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There is a high percentage of family business in Europe but only one third of those family businesses will successfully make the transition from each generation to the next

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Introduction

1.-TERMS OF REFERENCES. There is a high percentage of family business in Europe but only one third of those family businesses will successfully make the transition from each generation to the next (www.economist.com). Succession in a family business is not an event but a process and it involves the transfer of both management and ownership. Percentage of family business sectors 1 Percentage of businesses 1 2.-PROCEDURE AND METHOD EMPLOYED. The procedures I will follow in this report are as follows. Firstly, I will explain which are the advantages and disadvantages of family-owned firms explaining each of the reasons. Secondly, I will come up to a conclusion and thirdly I will propose some ideas that the government can take to assist family-owned firms. 3.-FINDINGS 3.1-ADVANTAGES OF FAMILY-OWNED FIRMS. When the company is owned and managed by family members with common goals and common basic values, it can shortcut much of the agreement negotiations that usually accompanies decision making in other business organizations. When family members´┐Ż minds run in the same channel, the business can run circles around the competition and can reach to be top performers. However, the advantage can be lost when family members lose sight of their common goals and can paralyze the company with conflict. Insurance, time off and other benefits usually cost a business less when several employees live under the same roof. This advantage again can be lost if family members put individual interest. For example, if the owner has a company car, his wife demands a company car too. ...read more.

Middle

Consequently family firms may face a lower cost of debt financing. Family firms may be less efficient than non family-owned firms. Family firms are more careful with financial issues as financial disasters can damage all the family. This situation brings that the owner of the family will invest less, or he/she will be more careful in raising loans or to admit new investors. This caution may limit the introduction of productivity. At the same time this means that they do not react ask quickly as non family firms to change. Because many times changes means to invest and other financial issues. Usually the management in family business is more informal. It is very difficult that the family can learn to work together in a systematic plan. Moreover, in many cases the family has not work in any other firms than in the family firm, so they have not enough experience. So discursions are more personal and many conversations can end in discussions and the result can be the stagnation. If the successor works in another firm, it will decide later or sooner to enter into the family business because he/she wants to and thinks that it can contribute from his/her experiences. It can be possible that from earlier experiences can bring new necessary knowledge to market the products, or more even a new way to contact the customers. That successor can be the source of new ideas. In the case that a middle manager exists, a non family member, he/she will know that there are not many changes to reach to the top management position in the firm. ...read more.

Conclusion

In the case that this business does not work, the lost will not be that high. When the five years are passed other new family businesses will have the change to have the same option allowing every family-owned firms to have an opportunity in starting a business. Many family-owned businesses that the owner acts as a manager, as we have mentioned above the owner many times have not knowledge about management. For those owners a course of management will be really helpful. The government can put some courses giving management lessons. Of course those courses should be free or of a low cost, so many managers will have the change to go. If the son or daughter is the successor it will be good also if they can have the chance to assist. Or also to form a center staffed with professionals, who can provide the expertise needed to evaluate business with new activities, and enable them to analyze examples of success and failure. Eventually, the owners will gain the knowledge of management issues and businesses will be more productive. The government could play a game among all the firms. For example, it can suggest making a competition among everyone. The game consists of firms creating new ideas, of course, related to business. For that company with the best idea, the government can give that company a strong subsidy. The subsidy can be to finance the business for some years or some money to expend in new technology or to pay free taxes for many years and so on. These way owners will put more effort to work harder and everyone can benefit from other entrepreneurs ideas. 1977 6. ...read more.

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