Bernard Liebowitz - The Family in Business: The Dynamics of the Family Owned Firm

The Family in Business

The Dynamics of the Family Firm

Bernard Liebowitz, PhD, CMC

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The Family in Business: The Dynamics of the Family Firm

Copyright Business Expert Press, LLC, 2012.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meanselectronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher.

First published in 2011 by

Business Expert Press, LLC

222 East 46th Street, New York, NY 10017

www.businessexpertpress.com

ISBN-13: 978-160649-278-9 (paperback)

ISBN-13: 978-160649-279-6 (e-book)

DOI 10.4128/9781606492796

A publication in the Business Expert Press Strategic Management collection

Collection ISSN: 2150-9611 (print)

Collection ISSN: 2150-9646 (electronic)

Cover design by Jonathan Pennell

Interior design by Scribe, Inc.

First edition: August 2011

Abstract

The family business has historically been seen as a haven for both family and business problems, the net result being that few families persist into the second generation and fewer still into the third and subsequent generations. Recent research has taken issue with this all-encompassing pronouncement and has suggested that those family businesses that persist into future generations have positive qualities that have been overlooked.

However, a common definition of what constitutes a family business is lacking, thereby casting doubt on much of the applicability of the research findings. In particular, the nonmonetary value the founder places on the business affects whether it ranks as a family business. In narrowing the focus to one subgroup of possible family business candidatesnamely, where two generations own the majority of equity, both are represented in the workforce, and the founder clearly states his intention of creating a family businessthe dynamics of the familybusiness connection and the attending challenges are explored. A new interpretation is presented as to why second-generation members enter the family business despite the many problems that can develop. Their intent is to resolve preexisting conflict and problems with and within their families that can take place only in the family business. A variety of case studies and vignettes illustrate this thesis. In addition, a model of transition and succession planning is offered as a means of helping family businesses traverse the many obstacles in their path toward longevity.

Keywords

Family business, family dynamics, succession planning, training for succession, succession failures, management succession, parental influence, family business consultation, business values, fatheroffspring conflict, family structure, dysfunctional family businesses, conflict resolution, definition of family business, longevity of family business, system theory

Contents

This book has had a long gestation periodfrom my teenage years until now. My father started several businesses simultaneously (scrap metal, barrels and drums, and sanitary rags for manufacturing use) in Cincinnati, Ohio, during the early 1930s and brought my older brother into the business after World War II. They gradually sold off the businesses, leaving only the scrap metal business. About 20 years later, my younger brother entered the business. Because of a serious disagreement that never was resolved, he left the business 8 years later to start his own scrap metal firm in Dayton, Ohio.