Question

Scenario:

When Donald McKay first joined McKay and Mills Construction Ltd., in the 1930s, he started at the bottom. As his son put it, “not quite digging the holes on a building site, but working as the lowest level of manager.” As Donald better understood how the firm functioned, he was involved in increasing levels of decision-making, until he eventually succeeded his father, Anthony, as the head of the family business. This on the-job, “learning the ropes” educational process is typical of how most family firms traditionally prepare their successors to take over the business: through a gradual transfer of knowledge, values, and responsibility from one generation to the next, often from a young age.

Traditionally, most family firms believe that their success over the long-term depends on how well their family’s unique entrepreneurial values and proven business practices are passed on to the next generation. Fully equipped through a long period of induction, successors are expected to be able to continue sustaining and growing the family business for the benefit of family shareholders and employees. There is an assumption, however, that the social and business conditions that supported the success of the firm they have inherited will remain favorable, and that the successors’ managerial skills will continue to be effective and relevant. With rapidly changing social and economic conditions, would the lessons learned through years of apprenticeship continue to be useful in the face of new circumstances? Or could they even become counterproductive, requiring some element of “unlearning” or “resocialization?” In today’s fast-moving business environment, is traditional successor induction still the best approach? Our study of a multi-generational Scottish family firm shows that learning from older family members (underpinned by the traditional values of obedience, loyalty, and harmony) is no longer sufficient to adequately prepare the next generation of successors to run their family businesses well, particularly in the face of rapid social and economic change. In fact, the attitudes and skills of the older generation, conscientiously passed on to their children, may even contribute towards business failure.

Our research findings1, published in Family Business Review (2019), show that younger family members need to interact and learn from their peers as well as from external stakeholders including non-family corporate professionals, industry networks, mentors, and minority shareholders. We call this “interactive socialization,” which can also occur when family business successors work with external companies prior to joining the family firm. Such exposure allows them to develop new skills and experiences that can be applied to the family business later, in an experiential form of socialization. It is through such peer interaction and experiential learning that successful family businesses nurture an entrepreneurial mindset in their successors. In our study of McKay and Mills Construction Ltd. (M & M), we found that while Donald McKay succeeded his father, Anthony, after a long apprenticeship at the company, it did not equip him to cope with the challenges brought on by the 1970s and 1980s recessions. Donald had to recruit externally for the financial skills necessary to restructure the company and this non-family board member was largely responsible for M & M surviving the 1970s—one of the few pre-war construction firms in Scotland to do so. By the time the third generation – Donald’s son Bill and nephew David – took over the reins of the company upon Donald’s death in 1993, their socialization into the family business had become more collaborative. This was in part due to the younger generation’s interactive learning from non-family members in M & M’s management, including Jack, the financial director who ran the business under Donald and who was recruited as an external manager to mastermind change and business restructuring. Bill and David also brought with them the skills and experience they had developed while working in architecture firms. Their interactions with peers, mentors, educational and industry networks, and other social and professional groups enabled them to implement innovation that set the company apart from other Scottish speculative builders. To cope with changes and to survive over the long term, we also found that family firms need to engage in re-socialization, a process of re-orientating their values and strategies towards new models of best practice within their industry. For instance, when Alan, Rob, and Mary, the fourth generation of McKays, became involved in the company after 2000, they found themselves having to respond quickly and innovatively to the changing social and economic conditions affecting their family and business. Working with the company’s non-family board members, they used resocialization as a conscious strategy and completely reversed the family culture and practice.

Read the scenario and answer the questions.

Question 01: Illustrate, what are the characteristics of a successful family business?

Question 02: Discuss any three types of work and conflicts that usually take place in family businesses.

Answer 1

1- what are the characteristics of a successful family business?

Family business is that business where a family owned the company and family members run the company in future like after Anthony, His Son Donald run the business as successor. in this case, i would say, the Characteristics which are present in a successful family business are that first, Work life and Personal life should be separated. This means that personal issues and conflicts in family are not allowed in Business.

second characteristic which is important that Have the right people at right position with right skills because A son who is not worthy of position and have no right skills to manage the family business then company will lead to failure so focus on improving the skills and experience of son from young age so that family business can be run smoothly.

third characteristics is having a proper plan like succession planning where Father should train internally as well externally with non family people so that Son or daughter can have right experience and knowledge to run the business.

fourth characteristic is to not to be limited and stereotypical that Successor like son can handle all the work, external help like support from non family members also help to run family business successfully.

2- Every family business have some conflicts and work which affect business performance even lead business to failure. the first conflict which interpersonal conflicts in which work or views between father and son are not matched like Son is not happy the way father lead the company in the past so son would change that when he is given the position . this way father and son relationship can conflicted and affect family business.

second type of conflict is related to ownership based conflict. i think there is assumption that father will handover the family business to the eldest son but there are situation where father handover the business to younger one who he think is worthy for position so this affect work and cause conflicts in business.

third is related to personal like and work life balance where Son bring personal issues at work and take decisions based on personal grudges which affect family business. it also includes having more power, more finance to himself and leave other siblings out of business decisions.