, or mutual fund) can garner enough shares to assure at least 20% of the voting rights and the highest percentage of voting rights in comparison to other shareholders. Family businesses may have owners who are not family members.

Family businesses may also be managed by individuals who are not members of the family. However, family members are often involved in the operations of their family business in some capacity and, in smaller companies, usually one or more family members are the senior officers and managers. Many businesses that are now public companies were family businesses.

Family participation as managers and/or owners of a business can strengthen the company because family members are often loyal and dedicated to the family enterprise. However, family participation as managers and/or owners of a business can present unique problems because the dynamics of the family system and the dynamics of the business systems are often not in balance.

PROBLEMS IN FAMILY BUSINESSMANAGEMENT

The interests of a family member may not be aligned with the interest of the business. For example, if a family member wants to be president but is not as competent as a non-family member, the personal interest of the family member and the well being of the business may be in conflict.

The interests of the entire family may not be balanced with the interests of their business. For example, if a family needs its business to distribute funds for living expenses and retirement but the business requires those to stay competitive, the interests of the entire family and the business are not aligned.

Finally, the interest of one family member may not be aligned with another family member. For example, a family member who is an owner may want to sell the business to maximize their return, but a family member who is an owner and also a manager may want to keep the company because it represents their career and they want their children to have the opportunity to work in the business.

. For example, if a family needs its business to distribute funds for living expenses and retirement but the business requires those to stay competitive, the interests of the entire family and the business are not aligned.

Finally, the interest of one family member may not be aligned with another family member. For example, a family member who is an owner may want to sell the business to maximize their return, but a family member who is an owner and also a manager may want to keep the company because it represents their career and they want their children to have the opportunity to work in the business.

SCENARIOS OF FAMILY BUSINESS MANAGEMENT

But balancing competing interests often become difficult in three situations.

The first situation is when the founder wants to change they are involved in the business. Usually the founder begins this transition by involving others to manage the business. Involving someone else to manage the company requires the founder to be more conscious and formal in balancing personal interests with the interests of the business because they can no longer do this alignment automatically-someone else is involved.

The second situation is when more than one person owns the business and no single person has the power and support of the other owners to determine collective interests. For example, if a founder intends to transfer ownership in the family business to their four children, two of whom work in the business, how do they balance these unequal differences? The four siblings need a system to do this themselves when the founder is no longer involved.

The third situation is when there are multiple owners and some or all of the owners are not in management. Given the situation above, there is a higher chance that the interests of the two sons not employed in the family business may be different than the interests of the two sons who are employed in the business. Their potential for differences does not mean that the interests cannot be aligned, it just means that there is a greater need for the four owners to have a system in place that differences can be identified and balanced.

SUCCESS OF FAMILY BUSINESS MANAGEMENT

Successfully balancing the differing interests of family members and/or the interests of one or more family members on the one hand and the interests of the business on the other hand require the people involved to have the competencies, character and commitment to do this work.

Often family members can benefit from involving more than one professional advisor, each having the particular skill set needed by the family.

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Some of the skill sets that might be needed include communication, conflict resolution, family systems, finance, legal, accounting, insurance, investing, leadership development, management development, and strategic planning.

INNOVATIVE TRENDS IN FAMILY BUSINESS MANAGEMENT

. There are three major trends among the most innovative family business management that together will have a strong impact on wealth holders and the providers to these families:

Develop new sources of knowledge.

Family business continuously gather practical information from a wide variety of sources.

As a result, much of the information these families receive comes from providers of products and services, who have a commercial motive. To further complicate matters, products and advice are often bundled together, with “free” services subsidized by the revenues generated from other components of the package. Unsurprisingly, the most complex and/or illiquid offerings tend to have the highest embedded costs. Family business management increasingly supplement these sources of information through “peering” – communicating with each other to compare experiences and solutions.At its best, this is a global exercise in which family business actively seek to learn from their peers around the world. Leading families recognize that local networks must be supplemented to ensure that they access more than a location-specific consensus shared by those who, for example, live in the same place, share the same social network, or rely upon the same sources of information.

Unbundle, measure, and innovate.

The most sophisticated family business recognize that products, platforms, and advice, are fundamentally distinct. They are creating customized solutions from select providers in each category, rather than accepting a bundled offering from a single source. This unbundling allows for more accurate measurement of the value provided by each component. This in turn allows family business management to see new areas of opportunity and to “swap out” only the individual components that are not working according to specific performance criteria. While trust remains paramount, the foundation of trust is shifting to be based on competence and track record rather than simply a personal relationship. The most enduring relationships are being built upon “informed trust,” which requires a clear understanding of the way a provider’s business works. Family business are increasingly focused on measuring inputs and outputs. This means that they are paying closer attention to the transaction costs of intermediation and actively seeking to calibrate economic incentives to better align costs with value. This requires a nuanced understanding of the inner workings of products and services so that meaningful benchmarks and cross-comparisons can be established. The most sophisticated families consider both absolute and relative value, using peer-based benchmarks as an input to their evaluations.

