Today, we are continuing our article series with a brand new episode! If you missed the first & second episodes, here is the link & link.
It is a weird topic to write about, but I did some research so... Anyways, we are here to broaden our vision! I am not limited to boring textbook info and can explain other things in a fun way if you want... I HIGHLY RECOMMEND YOU TO READ EARLY EPISODES!
Family and Professional CEO: Which One is More Appropriate? In What Conditions?
Gersick offers a three-dimensional lifecycle for the family business with family, ownership and business dimensions as shown in the figure 1(Gersick et al. 1997). Each dimension refers to the circles of the family business and implies the multiple characteristics of the company in a selected time period (Gersick et al. 1997). Managerial needs change according to the current character of the business and each dimension contributes with its unique requirements. On the ownership dimension, three distinct structures are shown as founder control, sibling partnership and cousin consortium which highlights the generations , although there are no exact borders in the real life (Gersick et al. 1997). Founder control implies the establishment of the family business which, however, greatly vary in size (Gersick et al. 1997). Its key challenges are lack of enough capital, concentrated ownership problems and designing a continuous ownership mechanism (Gersick et al. 1997). Sibling partnership implies the ownership of second generation where the power is divided (Gersick et al. 1997). The control of shares and the role of nonemployed owners are major problems, and possible power games may weaken the company (Gersick et al. 1997). Cousin consortium is the period of third and further generations and has a complex ownership structure with a crowded shareholder group (Gersick et al. 1997). Although most companies at this stage have a guideline to apply, the complexity of family and the shareholder group make it harder to manage (Gersick et al. 1997).
On the family dimension, next generation’s slow integration to the business is dividend into four part which implies the power transfer between generations (Gersick et al. 1997). The young family characterized as young and enthusiastic parents with children who are making the initial decisions of the family (Gersick et al. 1997). Then, children rise and meet the family business, sometimes work part-time, and decide whether to continue family business or not in the period of entering business (Gersick et al. 1997). Once they grow and attend the business atmosphere, they now have colleague status with their parents which generates tension as now they are equal in the business (Gersick et al. 1997). Eventually, the control will pass to the children and while a cycle completes, a new one starts (Gersick et al. 1997). On the business dimension, the size and the complexity of the family business is divided into three segments: Start-up, expansion, and maturity (Gersick et al. 1997). The company’s life cycle begins as a start-up and first steps are forming the company and making it financially survive (Gersick et al. 1997). A start-up’s organization structure is informal, and it cannot last long (Gersick et al. 1997). How long the hard part continues is uncertain, but once it is done, a childhood period starts. The company’s grow rate increases, and it requires a structural formalization (Gersick et al. 1997). The complexity of the firm creates managerial problems and a need for future planning appears. A healthy growth, well designed structure and strategic planning in this period is the key to the success in the maturity (Gersick et al. 1997).
OK, let's stop here for now. The topic will develop further and I ensure that you will gain a different perspective. When you are tired of the bad news about crypto, come here.
