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Strengths and Weaknesses of Family Businesses:
How Does Yours Measure Up?

While it is helpful to understand the conditions that lead to healthy and unhealthy family businesses, most family businesses cannot be classified as either completely healthy or unhealthy; each has certain strengths and weaknesses. Indeed, the uniqueness of family businesses is best understood by examining their strengths and weaknesses, often different sides of the same coin.

Whether a particular dimension of a family business is a strength or a weakness depends on three factors: (1) the degree to which the boundaries between the family and the business are managed; (2) the health of each system; and (3) the degree to which adaptability and learning is inhibited or encouraged in the boundary interface. The dimensions of a family business and the strengths and weaknesses associated with them are found in the following table:

Strengths and Weaknesses of Family Firms

Dimension
Strength
Weakness
Infrastructure Informal; flexible; entrepreneurial; innovative Unclear; confusing; boundary problems; indecisive; resistant to change; lack of management development; no organization charts
Roles Often play multiple roles; flexible; dual relationships; quick decision making Role confusion; jobs don't get done; nepotism; dual roles interfere with learning and objectivity; family birth right can lead to unqualified family members in jobs
Leadership Creative; ambitious; informal authority; entrepreneurial Autocratic; resistant to structure and systems; avoids letting go
Family's Involvement Employees committed; loyal; shared values and belief system; family spirit; family name; family dream; strong sense of mission/vision Can't keep family issues out of business; inability to balance family's and business's need for liquidity; lack of objectivity; inward looking; emotionally charged decision-making; can't separate work and family; rivalries
Time Long-term perspective; committed; patient capital; loyalty; deeper ties; trust built up over time Hard to change; tradition bound; history of family affects business decisions; trust affected by early disappointments
Succession Training can begin early; mentoring a life-long process; can choose when to leave Family issues get in way; unwillingness to let go; inability to choose a successor
Ownership/Governance Closely held; family owned; high degree of control; earnings are motivators May sacrifice growth for control; do not have to answer to stockholders; often no outside board of directors; high premium on privacy
Culture Innovative; informal; flexible; creative; adaptable; common language; efficient communications Founder's role stifles innovation; inefficient; highly emotional; resistant to change; reactive; high risk for conflicts
Complexity Can foster creativity; rich interplay of roles and goals Must be managed to avoid confusion; can be a drain of resources and energy

 

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