Family Businesses or Regular Companies: How They Compare With Each Other
If you own a company, you probably may be wondering about the line of succession you will create, to assure its survival. For some people, family businesses are a better option. This is due to the level of familiarity between the founder and management. It also reflects the relationship between the top bosses and the next generation of leaders. However, others may be confused between family businesses or regular companies, since families are not always capable of managing the line of succession.
The Advantages of Family Businesses
The most obvious advantage of a family business is that the founder’s own children will be able to inherit a fully-functional company after coming of age. The founder will be able to train his or her children regarding the inner workings of the company. The founder may also train their children in company duties when they are given specific roles.
But some company founders debate the logic behind this. They argue that both family businesses or regular companies have to comply with government regulations for their industry. They may also think someone from within the ranks of employees might be better suited to take over the reins. Once the founder steps down, this successor would manage the company on their behalf.
The Case of Chung Mong-Koo
Hyundai Motor founder Chung Ju-Yung designated his son named Chung Mong-Koo as his successor. However, Chung Ju-Yung did not foresee that his son would eventually be convicted of embezzling Hyundai Motor funds. The funds were given, in return for preferential treatment by the Korean government. This is a good example of the logic of assigning an intelligent and capable leader who is not related to the company founder. Chung Ju-Yung should have appointed someone from within the employee ranks as his logical successor. That would have been better for Hyundai Motor.
The Hyundai Motor experience shows that companies survive not just because the founding family will be assuming the reins of power eventually. There should be leaders who are trained in managing the different parts of the firm. The bigger the company, the more well-trained the corporate leadership should be. A competent leader should have the educational background, experience and on-the-job training that will prepare the company for challenges in the future. Assigning kinfolk to the company leadership can sometimes be detrimental for the welfare of the company and its people.
Family Quarrels Can Tear Apart A Company
Another major difference between family businesses or regular companies is that a family member can have disagreements with other relatives. This can destroy the esprit de corps of the company since the line of succession depends on family ties. Even ordinary rank and file employees may find themselves taking sides in a corporate family quarrel. But members of management in a regular company can resolve disagreements logically for the good of the organization, rather than for self-interest only.
A family quarrel can be petty, cruel and selfish, making the company atmosphere charged with negative vibes. Ordinary employees may find it unpleasant to work in a company torn apart by family quarrels. Corporate leaders may resign, bringing with them their most loyal followers from employee ranks. To resolve this, the founder of the company may have to shut it down or sell it instead. This is the logical result when family members don’t get along.
If you need more information about the corporate line of succession and other business news, visit us at Top World Business. We may have the right information you need for your company’s situation.