Family Entrepreneur

A family business is a commercial organization in which

decision-making is influenced by multiple generations of a
family, related by blood or marriage or adoption, who has
both the ability to influence the vision of the business and the
willingness to use this ability to pursue distinctive goals.
The various roles and responsibilities of the founder
of a family business include the following:

i) Starting the business,

ii) Building the organization,
iii) Providing guidance and direction to employees and
family members,
iv) Constructively family members in the business,
v) Planning for succession
1.Family Owned Business: As the name suggests, a family-owned business in
one in which the controlling size of the ownership stake is owned by the family
or by the member of the family.

2.Family Owned and Managed Business: In this kind of businesses the

controlling size of ownership, lies in the hands of a single-family, or by a single
member of a family. The controlling ownership allows the family to formulate
and decide the objectives, methods and policies.

3.Family Owned and Led Business: In such a business, along with the
ownership of majority stake by the family or by the member of the family, at
least one member of the family is a member of the board of directors. In this
way, the family member can exert influence over business’s direction, strategies
and plans.
Who are First Generation Entrepreneurs?
These are New Entrepreneurs, who invest their money and bears risks and
uncertainties to set up the business. They are wealth creators and pioneers in the
business. They are innovators who bring new ideas to the business.

Who are Second Generation Entrepreneurs?

Second Generation Entrepreneurs are supposed to control and run the business
established by their parents, but their activities and decisions are always under
examination. They join the business as middle or top-level management, and
after showcasing their potential, the reins of the business are handed over to
them.
 Entry of Family Members
Entry of family members into the family business may turn out to be a contentious issue. The founder and others will have to
develop some ground rules regarding the entry of family members.

The family can encourage the younger generation to develop skills and acquire relevant educational qualifications. The next
generation can even be encouraged to pick-up relevant work experience by working in other firms.

Different family members may be seeking different levels of involvement. There would be some members who will join the
family business and then decide that they would like to do something else. So, it may be good to develop an internship
programme for family members, so that they can judge if they are cut out to be part of the family business.

There may also be those who left the family business in the past and are now seeking a second chance. There should be some
thought given to dealing with such family members who want to come back to the family business fold. Some others might want
a part-time involvement. Usually, these are eth people who have other business or career interests or the men married to those
women in the family who wish to devote some time in managing household activities.
 Role of New Family Member in Business

1. A family enterprise welcoming the new family members in the business is faced with a vital
question: Do incoming family members fill an existing vacancy or will a new position be
created for them?

2. Other employees may feel resentment when a family member is given preferential treatment,
but by and large, most employees are willing to make concessions to the owning family as they
understand that it is the family‘s money that is running the business.

3. he role of new entrants in a family enterprise has to suit their abilities. If they are occupying a
position just because they belong to the family, they may not do justice to their responsibilities.

4. In many instances, the new generation does not identify with the practices adopted by the
older generation and also may not be confident of the long-term prospects of their current
business.
The second generation entrepreneurs have following natural advantages:
i) Coming from affluent families these youngsters have been able to obtain better professional education and
experience than their elders.

ii) They have the advantage of sound foundation in terms of established organization, image, finance and other
resources.

iii) They have better and faster access to knowledge, information related to business, competition and market
potential.

iv) They can afford to take risks of failure and losses as their sustenance is not entirely dependent upon new
challenges taken up.

v) It is possible for them to get credit facilities from banks and vendors due to the image of family and other business
activities.

vi) Based on group image and individual’s business image, the family owned business gets good response for public
issue of shares.

vii) Various business contracts and flows of information enable them to select product and service areas which are in
demand and which have bright future.
 Non-Family Entrepreneur
Non-family entrepreneurs are the entrepreneurs who lead the business because of their caliber and worth. Thy
actually strive to ensure that business b run by the people who are best suited to do that job. Sometimes these
types of firms are referred as professional firms.

Non-family entrepreneurs believe in the culture of transnational corporations when ownership, management and
control all are transferable and the growth and development of the business enterprise is the supreme goal.

In non-family business the major decisions are taken by Board of Directors and CEO of the company is the head
of executive body.
In family businesses, family maintains voting control over the strategic direction of the firm. Family may also be
directly involved in day-to-day operations . Further , multiple generations of family members could be involved
in such operations.
 Bringing Nonfamily Members into
the Firm

To bridge the gap between

generations

To set a new direction for Reasons for Nonmembers To provide

the firm in the Firm new skills and expertise

To deal with change

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 Basis of
Family Entrepreneur Non-family Entrepreneur
Difference
In most of the family entrepreneurships
family authority structure is “corporate Non-family business has “federal structure” referring to a
structure” referring to a structure, which is structure containing several independent and autonomous
1)Authority Structure
highly centralized and delegation is centers of authority, such as in the case of divisionalized
consistently upwards in a pyramidal organizations.
shape.

The succession is normally given to sons,

Succession plan is managed in a professional way, as per the
2) Succession Plan daughters or family members of the
decision of the Board of Directors.
enterprise.

The interest of the family is supreme and

Interest of the organization is the only criterion for business
3) Interest business actually becomes the reflection
decisions.
of family culture.

The division of property or familial feud

Familial feud dos not come into picture and familial interests do
4) Familial Feud casts a dark shadow on the health of the
not hamper corporate interests.
business, at times lading to heavy losses.

Employees may a time consider themselves as the owner of

The family is the ultimate power center,
5) Power/Authority organization and in normal cases employee empowerment is
Employees do not feel empowered.
better