CHALLENGES ASSOCIATED WITH FAMILY BUSINESSES

 1. Emotions

Usually family problems like divorce, separations, health or financial problems create difficulties for family members which end up affecting the business.

2. Informality

This takes the form of absence of clear policies and business norms family members.

3. Tunnel vision

There is a challenge of limited outside opinion and diversity on how to operate the business.

4. Challenge of compensating family members

Dividends, salaries and compensation for non-participating family members are not clearly defined and justified.

5. Role confusion

The roles and responsibilities for each member are sometimes not clearly defined. This results into overlapping of functions.

6. Poor managerial skills

There is hiring of family members who are not qualified, lack skills and abilities for the organization. In addition, it also becomes difficult to fire them even when it is clear that they are not working out.

7. Inadequate succession planning

Most family organizations do not have a plan for handing the power to the next generation leading to great political conflicts and divisions.

8. Absence of retirement and estate planning to cover the necessities of older members when they leave the company.

9. Limited training

There are no specific training programs for family members when they are integrated into the business. Hence there is no clear information relating to goals, expectations and obligations of position.

10. Centralized control systems.

Control is centralized and influenced by tradition instead of good managerial practices.

11. Conservativeness of members

Older family members try to preserve the status quo and resist change especially resistance to ideas and change proposed by the young generation.

12. Communication challenge

This results from role confusion, emotions, fear, envy, anger, e.t.c all of which result into political divisions and other relationship problems.

13. Difficulties in decision making

Decisions are made day-to-day in response to problems. There is long-term planning (strategic planning).

14. Limited business valuation

There is no knowledge of the worth of the business and the factors that make it valuable or decrease its value.

15. Variations in vision

Each family members has a different vision for the business and different goals.

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