Table of Contents
Major Characteristics of Family Business
By going through the definitions given above we can say that following are the characteristics of family business:
- Ownership: Family business enterprise is actively owned and run (managed) by two or more members of the single extended family.
- Membership: Family business enterprise ensures effective utilisation of in-house talent in the family. Family members are employed on key positions in the business enterprise. Relationship amongst the family members influences their respective positions in the enterprise.
- Succession Planning: Succession planning is an important decision in the business. The succession of the family business goes to the next generation thus, it is important to determine who will take over leadership and/or ownership of the company when the current generation retires or dies.
- Management and Operations: Generally, in these business enterprises the senior most member of the family is the head of the business and takes all the crucial decision. All the members have faith in the founder. This results into uniform mindset of the members which ensures uniformity in operation.
- Long-term Orientation: The family business is not dissolved by the death of the founder or the owner as the authority or ownership passes to the next generation. Also, owners of family businesses are not only concerned with the financial results of the business. They value the past and plan for the future with the perspective of their next generation. Thus, family businesses generally survive through the tough and rough times and perform well in long term.
- Mutual Influence: Policies of the family business enterprise are influenced by the family members in the mutual interest of family and business.
- Embedded in Cultural Values: In India, family businesses are predominantly caste-based, and their roots run deep and are embedded in family values and traditions. As a result, their respective cultures can be seen in the management, operations, and decision-making process of the business.
- Concentrated Structure: Ownership and management of family businesses are handled by family members. Additionally, family members serve on the boards of directors of the business. Due to their family-controlled nature, these businesses are often fast-moving, with quick decision-making processes because of the lack of external influences.