JFB Exam

Chua definition of FB

business govern and managed with intention to pursue a family-controlled vision potentially across generations

operational definition

observable characteristics (ownership %, succession plans, family managers, board composition)

theoretical definition

explanations of what fundamentally makes a FB differ from other businesses

7 bivalent attributes

simultaneous roles, shared identity, lifelong common history, emotional involvement & ambivalence, private language, mutual awareness and privacy, meaning of family company

simultaneous roles def

family members with multiple roles at same time (family, owner, business)

pros of simultaneous roles

strong loyalty , high trust, fast decision-making, long term cooperation

cons of simultaneous roles

family issues influence business decisions, role confusion, business issues leak into personal life

ex of simultaneous roles

mom criticizing her daughter interprets as parental criticism

shared identity def

family name is connected to business

pros of shared identity

strong family pride, common mission, greater loyalty, reputation —> good behavior

cons of shared identity

family members feel pressured to conform, lack of personal freedom, constant concern about family image

ex of shared identity

one family members bad behavior destroying the reputation the family and business

lifelong common history def

family members known each other for decades

pros of lifelong common history

understanding of strengths/weaknesses, can support one another, strong resilience with difficult times

cons of lifelong common history

reappearing childhood conflicts, old rivalries persist, trust problems —> into business relations

ex of lifelong common history

sibling rivalry from childhood resurfaces in management decisions

emotional involvement and ambivalence def

family members have negative and positive emotions towards one anotehr simultaneously

pros of emotional involvement and ambivalence

strong trust and commitment, deep loyalty, emotional support

con of emotional involvement and ambivalence

hidden resentment, lack of objectivity, emotionally-charged conflicts, avoiding difficult convos

ex of emotional involvement and ambivalence

a disagreement of a strategy becomes a personal arguments

private language def

family develops own communication style/jokes/expressions/shared meanings

pros of private language

faster communication, better mutual understanding, greater privacy

cons of private language

non-family employees excluded, old emotion triggers can be activated, misunderstandings increase with conflict

ex of private language

a term can speed up understanding of family but confuse non-family

mutual awareness and privacy def

family members know a lot about each others lives

pros of mutual awareness and privacy

better support and communciation, more informed decision-making

cons of mutual awareness and privacy

feeling trapped and cosntantly watched, greater vulnerability sigh conflict, limited privacy

ex of mutual awareness and privacy

business discussions influenced by personal family isssues

meaning of family company def

company often becomes a symbol of family identity and legacy

pros of meaning of family company

strong sense of mission, long-term orientation, strong commitment to firms success

cons of meaning of family company

emotional attachment makes succession difficult, family members fight over control

ex of meaning of family company

children may view control of the company as recognition of their value in the family

5 main FG structures

family meeting, family council, family office, family constitution, and informal governance

family meeting

regular family gatherings for discussing family and business issues

family council

formal body repping family members and branches

family office

organization, managing fam wealth and administration, investment oversight, legal and financial services

family constitution

written document of family values, policies, and rules to clarify roles/responsibilities, manage ownership issues and succession rules

informal governance

uninstructed mechanisms: gatherings, traditions, shared values

5 factors/successor prevention antecedents

individual, relation, financial, context, process

incumbent

person holding top management position in FB & must relinquish position ebfore another family member can take over

family business

business governed/managed with the intention to shape and pursue a vision held by a family-controlled dominant coalition across generations

potential successor

any family member who could assume managerial control

individual factors (successor-specific)

lack of motivation (to take over), unexpected loss (unavailability, removal), internal conflict (rivalry among family members)

individual factors (incumbent specific)

attachment (to the business), unexpected premature loss (sudden death/incapacitation), life events (divorce, remarriage, new children)

relation factors (parent-child)

poor quality relatioship with incumbent and successor

relation factors (conflicts among family members)

sibling rivalries preventing appointments/applications

relation factors (lack of trust by family)

successor won’t be considered a legitimate leader

relation factors (governance angle)

unanimous approval needs create higher rejection risk, lack of familial commitment leads successor unable to show abilities

relation factors (non-family members)

lack of trust and conflict could act as barrier and prevent appointment

financial factors (tax burden)

inheritance tax exceeds liquid resources —> sale

financial factors (liquidation)

remaining heirs cannot afford to buy out exiting heir’s shares

financial factors (cost of professional managers)

expensive to hire talent when successor is under-qualified

context factors

change in business performance (market conditions, competition shifts), decreased business scale (smaller size reduces successor attractiveness), loss of key customers/suppliers (their loyalty to incumbent —> successor rejection)

process factors (preparation succession)

not clearly defining roles of incumbent/potential successors or communicating/sharing succession decisions with family and stakeholders

process factors (development succession)

failing to train potential successors, late/insufficient exposure to FB, insufficient feedback about succession progress, incorrect evaluation of needs and ability gap

process factors (selection succession)

no formalizing rational and objective criteria for selection or defining composition of assessment team in charge

three activities for transgenerational entrepreneurship

strategic education, entrepreneurial bridging, strategic transition

strategic education

encouragement of offspring toward higher quality education and work experiences —> helps recognize educational opportunities

entrepreneurial bridging

transgenerational collaboration of older generation managers doing day-to-day operations and younger generation left to experiment; transfer of successor power, support, & resources to new generation

strategic transition

transferring of ownership and control to next generation

imprinting theory

when young person learns something quickly in short/early life stage, the learned behavior sticks with them forever even if their situation later changes

3 factors facilitating imprinting of entrepreneurial legacy

family size, family cohesion, childhood involvement in family firm

family size in entrepreneurial legacy

large = more storytelling opportunity & narratives

family cohesion in entrepreneurial legacy

frequent interactions & narrative transmission with having more cohesion

childhood involvement in family firm in entrepreneurial legacy

exposure early to daily business, immersed in family legacy, repeated exposure to narratives of family’s past

roots and wings paradox

concept that children need a strong foundation and sense of belonging (roots) from their family to thrive, while also needing the freedom and independence (wings) to explore and develop their own identities

roots

what the FB provides (sense of belonging, identity with FB)

wings

confidence and support for independent development

deep roots without wings

prevents children from finding their talents and career interests

shallow roots and strong wings

allows children to fly away from FB

3 stages of alignment

identity, ownership, career

identity alignment

relative strength of an individuals identification with the organization and involvement in the organization

identity alignment symbolic mechanisms

shared meaning to objects (home, family portraits) and situations (job, holiday, parents working together),

identity alignment interactive mechanisms

events (succession events, family/business occasions —> focus on heritage/belonging/pride

ownership alignment

feeling ownership fits identity & career, prepares future generation for roles as owners

ownership alignment symbolic mechanisms

continuing family business

ownership alignment interactive mechanisms

next-generation programs, sharing business visions/information, bonding branches, separating ownership from management of succession

career alignment

between offspring career interests & the career opportunities offered by the FB, finalizing studies and making first steps in career

career alignment symbolic mechanisms

parental/family career role models

career alignment interactive mechanisms

study/career support, professional counseling, emphasis on talent and independent choice

commitment types

normative, calculative, imperative, affective

normative commitment

I ought to contribute

calculative commitment

I have to contribute

imperative commitment

I need to contribute

affective commitment

I want to contribute

purpose of interactive mechanisms

to create personal growth, independent decision-making, and individual talents

purpose of symbolic mechanisms

creates pride in family, identification with business, feeling of belonging, and awareness of family legacy

3 direct causes preventing intra-family successions

dominant coalition stops business, successor says no, incumbent and/or dominant coalition says no