Pursue opportunities globally.

The inputs that family business use to create their solutions increasingly come from all over the world, not just their home countries. This trend is a direct result of the two trends described above. Family business have both the means and the incentives to invest in understanding foreign markets and practices. The empirical case for doing so is strong, particularly when local knowledge can be applied to less efficient markets. In addition to globalizing their portfolios, family business increasingly seek opportunities from direct investments. Family business are pursuing returns through country-specific direct investments, such as real estate or private equity, which require a greater level of due diligence and commitment (and offer greater potential rewards). These investments are often made in partnership with other sophisticated private investors who have relevant expertise in “co-direct investment” or “club investing” arrangements. The pervasive changes underway in the family business market reinforce each other. Increased knowledge leads to better analysis of a wider set of opportunities, and this allows investors to unbundle and measure, so that they can be more creative in devising comprehensive, global solutions. The more innovation that occurs in the market as a result of this creativity, the greater the additional knowledge creation and sharing.While the effects of this shift are now being felt.

STRUCTURING OF FAMILY BUSINESS MANAGEMENT

When the family business is basically owned and operated by one person, that person usually does the necessary balancing automatically.

For example, the founder may decide the business needs to build a new plant and take less money out of the business for a period so the business can accumulate cash needed to expand. In making this decision, the founder is balancing his personal interests (taking cash out) with the needs of the business (expansion).

ORGANIZATIONAL STRUCTURE

Organizational structure defines the roles and activities required of people in order to

meet the objectives of the business. The structure should also help people accomplish their own

career and personal goals. Concern with motivation and communication should influence the

organizational structure. In defining an organizational structure, the manager has four objectives

in mind:

(1)- division of tasks,

(2)- coordination of efforts and tasks among people and enterprises,

(3)- control over the way in which tasks are performed and

(4)- flow of information.

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To accomplish these four objectives, the manager must decide the positions to be filled

and the duties, responsibilities and authority attached to each position.

PRINCIPLES AND CONCEPTS OF ORGANIZING

Regardless of the specific characteristics of a horticultural business, some principles of

organizing will be helpful. These principles have two uses. First, they are helpful in the actual

design of the organizational structure. Second, they can serve as a check list for evaluating and

improving the current organizational structure.

EXCEPTION PRINCIPLE

Someone must be available to handle the exceptions to the usual, i.e., someone

must be in charge. When an employee or worker has a problem he or she can not handle,

the organizational structure should provide for someone higher in the organization to

provide assistance.

DECENTRALIZATION

Decisions should be pushed down to the lowest level possible in the organization.

The more routine a decision, the lower the level in the organization where it should be

handled. To illustrate, workers waiting each morning to be told what to do and where to

do it can be a great waste of manager and worker time.

Workers having a routine not requiring daily instruction, and workers being trained to handle with confidence decisions within their job descriptions illustrate decentralization. The objective is to overcome the waste of time stemming from too much centralization of decision making. Working managers rather than managed workers should be the goal.

PARITY PRINCIPLE

Decentralization requires delegation. With delegation comes responsibility.

Authority should be delegated along with responsibility. To illustrate, assume the 18 year old son of the owner of a landscape firm has been given the responsibility of taking a crew of 3 people, each over 25 years old, to a landscaping site to plant 5 trees and 30 bushes.

Further assume that the son has no authority to decide how hard it has to be raining before the crew stops working, no authority to correct a person who is digging the holes for the trees and bushes too deep and no authority to reward the crew member who is doing by far the best job. It is easy for the 3 workers to ignore the son if they have been accustomed to taking orders only from the owner and the owner has given the workers no indication of what authority the son does and does not have.

SPAN OF CONTROL

The span of control is the number of people a manager supervises. The organizational decision to be made is the number of subordinates a manager can effectively lead. The typical guideline is a span of control of no more than 5-6 people. However, a larger span of control is possible depending on the complexity, variety and proximity of jobs.

The ability, experience and style of the manager also affects the desirable span of control. Finally, worker characteristics should affect the span of control. Well trained, motivated, experienced and satisfied workers require relatively little supervision.

Owner/operators of family businesses often have span of control problems because of a “me” attitude. As a family business grows and people are added, the manager still may want everyone reporting to her rather than delegate responsibility and authority to a middle manager.

UNITY PRINCIPLE

Ideally, no one in an organization reports to more than one supervisor. Having

more than one supervisor causes an employee relatively few problems if the supervisors

have good coordination and frequent communication.

However, supervisors typically lack the time for the necessary coordination and communication. Too often, employees get conflicting instructions and assignments. Employees should not have to decide which of their supervisors to make unhappy because of the impossibility of following all the instructions given them.

