Advantages and disadvantages of family businesses~
Thread Content
This post was last edited by llyy0327 on 2011-12-14 09:57. Through years of working with and communicating with private family-owned enterprises in Wenzhou, I have found that most of these enterprises have mediocre management and lack technological innovation; yet they still possess strong survival and competitive capabilities. These are the unique advantages of the management model used by private family-owned enterprises in Wenzhou； However, when managers of private family-owned enterprises in Wenzhou abuse their power out of a sense of superiority and show favoritism, it leads to complaints among most employees. Therefore, once such companies reach a certain size, their weaknesses become very apparent, often leading to their downfall. The family-based management style in Wenzhou places too much emphasis on personal relationships, while neglecting system establishment and management. This management style fosters harmonious interpersonal relationships within the corporate family, bringing mutual benefits to the company. However, a company is not a family but a socio-economic organization; the individual goals and interests of its members often differ from those of the company itself, leading to conflicts. In particular, there is a need for objective and fair standards to regulate the interest relationships among employees who have no familial ties, as well as between employees and managers, relatives, or trusted individuals. Uniform systems and rules are necessary to restrain the behavior of all members, thereby establishing an objective and fair management framework and good organizational order. The role of managers in private family-owned enterprises in Wenzhou is extremely prominent. They possess high moral standards and proper behavior, as well as a rigorous work ethic; they serve as role models in terms of dedication to their work. They also have excellent professional skills, and many of them are versatile individuals – not only experts in a particular technical field but also shrewd businessmen and skilled public relations professionals. Due to their talent, they restrict the potential of many subordinates, suppress the development of talented individuals, and establish absolute personal authority. Therefore, such companies often experience the phenomenon of \"success and failure stemming from the same factor.\" At the same time, when this person is absent or steps down, the organization suffers from a shortage of talent and a power vacuum, leaving the company in a state of disorganization for a period of time. In Wenzhou, private family-style management is characterized by serious nepotism. When dealing with interpersonal relationships, they rely on closeness rather than suitability, which leads to a distinction between \"insiders\" and \"outsiders\" within the organization, creating a familial atmosphere where \"brothers fight together, and fathers and sons fight side by side.\" To survive, outsiders also seek to curry favor and form cliques, creating factions of \"your group\" and \"my group\". Sometimes, to protect the interests of \"outsiders,\" they unite to fight against managers or \"their own people,\" leading to internal strife within the company. Therefore, family-style management is either highly cohesive with harmonious interpersonal relationships, or it becomes fragmented internally with factional conflicts. [Case from the internet~] Let’s discuss family business management~~~~~~~~
There are also those who recruit talents without sticking to conventions!
In the early stages of a family business, power is highly centralized; the management team consists mostly of relatives and friends of the leaders, all of whom genuinely strive for the development of the company. Therefore, family-owned businesses often possess strong market competitiveness in their early stages. As a company grows larger, a high degree of power concentration becomes unsuitable for the needs of corporate management. Lower-level managers such as relatives also tend to become complacent. That’s why many family businesses fail to grow large. For family businesses to grow, they must hire a large number of non-family members, and leaders must be willing to delegate power, as seen in Li Ka-shing’s CK Group. But at this point, it can no longer really be called a family business.
There are successful family businesses in the world, and there are also family businesses that remain undefeated. In the early stages of a company’s development, it is often difficult to attract competent professional managers; at such times, the role played by family members within the company becomes extremely important – they work long hours and without complaint. When the company faces the threat of collapse, many employees will stand by its side, and it is even more crucial for family members to step forward bravely and contribute their efforts and ideas to help the company get through the crisis. All of this must be given attention in the development of family-owned enterprises. And as businesses continue to grow and develop, the problems associated with family-owned businesses also increase. The most prominent of these issues is exclusivity; secondly, there is an overconfidence in one’s own achievements. Thirdly, there is a lack of ambition to improve. Fourthly, corruption is a problem. Fifthly, there is abuse of power. Sixthly, there is excessive complaining. Seventhly, there is the tendency to form cliques.
