Successful Leadership in Small Family-Owned Businesses

Running head: MANAGEMENT
Successful Leadership in Small Family-Owned Businesses
Name of the Student:
Name of the University:
Author Note:

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Executive Summary:
The report aims at providing an overview of successful leadership in a small family owned
business. A family owned business is defined as the business where the family member’s
remains involved and the control or ownership of the business primarily lies within family. It is
the oldest type of business association. In early 1980s, the family business has been considered
as important and distinct categories of commerce. In present times, family owned businesses are
identified as dynamic and important participants of the economic world. According to US
Bureau of Census, close to 90 percent of the American business are not only controlled but
family owned. From partnership firm comprising of two-persons to the Fortune 500 firms, these
business accounts for half of Gross National Product and the employment of the nation. Family
businesses are believed to possess certain advantages over the other business entities in the focus
for long term, their quality commitment and the concern and care for the employees. Family
owned business also faces unique management challenges that arise from overlapping of
business and family issues.

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Table of Contents
Introduction:....................................................................................................................................2
Family Business versus Non-Family Business................................................................................3
A. Similarities..................................................................................................................................3
B. Differences..................................................................................................................................5
Statistics of Successful Family-Owned Business and Longevity....................................................7
Family Styles of Leadership..........................................................................................................10
A. Define Various Leadership Styles............................................................................................10
Example of Successful Leader and Leadership Style....................................................................13
A. Jorgen Vig Knudstorp - CEO of LEGO in 2004......................................................................13
B. Mark Zuckerberg- CEO of Facebook......................................................................................15
Factors Attributed to the Success of Family-Owned Businesses..................................................17
A. Family Unity:...........................................................................................................................17
C. Vision:.....................................................................................................................................19
Factors Attributed to Failures of Family-Owned Businesses........................................................20
A. Conflict within Family:............................................................................................................20
B. Lack of Communication:..........................................................................................................21
C. Lack of Succession Plan:..........................................................................................................21

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Planning for Successful Leadership in a Family-Owned Business...............................................22
Conclusion:....................................................................................................................................24
References:....................................................................................................................................25

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Introduction:
As far as the leadership is concerned, it is the subject that touches the various aspects of
family owned business which includes the development of the next generation to the succession
planning and from determining the effectiveness of the board to integration of the non-family
executives into firm and beyond. Leadership if not properly defined leads to the muddled
expectations and development of the multiples styles of the leadership within firm. There does
not exist any specific behavior, core skill and personality traits that defines an ideal leader.
Nevertheless, it is vital for the family members to determine capabilities of desired leadership in
accordance with the strategies and values. It is also necessary to describe the reasons as to why
the families’ remains in business together and also put forward a plan in attaining social and
commercial success that acts as the prerequisite for preserving the legacy. In the process, it is
also necessary to adapt the leadership styles to the generational change and the changing
conditions of the market. There is also the necessity of being explicit about the behaviors and
competencies for supporting the strategy and values. The expectations from the leadership are
simply part of equation. Families should work harder for identifying the ways of exercising the
leadership. This is important since everyone holding managerial positions within the family are
not leaders by birth. However, leadership can not only be learned but also enhanced by attracting
possible talents from the outside of the firm.
The report particularly focuses on the similarities and the differences of the family and
the non –family business. The report also puts across statistics of a successful family owned
business and its longevity. The report discusses various styles of leadership along with an
example of a successful leader, Jorgen Vig Knudstorp, who was responsible for turning around a

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failing family business. The report discusses the factors that attributed to the family owned
business and factors that attributed to the failures of the family owned business. The report also
provided an insight to the planning of a successful leadership in family owned business.
Family Business versus Non-Family Business
A. Similarities
Family business has been recognized by its significant presence in the economy and
throughout history. Family owned business is long lived and is the most prominent across the
world. According to the statistics put forward by the European family business in the year 2012,
it was found that close to 70 to 90 percent of the annual GDP is created by the family business.
The impact of this family business has been proved further through creation of 50 to 80 percent
of jobs in some of the major countries of the world. It has also been found that close to 85
percent of the startup companies is established with the money coming from the family (Dyer &
Gibb 2016), Besides, estimations have indicated that in most of the countries across the world,
family owned business account for 70 to 95 percent of the entire business entities (European
Family Businesses, 2012).
Research for the past few decades that has been related to the family business has
struggled predominantly with defining of the family business and the main characteristics.
Despite different definition in the literature put forward by various researchers in relation to the
family business can be stressed to the extent that there is no generalized agreement to what
should have been considered as the family business. The unique differences between the family
and the non-family firms can be utilized for explaining the operational and the conceptual

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definitions of the family firms. According to research studies, suggestions have been out forward
in determining how the background settings are playing crucial roles in defining the governance
of the family business and regulating the performance impacts. Studies have also suggested that
the family enterprises emerge as central force for driving the economies in the countries.
Non family firms are defined as the firms that do not perceive themselves as the family
firms and where the family does not own major shares. Brining a non family manager on board
acts positive family owned business since it acts beneficial for the company. This also helps in
explaining the professionalism of the family business where the financial management plays
leading role. Family business aims at maintaining healthier balance between the family and the
non family managers thereby helping in improving the performance of the company.
The last decade witnessed changes in the understanding of the family business as well as
the non family business (Aronoff, 1998). This represents the evolving changes that remain
crucial to the working and the understanding of both the business. The trends identified include
focusing on team management, business succession and ownership as the developing norm in
both businesses. In both the family and the non family business there has been an increased
importance of strategic planning, enhanced financial sophistication, increasing professionalism
of the managers, refining the retirement, expanding role of the women, requirement of the
professional service providers and quality and increasing availability of consulting and
education.
B. Differences
Research has helped in the identification of the key differences between the family
business and the non family business. The difficult part lies in the explanation of the reasons for