FAMILY BUSINESS: SYSTEM, GOVERNANCE and CHALLENGES Part 2
Dick thought that there were three major ways the company might grow in the future. First, the company could begin operations in Florida, where it already had developed some expertise with smaller real-estate investments. Second, it could convert several of its golf club properties into more lucrative commercial developments. Population growth surrounding several of the company’s older properties was pushing office complexes and retail shopping centers right up to the 18th hole. Finally, the company could grow in the property-management area, effectively providing management of properties for other owners and investor groups. In their industry, the service contract side of the business was growing significantly.
From the story above, the family business can be taken three important things, among others: family business system, governance and challenges. Each described below:
1.Family Business System
Family business system has three components that are Ownership, Family and Business. The above story can be explained by following description:
a. Ownership is about vision, legal structure, ownership transfer . From this side can be detected that
- vision : Become the most prestigious Real Estate development Partners company
- legal structure :Dick Randall as the second generation
- ownership transfer :Dick’s father inherited to Dick the family business 100%
b. Family is regarded of roles and relationship, family values, Conflict that can be breakdown as follows
- Roles and relationship : Dick as CEO and none of Dick’s brother and sister owned company
- Family values : they believe that education is very important
- Conflict :Dick doubted that his five children would get along to own company
c. Business is included mission, structure, decision making with explanation below
- Mission : to build a golf course and real-estate-development business
- Structure : family members of third generation involved both board directors and middle management
- Decision making : expand company to other areas, make commercial development of property and collaborate with other owners/investors.
2.Governance
Story at the top of Shareholders and Board of Directors are from members. In which the CEO of the company is a member of the family too. As for non-family members ranging from middle management down. Under these conditions, it is usually the company divided the teams to control by establishing audit committees composed of shareholders and board of directors, then there is also the internal auditors of the executive directors and the CEO.After that, the internal auditors monitor all activities performed middle of all operations from middle management to the bottom, while the middle management is as a central part to provide a report to the top and get feedback from the top. Furthermore, audit committees and internal auditors should enforce good corporate governance (GCG). In this case, the board of directors not only monitor how the system can be run effectively and efficiently, but also must carry the correct values of the company. So that GCG is the responsibility of all levels of management within the company structure.
Enforcement of the GCG is to avoid the result that the zero sum game, in which the company should be able to be able to generate positive sum game from time to time. For example: the application code counduct to boost the company’s revenue, provide benefits to stakeholders provide sustainable progress against the company, anticipate conflict with a positive value so as not to damage the company’s management.
To be continued…
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