Entrepreneurial firms usually become family owned business. However, once the next generation become shareholders, board of directors then nature of company shifts therefore impact its profile. There are several definitions regarding family business:

  • Ownership control by two or members of a family or partnership of families
  • Strategic influences by family members on the management of the firm, whether by being active in management, by serving as advisors or board members, or by being active shareholders
  • The unique sources of competitive advantage derived from the interaction of family, management, and ownership, especially when family unity is high.

Below there is an example of a family business story which contains of the things that are important in running of company, as follows:

Dick Randall, president and CEO of Real Estate Development Partners, Inc., arrived in Pennsylvania after serving in World War II. He had saved a little money, and together he and his father bought a piece of property and developed it into a golf course. Eventually, Dick decided to build a golf course and real-estate-development business. His father wanted to limit his personal involvement, so he eventually sold all his interest in the property to Dick. Thus, none of Dick’s brothers or sisters were ever part of the family-owned business.

The company grew at a rate of approximately 9 percent annually and enjoyed annual revenues of approximately $48 million in 2011. It also saw the value of its assets—mostly undeveloped land—skyrocket.

Over this same period, several national measures of economic activity in the industry indicated considerably lower growth rates in both revenues and asset values of other companies. In fact, Real Estate Development Partners seemed to be growing at twice the rate achieved by the average performers in the industry.

Although he was very pleased with the company’s record, Dick felt that he had two major unresolved issues. First, he questioned whether, given the size of his estate and his age, he could do enough to avoid extraordinarily high estate taxes. Second, he was uncertain as to whether his five sons and daughters would get along well enough to allow the family-owned business to continue to a third generation . He felt strongly about keeping the business together. Because of the expertise and economies of scale that he had been able to build into the business, he was disinclined to divide it into smaller business units that the sons and daughters could separately own and manage.

Al, the eldest son, had worked in the business since he was 8 years old. Along with his two brothers, Tom and Ken, Al had learned the business from the bottom up by doing mostly odd jobs, especially during the summer months. They mowed lawns, dug ditches, picked up trash, and repaired clubhouses. The three sons were busy in “the house that Dick built.” Their sisters, Deb and Amy, on the other hand, always seemed to be protected from toil in the male-dominated industry in which Real Estate Development Partners operated.

He had recently returned to the family-owned business, citing a desire to be closer to his family and also to work in a more caring corporate culture. Amy and Deb also went to work for other companies. Amy had returned recently and assumed responsibilities in the marketing department. Thus, four of the five siblings (all except Deb) were now working in the firm. They had very different positions and, as managers, limited interdependence. Most of the need for communication and coordination seemed to emerge around strategic and ownership issues, not the day-to-day running of the business.

To be continued…