The Advantages and Disadvantages of Running a Family Business

American dramatist and actor JohnHoward Payne said there is no placewhich is better than home (Payne, nodate). People like setting up a businesswith family members because they arefamiliar with each other. However, afamily business has both advantages anddisadvantages. A family business is moreflexible, more trusting and has longtermoutlook, but sometimes it maysuffer from family conflicts and a lack ofsuccession planning.So, what is a family business?A f a m i l y b u s i n e s s i s a b u s i n e s sorganization in which decisions aremade by several family members. Itis the most ordinary form of businessin the world. Alderson, a professor ofCalifornia Baptist University, has arguedin his essay that 90% of businesses arefamily-owned or controlled by family

(Alderson, 2012).

One of the most important benefitsof a family business is flexibility. Familymembers may be willing to do severaldifferent jobs without complainingbecause they can get advantages assoon as their family gets profit. "Infamily businesses, (the founder andemployees have) an incredible passionfor the business, and a focus and energythat you'll never find in a non-familyemployee." said Fishman, the founderand chairman of business guidanceservice (Fallon, 2014).

Flexibility isn’t the only advantageto a family business. An elevation oftrust is also more common to this typeof business. Dennis Jaffe, a familywe a l t h m a n a g e m e n t e x p e r t , h a sargued, "Their sense of the business isas a trust, stewardship, responsible notjust for today but for many stakeholders,including those of future generations"(Kennedy, 2013). Family members trusteach other and bring their trust to thewhole business. This behavior helpsthem become more reliant on each otherso that they can have a better chanceat success. Don Gentilini, the previousowner of Gentilini Motors, said thatfamily business makes employees feellike part of the family. They take care ofeach other and treat everyone equallylike a family (Fallon, 2014).

Not only do family businesses offermore flexible environment built ontrust, they also tend to focus more onlong-term profits. By contrast, nonfamilybusinesses pay more attentionto short-term profits. In other words, afamily business is an elongated processo f a c c u m u l a t i n g we a l t h , b e c a u s emanagers can transfer the treasure tothe next generation. By way of example,Alderson argued in his article that theFord Board has relationships with otherfamilies which controlled business(Alderson, 2012). They know that onlya long-term viewpoint can bring moreprofits for their families.W h i l e f a m i l y b u s i n e s s e s h a v esome advantages, they also have somedisadvantages. The biggest problem forfamily business is succession planning.Most of the managers pay more attentionto their work instead of teaching theirchildren.Given the difficulty of successionplanning, many family businesses, havefailed. Research from Family BusinessAlliance found that only 30 percentof family businesses in America havecontinued to exist. In addition, only12 percent still remain by the thirdgeneration (Fallon, 2014).

The lack of proper successionplanning is due to various reasons:o w n e r s ’ r e s i s t a n c e , p e a r o fretirement, and inability to develop agood succession plan. Some commonreasons including owners’ resist,fearing of retiring and enable to finda good succession. Chung Mong-Koo is a good example of a personthe failing to find a good successor(Top 10 CEO Scandals, 2010). Hisfather, the founder of Hyundai Motor,appointed him to be his successor in1997. However, just six years later,Chung Mong Koo, the new chairmanof Hyundai Group, was convicted offraud and embezzlement.To conclude, a family business hasboth advantages and disadvantages, andeach of them can lead to a business’ssuccess or failure. The advantages ofrunning a family business, however, faroutweigh than disadvantage, becausemanagers can solve the disadvantagesby cultivating children earlier, settingfamily rules and formulating policies.In other worlds, the disadvantagescan be solved, but the advantages areinevitable. The goal, then, is to realizeand understand both of the strengthsand weakness and then make a longtermsuccess. In the future, familybusiness will still be the mean currentof business.__