REASONS OF FAMILY BUSINESS’ FAILURES

Family Business ‘‘ Give him a living, but never discuss the Family business with him." Don Vito Corleone to Tom

Outline What is the importance of family businesses? Why do family businesses fail? What are the main reasons?

Family Businesses According to researches; 65-80% of businesses around the world are family business.

Family Businesses

Surviving Through Generation

Why do businesses fail? Poor management Insufficient Capital Location Overexpansion …

Family Business’ Failures Family business failures were not often the result of market or macro enviromental forces. Family business’ failure reasons generally occurs from family and management issues.

Young Members’ Behaviors Dont change their behaviors (during transition period) Disagree with new rules Parents try to take control Restrain young members’ activities

Old Members’ Behaviors Parents can not recognize that second or third generation members are old enough Parents do not show any respect and they fail to pass authority Parents do not want to be out of game Parents see their children as their competitors

Deciding who will be involved in family business If more than one candidate, parents have to choose right family member for right position. They have to decide who will be in, who will be out. Parents force children to involve in family business. They do not pay attention what their children want to do

Employing Children Employing children according to sex and age status Oldest son for most important and critical position Daughter for basic or not so important position Ignoring abilities and management skills

Keep Family in Peace Ignoring children fails Being away from arguing important cases about family

Communicating or Solving Problems via Third Parties Damages relationships between family members

Fraternal Fightings and Estate Conflicts In 2003, twenty biggest and famous Turkish family businesses were failed. According to researches, the biggest two reasons were fraternal fightings(%43) and estate conflicts(%19). Conflicts between family members in and out of the business and with non-family members

Institutionalization (getting a corporate identity) First generation or the founder generally becomes disagree with institutionalization They do not want to loose control They do not want to see external people in company

Lack of Succession Planning Next generation lacks essantial skills, experience Next generation have not been well prepared for job

Unfair Promote or Assignment Makes other employees disappointed Decreases their willingness Ignoring experience, skills, abilities, and education Damages corporate identity

References /ais.html /ais.html = =

References chedules/Isib/TU /Family_Business_Rulebook.pdf.com chedules/Isib/TU /Family_Business_Rulebook.pdf.com essReleases/PressReleases2004/2004_09_16. asp essReleases/PressReleases2004/2004_09_16. asp

References wsId=514&pageId=7&categoryId=45 wsId=514&pageId=7&categoryId=45 ories/2002/09/16/smallb3.html ories/2002/09/16/smallb3.html ge=event&eventID=107 ge=event&eventID=107

References Arguden, Yılmaz (2002). Aile Şirketlerinde Kuşak Değişimi Lea, James (2004). Planning could avoid many family business failures /05/17/smallb3.html