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Module 3C - Course Notes PDF

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11 views15 pages

Module 3C - Course Notes PDF

Uploaded by

Nick Sokolon
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT

ADM2313
The Entrepreneurial Society
Module 3C
Ali Mahdi
Spring-Summer 2024
June 3, 2024

● Family Entrepreneurship
ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT
Family
A family firm is a firm
Entrepreneurship dominantly controlled by a
family with the vision to
potentially sustain family
control across generations.
(Zellweger, 2017)
What is a Family Firm?

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


● One or more family members involved (as owner, managers or both)
● Majority of ownership or control lies within an family
● Examples: FedEx, Ford, Porsche, Michelin, Samsung, Walmart, Loblaws

A few stats:
● Globally, they make 30% of companies with sales over $1billion
● In Canada, they represent
• 63% of all private-sector firms
• 47% of private-sector employment
• 49% of GDP
Sources: Boston Consulting Group, Conference Board of Canada
Familiness

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


● Habbershon and Williams (1999, p. 11) define familiness as “the unique
bundle of resources a particular firm has because of the systems
interaction between the family, its individual members, and the business.”

● A bundle of resources that is distinctive to the family business (and


resulting from family involvement) is called the “familiness” of the
family business (Habbershon & Williams, 1999).
Familiness

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


How to measure the degree of family businesses’ familiness (i.e., the
extent of family influence leading to unique resources):

1. ownership, management, and control,


2. proficiency level of active family members,
3. sharing of information between active family members,
4. transgenerational orientation,
5. family-employee bond, and
6. family business identity.
Better or Worse?

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


(Mignon, Kachaner, Stalk, Bloch, 2012)

● Compared a list of 149 publicly traded, family-controlled businesses


with revenues of $1bn+ with a similar group that was not family-
controlled

● Characteristic of family-controlled businesses:


• Family owned a significant %
• Family members were actively involved in board and
management

● Compared performance across business cycles from 1997 to 2009


Better or Worse?

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


(Mignon, Kachaner, Stalk, Bloch, 2012)
Result:
● During good economic times, family-run businesses
don’t perform as well as others
● During economic slumps, they outperform others

Family businesses
focus on resilience
rather than
performance.
Better or Worse?

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


Though family-run companies slightly lag their peer group
when the economy booms, they weather recessions far
better.

Executives of family businesses often invest with a 10- or


20-year horizon, concentrating on what they can do now to
benefit the next generation.
Check Notes

Managing for resilience

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


(Mignon, Kachaner, Stalk, Bloch, 2012)

● Frugal in good times and bad


● High standards for capital expenditures
● Little debt
● Acquire fewer and smaller companies
● Yet, surprising level of diversification (46% for Family Business
versus 20%)
● More international (49% for Family Business versus 45%)
● Better talent retention (turnover 9% for Family Business versus 11%)
Advantages of Family Firms

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


● Prudent governance
● Entrepreneurship culture with a long-term view based on
personal and emotional values
● More stable and resilient during uncertain times
● Greater willingness to forgo financial gains
● Corporate social responsibility (debatable… see Walmart and
Loblaws)
• More embedded in their communities and care about their image and
reputation
Disadvantages of Family Firms

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


● Less adaptive to change
● Tensions among family members
involved in the business
● Nepotism → resentment among
other employees
● Disruption of work life balance
● Limited source of external capital
Challenges of Family Firms

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


● Succession
○ less than ⅓ of family businesses survive into the second generation
○ only 13% make it into the third generation

● Hiring of non-family employees


● Hiring of professional management
→ fresh thinking
→ impartial perspective
Challenges of Family Firms

ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT


● Hiring of external professional management makes it seem like
professional management and family management are
mutually exclusive.

● Policy to make sure that family management is also


professional management: imposing prior experience outside
of the family firm.
ÉCOLE DE GESTION TELFER SCHOOL OF MANAGEMENT

Thank you

ADM2313
The Entrepreneurial Society

Ali Mahdi
Spring-Summer 2024

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