Management of a family business is a dynamic issue that must be handled on a case-by-case approach. Without the proper management structure, continuity in the family business becomes a challenge that leads to many businesses' failure. Family structures act as the critical factor determining the delicate balance of family and business required for success in continuity. Family businesses face both economic difficulties and risks from conflicts that are common in their business nature. Statistically, many family businesses do not survive succession from one generation to another due to this dilemma involving priority between family needs and business needs (Yasargil & Denton, 2020).
Overcoming these challenges requires the business to adopt a management approach that is suitable enough to predict and deal with any future succession issues that may arise. This paper recommends and describes the best management structure in a real estate family business that can handle these issues properly. The paper defines effective policies that should accompany the recommended structure to ensure stability and maintenance of the business's values and vision.
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The level of control and presence of owners and family members in the real estate business defines it as a family business. For a family real estate business to be appropriately managed, the organization's needs should prioritize the welfare and needs of the family (Yasargil & Denton, 2020). Three main guidelines should be considered when designing the structure of a family real estate business. First and foremost, the implementation of the appropriate ownership model with clearly defined shareholding and control figures. The decision-making guidelines should be well articulated within the ownership documents to leave little room for confusion and conflict.
Secondly, all relevant shareholders' and employees' education on the organization's system and structure must be conducted regularly. Ensuring all organization members have adequate information regarding the structure is key to managing conflict and ensuring survival in succession. Thirdly, the organization should invest in establishing a body that mediates between the company and its owners. Of critical importance is the relationship between the shareholders who belong to the family and those external to the family.
The most recommended structure of management of a real estate family business is one that delegates the firm's daily operations management to professionals. The business ownership remains to family members with an ownership structure that stipulates the shareholding of each member involved in the business. The significance of delegating management to professionals is to ensure efficiency in decision-making since family-based decision-making subsystems are more prone to conflicts and struggles, making the process tedious and inefficient (Kaur, 2019). The family, on its part, benefits from the dividends from shares that each member possesses.
The inclusion of external members as shareholders does not hinder the firm's management since it is effectively shielded from issues that arise in interactions between family shareholders and external shareholders. Continuous channels for proper communication should be established and continuous education provided to all members of the company (Kaur, 2019). Family meetings are a suitable avenue to address conflict and discuss issues to do with succession in the death or divorce of a family member. Shareholder board meetings should be used to discuss issues beyond the firm's professional management and make critical decisions such as appointing firm executives.
Institutions that govern the relationship between the firm and its owners are significant in this structure since they help in the system's education and communication processes. A family office is an example of a suitable institution that can play this role effectively. Lawyers, accountants, and financial coaches can be included as external advisors and mediators in the firm to advise on issues of equity, debts, and succession. Financial coaching is particularly critical in the business's succession since many of the family businesses that fail after succession happen because of poor financial decision making by the new generation of owners. The firm should adopt an equal distribution of shares structure from one generation to the next in succession. Since the firm's daily management is delegated to professionals, there is no need for radical changes in the company's investment portfolio for continuity to be achieved.
References
Kaur, R. (2019, February). Corporate Governance in Family Businesses – A Review . ResearchGate. https://www.researchgate.net/profile/Raghuveer_Kaur/publication/331257007_Corporate_Governance_in_Family_Businesses_-_A_Review/links/5c6ea93c299bf1e3a5ba72f2/Corporate-Governance-in-Family-Businesses-A-Review.pdf.
Yasargil, H., & Denton, L. (2020). Family first or business first: issues in family business. Coaching in the Family Owned Business , 77–90. https://doi.org/10.4324/9780429473050-6
