Family businesses have also become known as the business of relationships. The prime factor that family businesses depend on is how strong the relationships are between family members. However, it has been highlighted by Hoover and Hoover that the ‘greatest threat to the long-term survival and success of any family business has less to do with what’s going on outside with customers, competitors and technology, than it does with what’s going on inside with relationship among the key players, especially among family members.’ (1999, pg. 2)
In order to achieve success within a family business, there must be a clear separation and balance between the family and business especially in terms of relationship and personal issues. Families who balance the family and business systems will be able to create a positive environment where the family will thrive through family harmony and the business will perform well and operate effectively. This can be seen in the figure below:
(Source: Carlock and Ward, 2001, pg. 4)
Conflicts can be resolved through family business meetings where they can establish guidelines and policies before the decisions that are made become real and personal. Families who develop business values and philosophies together can help improve the performance of a business while working in the best interests of the family.
Family businesses that are able to balance the two systems can develop a ‘foundation for healthy family business relationship and for the creation of family business legacy.’ (Carlock and Ward, 2001, pg. 7)
- Business
Any business including family businesses face decisions every day. These decisions can bring challenges in the running of a business today but also affect the future of the business as well as the family. Fortunately, timely business planning can effectively address any concerns and decisions, which will protect both the business and family. Business planning is especially important to successful family businesses that usually seek steady growth and performance and avoid threatening the wealth of the family and control of the business. Discussions of the decisions made within a family business will need to go through a parallel planning process. This is the integration of family and business thinking and action in the formulation of long-term family business plans. An illustration of the parallel planning process can be seen below:
(Source: Carlock and Ward, 2001, pg. 46)
Ownership strategy is defined as the family’s wealth on one hand and the family’s shared values on the other. McKinsey implies that ‘Large family businesses that survive for many generations make sure to permeate their ethos of ownership with a strong sense of purpose.’ Every member within the business will need attain the knowledge about ownership. This includes ‘understanding the rights and responsibilities of owners, the nature and structure of the family’s assets, different forms of ownership organisation and their consequences (responsibilities, tax, and so on) and the families shared goals and strategy related to ownership.’ (Kenyon-Rouvinez and Ward, 2005, pg. 62). As a family business grows, the ownership could become fragmented. McKinsey mentions that ‘family institutions play an important role making continued ownership meaningful by nurturing family values and giving new generations a sense of pride in the company’s contribution to society.’
A business will need to develop an exit strategy through a succession plan. Having a plan will help protect the business from the unexpected and give the owners time to share plans between the family and other members of the business. Kenyon-Rouvinez and Ward believe that both the family and the business benefit from preparation for succession: ‘The more family members are informed and trained to interact in a mature, respectful way, the more they will reap the benefits of the succession process. Family members should know about the family, ownership issues, leadership issues, about the company itself, and about the succession process.’ (2005, pg. 62). This will hopefully create a smoother transition.
Who takes over the business is a very significant factor in the succession plan. The future owner needs to be committed to the business especially since the preparation for succession can be a lifelong process for family members because it begins from the future owner’s upbringing. Family commitment is an important factor in the family business because ‘if the family cannot develop a shared commitment to invest and participate in the business, then it is time to sell or liquidate.’ (Carlock and Ward, 2001, pg. 51).
- Governance
Governance is known as ‘a system of structures and processes to direct and control corporations and to account for them.’ (Neubauer and Lank, 1998, pg. 60). Davis suggests that effective governance will enable a business to generate ‘a sense of direction, values to live by or work by, and well-understood and accepted policies that tell organization members how they should behave or what they should do in certain circumstances.’ It will also allow members to interact will one another while discussing important issues related to the business (2001).
Kenyon – Rouvinez and Ward explain that family business governance is a ‘system of processes and structures put in place at the highest level of the business, family and ownership to make the best possible decisions regarding the direction of the business and assurance of accountability and control.’ (2005, pg. 45). They follow by suggesting that ‘family businesses are complex entities where the roles of the family, management, and ownership can be easily confused.’ (2005, pg. 45). Davis agrees with their statement since he believes that governance within a family business can be more complicated than for a non-family owned business (2001). In order to overcome any family business problems, the factors of business, family and ownership will need governance. According to Carlock and Ward, ‘family business governance requires parallel family and business thinking to support the development of planning, decision making and problem- solving structures for both the family and business systems.’ (2001, pg.140). A successful family business will be able to understand the importance of family governance.