OWNERSHIP STRUCTURE

There is no one family or ownership structure; it have family businesses that are owned by one sole owner. When it comes to the second generation, most of them turn into a sibling partnership with very few but strong owners who hold large shares in the company. In the next generation, it come to a cousin federation and maybe one day we are a family dynasty like Haniel or Wendel.

Each stage has its own problems. It must understand the stage you are at, asking the right questions and giving the right answers relevant to that stage. The transition from one stage to another creates a crisis because, in the next generation, you have different questions and you have to give different answers. If you understand that there is a crisis and find the right answers, this crisis may create a chance.

Owner strategy starts, like every strategy, with some simple key questions: what is our vision, what is the mission statement we have as owner family.

More specific questions for owner families include the following: who can become a member of the owner group. From whom can member groups inherit their shares and to whom can they sell shares? How do we want to deal with in-laws and the next generation

Emotions must be dealt with effectively when managing a family business and managing a family that owns a business. Successful families are families who are better at addressing emotional problems and then solving them.

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Values and aims must be clarified if any group wants to be successful. This helps prevent conflict when making decisions. Knowing the company goals and the family aims is important – otherwise, a family cannot determine whether it is successful or not. In successful family businesses, strategies will change, but the values remain very stable over generations.

BUSINESS STRUCTURE

This is the business model follow. It often starts with the entrepreneurial stage and then it turns to a traditional and classical family business. There are several different business models and each family should address some essential questions when choosing the correct one.

“Do we want to be a more focused or more diversified owner family?”

“How do we want to influence the business? Do we want to run it or just control it? Do we want only to act as owners and let outside people control it?”

“How should we manage the owner family so that we maintain family unity and commitment?”

New Ideas – We must formulate a family code that is sensitive to new membership values, aims and a changing business model.

Family Education – All the owners should know what it means to own a family business, and what professional ownership means.

Emotion-Added Value – It is important to come together and have family days so that you have the chance to enjoy being a member of the group.

Family Office – You may want to start a family office and do family philanthropy together.

FUNDS AND INVESTMENT STRUCTURE

With a dedicated funds, investment and tax team, including lawyers with corporate, tax and trust experience, we are able to provide the targeted investment structuring advice on which family offices depend.

leading investment managers and fund managers, to ensure that private investments are designed and structured to mitigate taxation and provide the greatest opportunity for returns.

LEGAL RISK STRUCTURE

Risks from many directions, including legal liability, risk of investment loss or devaluation, compliance failure, tax and property law change, security (this includes risks to property and person) family dissension, divorce and indiscretion.

The mitigation and balancing of risk in all its forms is of paramount importance for many family business management.

Wealthy families and family members are faced with many legal and investment challenges, and increasing regulatory scrutiny. These issues become more acute in the case of multi-generational families with members based in various countries who have international asset holdings

Another key risk for clients is breach of confidentiality, especially in a world where the Internet means information anywhere is information everywhere.. It is possible to reduce such risks by the use of appropriate structuring and third party contracts – but these measures should be taken when the office is established. If a breach occurs our Reputation Management team can help.

. These include the offices of substantial international families with assets and family members in numerous countries, as well as more traditional families with large landed estates or entrepreneurial interests. Theses point should be consider:

Conducting an audit of various substantial wealth-holding structures, to ensure they were watertight from a fiduciary and tax perspective.

Undertaking a major review of the trust and asset structures of a large international family with international assets. One of the main purposes was to identify potential areas of risk for the family and take measures to safeguard against such risks going forward.

CONCLUSION

To conclude , we can say that this was the aforesaid explained report on innovative family business.

Main facts that are dicussed in study are

1 meaning of family business management

2 current scenario

3 Type of structure for family business management

4 problems

5 innovative trends in family business management

After studying all the above given study it is been very clearly understood that family business structure is one of the very common structure of business structure that is been used worldwide.

As every business structure has its scenario, advantages , disadvantages, problems, and its new and emerging trends, it is similarly applied here.

We can say that family business management is a trend that has been followed for years.

Innovative method could be used for more flexibility in family business.

RECOMMENDATIONS

1 overcome the internal dispute

2 proper engagement of all members

3 follow the structure that is bet suited to ones business

4 proper management

5 go as by the time.

6 properly implementing the strategy

BIBLIOGRAPHY AND REFRENCES

http//www.family-business-experts.com

http//www.familybusinessmagzine.com

http//www.businessweek.com/magazine.com

Astrachan, J. and Shanker, M. (2003). Family Businesses’ Contribution to the U.S.

Economy: A Closer Look. Family Business Review, Vol. 16, No. 3, pp. 211-219.

Colli, A. (2003). The History of Family Business, 1850 – 2000. Economic History Society.

Chua, J., Chrisman, J., and Sharma, P. (1999). Defining the Family Business by Behavior.

Entrepreneurship Theory and Practice Vol. 23, No. 4, pp. 19-39.

Davis, J., Pitts, E., and Cormier, K. (1997). Challenges Facing the Family Companies .

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