The similarities and differences of making an informed assessment in traditional (non-family owned) and family-owned businesses (FOBs)
Family-Owned Businesses (FOBs) and traditional businesses, albeit both functioning as for-profit enterprises, adopt very distinct organizational models that, in some ways, are similar and in other very different. As the subsequent discussions will elaborate, although there exist numerous differences between the two business entities, they also possess some similarities. Primarily, as Sikandar & Mahmood (2018) notes, both forms of businesses are driven by the need to make profits. Thus they share a common agenda to make a return on their investment. However, the ownership is different in FOBs because the family owns all or a controlling stake in the enterprise while stakeholders own non-family owned businesses (Wing, 2018). Notably, this is the distinguishing characteristic of family-owned and traditional enterprises.
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Another key difference is the particular ways that the governance structures between the two organizations are framed. First, FOBs lack a formal organizational chart that clearly defines the role of each family member in the organization. Therefore, the absence of a clearly defined role for the members creates an ambiguity of role that significantly hampers the decision making processes. As Christina Wing hypothesizes, there is plenty of conflicts that arise from FOBs because of the lack of a particular hierarchy of roles. For non-family businesses, the organization clearly defines the roles and responsibilities of each person and their specific duties; thus, there are minimal instances of conflicts.
However, despite these differences mainly at the top leadership level, the lower levels, such as the technical staff, both business models use the same management system where the role of the junior staff is well defined. More so, the overall performance and the metrics used to evaluate the performance for both entities are very similar such as revenue, customer base, market growth, and market share (Wölfer, 2010). In conclusion, while both adopt a different system of leadership and structural framework, the bottom line us both are very similar in that each operates toward making profits.
Factors within family-owned businesses that are different from traditional businesses and how these could impact the OD's ability to assess and evaluate issues effectively.
For family businesses, the emotional dimension created by the family fundamentally distinguishes it from traditional businesses. Thus, the family beliefs and interests greatly influence the nature of the decisions made and the model that they follow in their day to day operations (Blanco-Mazagatos et al., 2016). In more precise terms, family dynamics play a vital role in the way that FOBs operate. Therein, the sentimentalism involved in the FOBs adversely affect the way that organization makes decisions because there it is usually impossible to get all family members to come into a consensus unless there exists a family board with the designate duty to oversee all critical decisions regarding the enterprise (Aung & Kohda, 2019). More so, there is the factor of the changing family tree as the generations continue to grow. In summation, the inter-family relations significantly impact the assessment and evaluation process of crucial business decisions made in regards to the enterprise.
The role of family systems theory in consulting for FOBs
Some of the FOBs turn to professional management consulting firms to help in the management of the family enterprise. To this end, the family systems theory plays a crucial role in the way that these firms establish a governance model structure suitable for the FOB (Gamble et al., 2020). Given the distinct characteristic of a different family, the theory is instrumental towards helping these entities to conceptualize workable framework that serves the best interests of the family towards accomplishing their goals and objectives, vision for the enterprise and most importantly handle particular conflicts that may threaten to impede the operations of the FOB.
References
Aung, N. Z., & Kohda, Y. (2019). Emergence of Familiness and family owned business performance. International Journal of Asian Business and Information Management , 10 (3), 61-73. https://doi.org/10.4018/ijabim.2019070104
Blanco-Mazagatos, V., De Quevedo-Puente, E., & Delgado-García, J. B. (2016). How agency conflict between family managers and family owners affects performance in wholly family-owned firms: A generational perspective. Journal of Family Business Strategy , 7 (3), 167-177. https://doi.org/10.1016/j.jfbs.2016.07.003
Gamble, J. R., Clinton, E., & Díaz-Moriana, V. (2020). Broadening the business model construct: Exploring how family-owned SMEs Co-create value with external stakeholders. Journal of Business Research . https://doi.org/10.1016/j.jbusres.2020.03.034
Sikandar, S., & Mahmood, W. (2018). Corporate governance and value of family-owned business: A case of emerging country. Corporate Governance and Sustainability Review , 2 (2), 6-12. https://doi.org/10.22495/cgsrv2i2p1
Wing, C. (2018, September 27). Governing the family-owned business . Harvard Business Review. https://hbr.org/webinar/2018/10/governing-the-family-owned-business
Wölfer, K. (2010). Are family-owned businesses better innovators? Innovation and International Corporate Growth , 393-415. https://doi.org/10.1007/978-3-642-10823-5_24