Reply to 4# ggnnn: Just as the original poster mentioned regarding Wenzhou, family-owned businesses tend to collapse on their own once they grow too large. In fact, family businesses that strive to grow and become larger are no longer true family businesses. Because a large corporation is like a large society, while a family-owned business is like a feudal society. History has shown that feudal society is not suited to the development of modern society.
My previous employer was also a family-owned business, and it was quite large. In the early stages of its development, things were tough and demanding, but there was a lot of enthusiasm. However, as the company grew larger, many problems arose: favoritism in hiring, failure to make proper use of talent, an overly large management team, and a conservative attitude that prevented acceptance of new ideas and management methods. The approach used back when the company was first established no longer suited the scale it has now. So many college students leave after just one or two years, because the positions of authority go to people from within their families; outsiders simply don’t have any chance. Yet, the successors get worse with each generation. It’s heart-wrenching! !
In terms of advantages, the senior management in family businesses is more responsible and dedicated. Family members are loyal to the interests of the family; they never consider the business merely as a place for making a living, and naturally treat the factory as their home. Generally, family members tend to work or live in the company since childhood, being exposed to all aspects of it. They acquire a great deal of specific knowledge related to the company, and this knowledge enables them to manage operations with ease; such experience and skills are often difficult to imitate. On the downside, family-owned businesses tend to hire employees who may not be very competent but are members of the family. After all, the primary concern for such businesses is providing employment opportunities for family members first. As a result, it is difficult for them to attract and retain talented outsiders. Family-owned businesses rarely consider external work experience and educational qualifications as important criteria for promotion, and they lack a spirit of innovation; therefore, it becomes hard for them to continue growing once they reach a certain stage.
What must not be overlooked is that given the current characteristics of socialism in our country, we cannot apply the development models of Western family-owned enterprises to Chinese companies. But the important thing is that in the development of family businesses, while paying attention to economic benefits, equal emphasis should be placed on social benefits, so as to achieve sustainable growth.
Reply to 8# East of Tainan: It’s fine to maintain the business as it is in the current situation, but it’s difficult to pass it on to the next generation without being too restrictive when selecting talents – otherwise, the company will gradually decline!
Sharing the next material: 21 Business Rules of Zhejiang Entrepreneurs: Behind this vitality, we can perhaps learn many secrets of doing business from these 21 rules: 1. Keep watching CCTV-1’s News Broadcast; 2. Don’t trust contracts or agreements too easily; 3. You must be honest and keep your promises, but this does not apply to those who are dishonest; 4. Avoid entering into businesses where you can win but might not be able to afford to lose; 5. Don’t invest too much upfront – keep some reserves for yourself; 6. There is nothing that cannot be done in the world, but entrepreneurs know what to do and what not to do; 7. Choose partners carefully; 8. Don’t include any members of your family in your team; 9. Don’t sleep with women who have conflicts of interest with you; 10. Don’t share your business details with your partner; 11. Don’t evade taxes, but learn how to minimize them legally; 12. You can use journalists, but don’t trust them; 13. Don’t act like you’re the boss, even if you really are; 14. Stay neutral and avoid getting involved in factional disputes; 15. Don’t worry too much about money and profits; 16. Don’t use money to cover up your flaws; 17. Capital determines one’s influence, but you shouldn’t let others know exactly how much influence you have; 18. Learn from the successes and failures of others, but ignore examples from abroad; 19. Don’t use the rules of the criminal world to resolve business conflicts; 20. Try not to handle everything personally, as long as you can oversee the overall situation; 21. Keep a backup plan to avoid being abandoned by everyone.
This post was last edited by woliaibo on 2011-12-14 at 16:40. Reply 10# yusea: I don’t know how to rate this post, nor how to determine its quality. If management is quality. So it can only be said that the quality of most products produced by Wenzhou businessmen is quite good. Its excellent management has led to its outstanding quality. Whether it’s a family business or a non-family business. As long as it generates profits, produces products of satisfactory quality, and brings benefits to the public, it is a good company, right?