Kenyon-Rouvinez and Ward define the meaning of family governance. A family governance aim to ‘achieve, maintain, and increase family members’ unity both among themselves and with their family business; promote stable and committed ownership; and ensure that shareholders adopt a professional attitude towards the business so as not to impede operations.’ (2005, pg. 53).
The figure below illustrates the family and business governance structure. Carlock and Ward stress on the importance that ‘sharing information and coordinated action between the family council and board of directors is often required because of the overlap in the family and business systems.’ (2001, pg.141).
(Source: Carlock and Ward, 2001, pg. 141)
With the help of a regularly scheduled family council and board of directors, a family business can provide a governance structure throughout the business, which in turn can create a forum for sharing information, allow shareholders to access the information, communicate and discuss concerns related to the business and encourage family participation in the decision making process. As a result, these factors can create a healthy family business.
- Foundations
According to Poza, there is a general perception that family business are ‘less socially responsible because of their incentive to protect family wealth’ and ‘less ethical because of their incentive to reduce tax liabilities and derive competitive advantage by whatever means possible in the often private, less-transparent world of most family businesses.’ (2007, pg.21). Nevertheless, McKinsey suggests that charity has become an important element by keeping families committed to the business. It can provide ‘meaningful jobs for family members who don’t work in it and by promoting family values as the generations come and go. Sharing wealth in an act of social responsibility also generates good will toward the business.’ (2010, pg. 9). Family businesses have aspiration to protect the family business image through its name and reputation.
Neubauer and Lank identify the benefits of why family businesses set out philanthropic goals. Families believe philanthropy is a way to ‘perform their duty to be compassionate to those less fortunate than themselves. Others see their charitable foundations as a concrete way of returning to society a portion of the wealth that the community has allowed the to accumulate over generations.’ (1998, pg. 259). ‘Furthermore, donating private money to improve the social infrastructure of the community can lead to enhanced human potential, which can create a better climate and resource base not only for the family firm itself but for all of society.’ (1998, pg. 259-60). These results can lead to a win-win situation where everyone can benefit.
McKinsey mentions that families face a challenge when setting out the direction of their philanthropic activities especially when transferring power to the next generation. Families have tackled this issue by ‘creating a discretionary spending budget allowing family members to finance projects that interest them.’ (2010, pg.9). Some family businesses also give family and non-family members the opportunity ‘to participate directly in philanthropic projects through onsite visits and volunteering schemes. This approach is an especially powerful way to engage the next generation early on.’ (2010, pg.9).
Even though there has been an increase in philanthropy, Kaslow has an argument concerning to what extent the charitable work given out should be at a personal or corporate level. Personal responsibility is where ‘ families generally tend to be very supportive of charitable causes, on the whole they prefer to maintain anonymity and a low profile.’ On the other hand, ‘some argue that charitable endeavor can and should take place as a corporate initiative, and that, as well as giving money to good causes, no one should feel ashamed if there is also some benefit for the company.’ (2006, pg.343).
- Case Study
The foundation factors including social responsibility and philanthropy are the key features into creating a healthy family business. The author will illustrate these factors by using Bottlegreen and to what extent the level of social responsibility and philanthropy is used within the business. Bottle Green is a family owned business that produces a wide range of soft drinks. It has met the whole criterion into making a family business successful but it has an emphasis on its social responsibility and charity work.
3.1. Bottlegreen: Sustainable Principles
Bottlegreen’s sustainable principles have been embedded within the business origins. The business started up as a ‘cottage industry business’ between the fair-trade towns of Stroud and Nailsworth. The local culture undoubtedly influenced the approaches of the business. The business took the ideals of the target market and the small family ethos of ‘doing the right thing’. From the early stages of the business to the present day the principles have stayed with them. As they have grown in size and revenue, they have been able to operate at a greater efficiency and with as many sustainable practices they are realistically able to manage.
3.2. Bottlegreen: Sustainable Practices
- Production Facility
Bottlgreen’s production factory has been made eco-friendly as possible. They have designed a water recovery system, which enables them to use recycled water to rinse and sterilize the bottles before they use them. The electricity has been sourced from an eco friendly 100% renewable source. All factory machines use high efficiency variable speed motors, resulting in more than 25% reduction in electricity consumption.
3.2.2. Recycling
Waste materials including cardboard waste, plastic wrap, glass, steel drums and scrap paper along with faulty or used bottle cap are sent for recycling. Bottlegreen also return all of the wooden pallets back to the suppliers so they can be re-used again. Plastic barrels are sold to local residents as garden water butts. The money is then donated to the local charity, Winston’s Wish.
