Sustainable Family Business Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Sustainable Family Business Case Study Solution

Some of the major factors that determine the success of family businesses is strong family and aggressive entrepreneurship. Although the unique features of the family business are known to develop corporate governance and its environment and management characteristics inferior to other businesses. But, the succession process of an organization is dynamic,which mainly comprises of a combination of activities in relation to the niche inheritance over time. Whereas family inheritance is referred to as the power transferring process,which is not considered equal to legal inheritance. Based on the inheritance theory, growth and expansion of business in size; the members of the family tend to experience challenges like whether they are capable to preserve the mission of family and have the capability and willingness to continue the inheritance or not. Therefore, the choice of a successor in the family business might not be limited to a member of the family. (Liu, 2018)

A negative correlation between the intention of the successor and the size of family business has been reported. The smaller the size of the business stronger will be the perception of successor regarding the future unattractiveness about the non-monetary and monetary rewards. Thelimited capability and willingness of family members to join the business,leads towards an increase in the dependency of family business on the non-family members. The acceleration regarding the growth of family business is expected to be in association with necessary skills and new ideas provided by the non-family managers. Additionally, lower debt ratio and weaker orientation of growth in the family business are the potential outcomes of the wealth preservation objectives for the family business of second generation. Thus, third or later generations tend to be found in association with less conflict and lower risk aversion between the successors and incumbents.The succession of family members leads to poor performance, particularly in the well-performing of the business operated by the owner in competitive sectors. Such performance decline is less in the non-family-run business as compared to the companies that are known to be managed by the successors. (José António Porfírio, 2019)

However, families are expected to bring trust and long-term relationships to the business,which results in the higher levels of accountability, faster decision-making, and ease of communication. Similarly, analyzing the worth of human resource policies includes work rules that are family friendly, ethics policies and training, employee evaluation, employee development, information and communication, recruitment and retention, healthcare and other benefits. There has not been much research conducted on these issues faced by the family businesses. For instance, in terms of compensation;one of the widely studied topic is CEO compensation, which represents the finding that the CEOs of family business receive less compensation as compared to the CEOs of non-family organizations. Furthermore, the strong predictor of the pay of family CEO is the overt family power.

Therefore, the members of family business are paid less wages at all level followed by less variation in the payment as compared to the non-family and the firms that are professionally managed by the family. In terms of retention;the downsizing is less reported in the family firms as compared to the non-family businesses. Thus, family firms that represent progressive human resource policies, tend to demonstrate an improved performance and longevity. Despite the fact that progressive practices of human resource can be inhibited by the family culture, which results in limited growth and performance. The development of sophisticated human resource policies in the family firms is not likely,because of the involvement of families in the management which is known to bring a significant reduction in the monitoring cost. (Astrachan, 2010)

In contradiction, the lack of understanding about the owner exchange and exchange of business resources between the family and the business can result in significant consequences of the business. Therefore, for the development of solid financial plan and determination of whether the family and business have the ability to meet the goals or not; it is considered important to be aware of the source from which income is obtained and itsexpenditure on the resources. It has been recommended by many researchers that there is a requirement of clear trail of entrance and exiting of funds in both business and family. This is considered true for the businesses whichrepresent the use of owner resources. (Tansel Yilmazer, 2010)

As defined by the World Commission on environment and development; the sustainability of a business is based on itsperception to meet the current needs without having to compromise on the ability of the next generation to meet their needs. This led to the emphasis that each family business is required to develop a plan in order to sustain the business growth through generations. This would significantly serve the needs of both the family and the business,directing them towards the right path to be followed for generations. Similarly, to avoid the business and family complications;the management, governance and ownership structures should be simplified through trimming of family tree at right time,in regards to achieve the longevity of business performance and family harmony. (Mohammed Oudah, 2018)Furthermore, service exchange is considered as the outcome of a commitment that is made to achieve the best practices,to make the supply chains sustainable other than the need to attain the sustainable outcome.(Danilo Brozovi´c, 2020)

Conclusion:

Despite of the identification of numerous factors influencing the sustainable growth and long-term survival of family businesses;there are numerous limitations as well. The dynamics of family business evolve with generation, based on the advancement of the technology and requirement of skills used to perform any function. Like, in the digital era;there isn’t any requirement of skills that require more efforts and energy because of an availability of machines which has resulted in the reduced human efforts. But, the change in the approaches adopted for the study in previous studies; social response bias mightbe observed. Thus, to achieve sustainability, family firms are required to bring changes that are considered as transformation of the entire logic of business. This would provide significant opportunities for the family businesses with the to remain competitive and gain a competitive advantage through an improved longevity and better understanding of the processes.......................................

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