Entrepreneurial families: succession and continuity

• Are you the son or
daughter of an
entrepreneurial
family?
• Is the founder starting
to have health
problems?
Pathway: Succession

Chapter 7
Entrepreneurial families:
succession and continuity

Objectives
1. To describe the importance of family businesses in the Asia–Pacific and their
unique problems
2. To discuss the concept of transgenerational entrepreneurship and its
differences in mind-set and context
3. To explore the unique types of family capital
4. To examine some of the hallmarks of family entrepreneurship across our region
5. To depict family entrepreneurship as three sometimes conflicting but
overlapping systems
6. To explore the ways that climate change and family entrepreneurship may be
interrelated
7. To examine the problems as well as the key factors in management succession
8. To explain the steps involved in carrying out a succession plan
9. To understand the contextual aspects toward developing a succession strategy
10. To examine the harvest strategy for reaping the value of family business
through trade sale

But first
What are the ways you would use your family
connections to secure a long-term future for
your venture?
?

• Family is an incubator for the
generation of new business ideas.
• Birthplace of entrepreneurial
ventures is often the home
• Are you are ready to become a
successor in your own family
business.
• Entrepreneurs who have self-
employed parents are more likely
to start a business.
Pathway: Entrepreneuring families

Global and all sizes
• Families are actually the dominant form
of business organisation worldwide.
• Not just ‘mum and dad’ operations, for
example:
– Wal-Mart (USA),
– L’Oreal (France)
– Ikea (Sweden)
– Kikkoman (Japan)
• Weathered the GFC better than
businesses that do not have family
ownership

Transgenerational entrepreneurship
• Parents have the most influence over their
children during early childhood through both
parenting and genetic inheritance.
• Later, children are socially conditioned and
pick up the values of their surrounding
socioeconomic class.
• Normally children want fantasy occupations
like an astronaut, fireman, oceanographer, or
policeman, rather than wanting to directly
mirror their father or mother’s occupation.

What
influences a
child’s career
choices?

Mind-set of
entrepreneurial families
• It’s all about ‘succession’.
• Some families are serial entrepreneurs who
create new streams of value across
generations.
• Others simply continue to maximise the
founder’s product or service without
innovating something new.
• 64,000 Question: How does the ‘founding
father’ or ‘founding mother’ transmit his or
her entrepreneurial zeal, spirit, attitudes,
values and beliefs?
Arthur Klein Family, Unicycle
Musicians, in 1923

Transgenerational entrepreneurship consists of . . .

Types of
family capital
• Family social capital – based on
relationships
• Family human capital – family member
knowledge, experience, ability and
energy made available to the business
• Family financial capital – sharing
financial resources, and benefiting from
family reputation
• Family emotional capital – the family
success that unites them through
consecutive generations.

Attitudes to family business
in Australasia
• In Australia, half of all firms are family businesses.
• India’s supercharged transformation is powered by its
entrepreneurial families.
• In China, there is a perception that family businesses are
small, unprofessional and backward.
• In Hong Kong, NextGens not meeting the founders’
expectations.
• In Malaysia, family leadership and culture are strong and
consistent across generations.
• In Taiwan, family-owned enterprises sustain competitive
advantage from generation to generation.

Challenges
Business ventures face many
changes.
What specific challenges would
stem from being a family-owned
business?
?

Challenges facing
family businesses --
Three-Circles Model
Family are concerned with
reputation, dividends and family
unity.
Owners are concerned with
performance and dividends
Management-Employees are
concerned with reputation, career
opportunities, bonuses and
performance measures

Generational curse
• Only one-third of family businesses
make the leap across generations.
• 70 per cent fail or are sold before
the second generation gets a
chance to take over.
• Many family businesses have the
same leaders for 20 or 25 years.
It is said that the first generation establishes the
business, the second generation develops it and the
third one destroys it.
– Means difficulties in coping with shifts in technology, generational trends, business models and
consumer behaviour.
• Most are sold or wound up after the founder’s death.
• Only 5 per cent of family businesses are still creating shareholder value
beyond the third generation.

What helps family
businesses succeed?
• Family businesses not encumbered by
demanding shareholders who want to
dictate operating strategy.
• Family members are willing to sacrifice
short-term profits for long-term gains.
• Family members are more productive than
other employees.
• Family firms have flexibility and can
respond to challenges and opportunities.
JewishfamilyownedLender'sBagelschanged
Americaneatinghabitsbytransformingan
ethnicfoodintoaubiquitousfood.

What helps
family
businesses
succeed?

A genogram is a family business timeline

Family businesses and environmental sustainability
• Imagine taking a genogram of the
impact of climate change or
environmental sustainability on
family business.
• Climate change can be a limitation or an
opportunity.
• Family businesses may have trouble
finding capital due to environmental
exposure.
• Are family firms are more susceptible to
climate change effects than non-family
firms?
Typhoon
Bushfire
Flood

• Are you the son or daughter of
an entrepreneurial family?
• Is the founder starting to have
health problems?
Pathway: Succession
• Does the founder see family members’ greedy efforts to
plunder the operation for personal gain?
• Is there any sibling rivalry, fear of death, or fear of loss or
abandonment?

How to overcome the barriers to success?
•The owner should develop a
succession plan. But choosing
an heir can be like buying a
cemetery plot.
•A potential successor should
ask, ‘Am I truly interested in
taking over?’
•Your inexperience can increase
the chances that the business
will fail.

Pressures
Does anyone in the class face
pressures around succession
coming from inside and outside the
family-owned business?
?

Harvesting a business
What reasons could there be to
consider selling the business
(rather than passing it on to
family)?
?

Pathway: Harvesting a business

Key concepts
(close your books)
What are the challenges
and advantages of
establishing
a family-owned business?
?

Entrepreneurial families: succession and continuity

More Related Content

What's hot

Viewers also liked

Similar to Entrepreneurial families: succession and continuity

More from Tecnológico de Monterrey

Recently uploaded

In this document

Entrepreneurial families: succession and continuity