Family Business Structure Management and Financing
Family business is growing everywhere specifically after pandemic. One of the key player in any economy is small businesses managing by family members. Just in Turkey, more than 100.000 new small businesses come into market. This research studies the theories and framework of family business structure, definition, challenges and financial system.
Definition of Family Business
Family business has the same nature as other business activities. The main difference is the relationship and possible conflict. This can impact on the structure, mission, vision, and even the services that a business wants to provide to the customer.
Association for entrepreneurs in Germany defines the family business as it is not limited to any size of company and employees in any sector and activity. The phrase “Family Businesses and Family Foundations” from Dr. Rainer Kirchdörfer is one of the academic research in this filed but in Dutch language, however, the key insights are translated in English.
The main aspect of family business is that this is like the legacy can transfer to other generation of family. Family business is one of the key research area in management science, and it is published many books and academic literature in this field from the structure to financial and legacy problem. The main definition of the family business is the separation of ownership issue and success of business.
Academic research
In this research, the definition can involve structure and organizational view in family business. Poza describes that family business has the lot of challenges like the ownership. In fact, who is the manager?
Is the main question when there is conflict among stakeholders. In his book, Poza mentioned the governance, strategic planing, financial management and non-family management and some good case studies for family business.
For instance, in family business, maybe the size of company can influence on decision-making. In the book, family business can classify into two groups: -Family Owned: The management board and CEO are from all the family and it is hard to have a board from outside.
-Family Controlled:
The leadership can be from outside the family, but family is controlling and assigning the positions for the CEO or board of executives.
This two main type can have the different structure and leadership and some articles discuss the structure and ownership and more importantly succession planing in family business.
Tatoglu et al (2008) studied the succession planing in Turkey and mentions that FOB (family owned business) are the inter-generation management system and succession. There are a lot of FOB business in Turkish market and many of them choose the name of grandfather or fatherhood who created the business.
Family constitution
Family business is the around 80 percent of businesses in global scale. This shows how family business is important in any country. It is very interesting to study the formation of family business. For example, a father who make shoes, wants that his son or daughter continue the legacy.
Take an example of my own father, as sometimes he insists on involving me in the business of jewelry packaging industry. But the minds are different, or the interest are different. In konya there are a lot of family businesses as the city is like the commercial and industry sector.
In Istanbul, I can continue to have enterprise experience and big size company. There is an interesting article family business succession and highlights the problem of succession planning in family management system.
The expectation, trust and psychological factors are some research question in Marylne Gange et al (2021) study. They studied 89 Canadian family businesses. The scholars found that trust and motivation are key factor to give and get the succession.
The great question is that why family business exists? G.Tyge payne (2018) answers to this question. He says that there is no absolute theory to define family business, but there are relevant subjects. Two theory of agency and stewardship are examples. In this research, the figure 1 shows that how family business is so complex and dynamic.
If a family business is growing, this can be more complex. For example in Sabanci holding or Koc as two big holdings in Turkey, probably the succession and leadership selection of family members is difficult because the leaders expect more about their son or daughters and if there are two brothers or sisters with the next different generation, it is hard to select and follow the leader.
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