3.2.3. Suppliers
Bottlegreen source a majority of the products and ingredients locally. This will help reduce food miles. The water used to blend the cordials and presses is drawn from the sites own borehole and the elderflowers used to make the award winning cordial are supplied, as much as possible, from local farms in Gloucester and Kent. In addition, all of Bottlegreen’s glass bottles are made in the UK, resulting in a saving of 260,000 road miles per year.
3.2.4. Distribution
As Bottlegreen’s products are distributed across the UK, they aim to reduce unnecessary carbon emissions and road miles where possible. By switching to a local distribution company, Bottlegreen have saved over 30,000 road miles this year, and all of the distribution lorries now run on a 20% bio diesel mix, helping to reduce the amount of fossil fuel consumption and lower our carbon footprint.
3.2.5. Packaging
The distinctive conical shape of the Bottlegreen bottles can be considered impractical in terms of being stacked on shelves as well as being transported. The wasted space during the distribution process could be seen as in cohesive with the company’s positioning on sustainability. However the distinctive shape adds to the appeal and sophistication of the drink. Altering the design of the bottle could damage the image leading to a decrease in desire for the brand, producing an undesirable win-lose situation for the company. An alternative space saving option for the distribution process would be to alter the way the bottles are stacked together. Below you can see how the bottles fit when stacked next to each other in the upright position, while next to it you can see the space saved when laid flat in a head to tail arrangement. Although this technique cannot be used when the bottles are placed on the shelves, it manages to utilise the full use of space during transportation.
- Bottlegreen: Philanthropy
- Breakthrough Breast Cancer
Breast cancer has become the most common cancer in the UK with over 46,000 women and 300 men being diagnosed each year. Since it can affect everyone in some way or another, Bottlegreen has created a limited edition bottle containing a new cordial flavour known as Bottlepink. With every bottle sold, Bottlegreen will donate 10% to the breast cancer charity, Breakthrough Breast Cancer. The charity fights cancer through research, looking at prevention and cure, campaigning and education.
- Charitable Functions
Bottlegreen is willing to help charities and businesses that are raising funds for praiseworthy projects. Bottlegreen can assist these charities and businesses by donating their products for charitable functions. Recently, Bottlegreen have donated to Marie Care Cancer Care, Action Against Hunger and St Johns Ambulance. The donations may by small but it can make a big difference to a charity. As a result, Bottlegreen will always be known for their philanthropy throughout the community.
- . Bottlegreen: Conclusion
After evaluating the family owned business Bottlegreen, the author of this paper has concluded in believing that Bottlegreen is a successful family business especially in terms of the foundations criteria. The family owners of Bottlegreen established the business using and undertaking sustainable practices while helping the local community through philanthropy. For this reason, these foundations will always be part of Bottlegreen’s values and vision.
- Conclusion
This assignment only includes several criterions on what makes a successful family business. Nevertheless, they all give an indication on how to create a healthy family business. These criterions may formulate a successful business but there will be consequences if the family business cannot perform in these areas.
- References
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Carlock, R.S. (2010) When Family Businesses are Best
Available at:
a-5b9a-4d0b-a6bf-8560e0125541%40sessionmgr113&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=51974454
Accessed on: 19.11.10
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Carlock, R.S. and Ward, J.L. (2001) Strategic Planning for the Family Business. Palgrave.
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Davis, J. (2001) Governing the Family-Run Business Harvard Business School
Available at: http://hbswk.hbs.edu/item/2469.html
Accessed on: 21.11.10
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Hoover, E.A and Hoover, C.L (1999) Getting Along in Family Business. London: Routledge.
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Kaslow, F.W. (2006) Family Business and Family Business Consultation: a global perspective. New York: International Business Press.
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Kenyon- Rouvinez, D. and Ward, J.L. (2005) Family Business: Key Issues. Basingstoke; New York: Palgrave Macmillan.
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Mckinsey (2010) 5 Attributes of Enduring Family Businesses
Available at:
Accessed on: 21.11.10
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Neubauer, F. and Lank, A.G. (1998) The Family Business: Its Governance for Sustainability. London: Macmillan Press.
- Bibliography
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Fleming, Q.J, (2000) Keep the family baggage out of the family business. Fireside.
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Poza, E.J. (2007) Family Business. Mason. OH: Thomson South Western.
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Kaye, K. (2005). The Dynamics of Family Business. Lincoln, NE: Universe.
- Lecture Notes, Chris Swaffinsmith 2010
Available at:
Accessed on: 19.11.10
by
larryhover (student)
