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This study explains the reasons of family business' failures and related problems which occur in family business'.
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REASONS OF
FAMILY BUSINESS’ FAILURES
Family Business
‘‘Give him a living, but never discuss the Family business with him."
Don Vito Corleone to Tom
Outline
What is the importance of family businesses?
Why do family businesses fail? What are the main reasons?
Family Businesses
According to researches; 65-80% of businesses around the world are family business.
Family Businesses
0102030405060708090
100
Italy Turkey USA Mexico England Australia
% of Family Businesses
Surviving Through Generation
0
10
20
30
40
50
60
70
80
90
100
1st Generation 2nd Generation 3rd Generation
Why do businesses fail?
Poor management Insufficient Capital Location Overexpansion …
Family Business’ Failures
Family business failures were not often the result of market or macro enviromental forces. Family business’ failure reasons generally occurs from family and management issues.
Young Members’ Behaviors
Dont change their behaviors (during transition period)
Disagree with new rules Parents try to take control Restrain young members’ activities
Old Members’ Behaviors Parents can not recognize that
second or third generation members are old enough
Parents do not show any respect and they fail to pass authority
Parents do not want to be out of game
Parents see their children as their competitors
Deciding who will be involved in family business
If more than one candidate, parents have to choose right family member for right position. They have to decide who will be in, who will be out.
Parents force children to involve in family business. They do not pay attention what their children want to do
Employing Children
Employing children according to sex and age status
Oldest son for most important and critical position
Daughter for basic or not so important position
Ignoring abilities and management skills
Keep Family in Peace
Ignoring children fails Being away from arguing
important cases about family
Communicating or Solving Problems via Third Parties
Damages relationships between family members
Fraternal Fightings and Estate Conflicts
In 2003, twenty biggest and famous Turkish family businesses were failed. According to researches, the biggest two reasons were fraternal fightings(%43) and estate conflicts(%19).
Conflicts between family members in and out of the business and with non-family members
Institutionalization (getting a corporate identity)
First generation or the founder generally becomes disagree with institutionalization
They do not want to loose control They do not want to see external
people in company
Lack of Succession Planning
Next generation lacks essantial skills, experience
Next generation have not been well prepared for job
Unfair Promote or Assignment
Makes other employees disappointed
Decreases their willingness Ignoring experience, skills,
abilities, and education Damages corporate identity
Insufficient Business Volume / Job Duties
Study Case – Ali Sabancı
References http://www.milliyet.com/2004/05/13/isy
asami/ais.html
http://capital.com.tr/haber.aspx?HBR_KOD=4454
http://www.haber3.com/haber.php?haber_id=232028
http://view.fdu.edu/default.aspx?id=2337
References http://blog.tootoo.com/en/ninetown/
post/688 http://www.tuta.hut.fi/studies/
Courses_and_schedules/Isib/TU-91.148/Family_Business_Rulebook.pdf.com
http://www.enetrust.com/Communications/PressReleases/PressReleases2004/2004_09_16.asp
http://www.robbinex.com/family.shtml
References
http://www.trinvest.com/nshow.php?newsId=514&pageId=7&categoryId=45
http://boston.bizjournals.com/boston/stories/2002/09/16/smallb3.html
http://www.forbesconferences.com/?page=event&eventID=107
References Arguden, Yılmaz (2002). Aile
Şirketlerinde Kuşak Değişimi http://www.kobitek.com/makale.php?id=122
Lea, James (2004). Planning could
avoid many family business failures http://www.bizjournals.com/triad/stories/2004/05/17/smallb3.html
Thank you for your attention