Introduction
In most countries, businesses operate by families are becoming majority. In UK, within the market, family firms have held a proportion of around 70 per cent (Carter & Jones-Evans, 2012). Nevertheless, according to a statistic displayed by Conway center for family business (2003), 35 per cent of the 500 top Fortune companies are owned by families in America, and family businesses in America have been contributing the country’s economy in various way, such as manufacturing approximately 65 per cent of domestic product, and being responsible for more than 60 per cent of the country’s employment (Conway center for family business, ibid).
In addition, the study of comprehending a general structure and knowledge of a family firm can be accounted as one of the most prevalent and worth-researching issues in business world. Take UK for example, according to GOV.UK (2013), the typical type of existing family businesses in UK are generally running over 20 years, which is almost 50 per cent of them. And around half of the family businesses own by one partner/director. However, the above statistics are not demonstrating the whole classification and situation for family businesses. Simultaneously, many studies argued whether family firms are more profitable than non-family firms. In the following paragraph, the discussion would be covered with the common traits of family entrepreneurship, the importance for family enterprises to the economy, and the particular policy movements support and strengthen these family enterprises.
Features of family business
Different from other non-family firms, family business could be categorized employees and employers into three basic segments, including family members and non-family members. The three segments are ownership, family, and business. However, as figure one demonstrated, it is frequent to discover overlapping roles within family businesses (Habbershon et al., 2003). For example, in terms of ownership, it is common to hold posts by family members, as a result, people in these cases would be classified into both ownership and family circles.
Figure 1. Tagiuri and Davis’ three circles model of family business (1982)
Source: Siakas et al., 2014
Additionally, another vital issue within a family firm might be managing the balance and conflicts between the family system and the business system to enhance competitiveness (Siakas et al., 2014). By handling the issue successfully, the outcomes of a firm could therefore increase. As stewardship theory expressed, instead of seeking higher personal earnings and benefits, family members serving in their own firms are willing to considered assets of their families as a priority (Carter & Jones-Evans, ibid). Since a family firm frequently consist a certain amount of family members, people working in the firm can appear more engaged and more motivated to preserve assets and pursue long term achievements (Dyer & Handler, 1994). The high involvement can transfer into a powerful point of superiority. Moreover, family members within the firm may perform indeed well since working with other family members could decrease the stress and pressure of associating with other colleagues. That is, they may be permitted to devote all the efforts on business affairs without distracting by interpersonal relations within the firm.
Still, an early engagement and acknowledge to the business industry, as well as building relationships and reputation in advance, for younger generations within the family will provide a large advantage for the juniors to be competent in the near futures (Dyer & Handler, ibid). For instance, while linking with family form business, one of the affirmative industries will belong to art business, which including art galleries, antiques markets, fashion design, film and television production, publishers, and so on. (Steier et al., 2015). It is argued that, within art industry, in order to create and identify high quality merchandises and deliver them to customers, managers and employees require a background of having enormous volume of basic art-related knowledge (Steier et al., ibid). By having access toward the professional information in an earlier age, the younger generations are lucky to have numerous steps ahead the others to closely being cultivated and possess more opportunities. What’s more, merchandises in art business may sometimes take years to be sold, hence, it will appear significant if the younger generation has the ability to finance production and inventory until the buyer is found (Steier et al., ibid).
On the other hand, it is concerned that family firms are used to make decisions during family mealtimes or family events, which may give non-family managers no sense of participation (Habbershon et al., ibid). Further, once non-family managers start to feel disengaged or disrespected, they might either easily decreasing their motivations and begin to pursue on personal interests only, or becoming a part of agency problem (Carter & Jones-Evans, ibid). Both of the issues could be harmful to the firm, since managers have initiated different objectives as the family owners. Not merely non-family members have possibilities to turn into encumbrances. Family members may become burdens as well.
Another primary characteristic among family businesses is that managers as family members ought to carefully manage the roles between family and business (Siakas et al., ibid). In other saying, a manager as a family member is suggested to avoid allowing emotions regarding to family to affect any professional decision making in the firm. A common situation occurs in most Asia countries shows, while the owner belongs to a family member, in views of favors or expectations, owners may provide positions for people within or related to their families. According to Dyer & Handler (ibid), people who entered the firm without normal regulations are often disqualified or unsuitable for the job. In addition, they might require others to cover their jobs, offer limited contribution to the firm, or other issues could arise (Dyer & Handler, ibid). As a consequence, problems may then presence such as wasting real assets of a firm, dragging and exhausted other hardworking employees, and causing negative influence and ambience within the firm. In sum, under conditions above, it would lead to dozens of drawbacks and become harmful toward the firm.
Family business classification
Depending on a wide variety of factors, family business can be divided into several types. One of the major models to categorize family business was indicated by Westhead and Howorth in year 2007. Westhead and Howorth classified family firms into six types. As figure two exhibited, the model presented variables with whether the firm is leading by family members and either objectives are close to family or financial (Carter & Jones-Evans, ibid). The six types are named average family firms, professional family firms, cousin consortium family firms, professional cousin consortium family firms, transitional family firms, and open family firms.
Figure 2. Types of family firms conceptualized by Westhead and Howorth (2007)
Source: Carter & Jones-Evans (ibid)
Yet, findings according to Carter & Jones-Evans (ibid) illustrated that a family firm is able to reach best performance when the firm is managing by both family members and non-family members, as well as objectives should involve in both family goals and financial goals. On the contrary, a family firm might has poor performance while the firm is running by family members independently, and focusing merely on family objectives (Carter & Jones-Evans, ibid).
Furthermore, a profitable family firm which can be passed on generations has a few idiographic traits. First, it is important for an existing family firm to sustain implementation of innovation, and develop new products and services (Dyer & Handler, ibid). Second, staffs within the firm, including family members and non-family members should always stick united and respect each other. In other words, based on the same level of position at work, non-family members ought to be treated and trusted equally as other family members. For example, non-family members are practically able to participate in each meeting and decision making, and their opinions can nevertheless become considered options whether it is distinctive from other family members. With doing so, non-family members may strengthen their commitments and motivation towards the firm by recognizing themselves as in-group members. After consolidating human resource within the firm, a resource-based view might associate entrepreneurs (Carter & Jones-Evans, ibid). In more details, family businesses generally possess their own resources toward their products or services, and usually have great knowledge with their own business and the related business industry. This gives them the advantages to reduce transaction costs and risk (Carter & Jones-Evans, ibid).
However, Steier et al., (ibid) explained that theories above could only apply to a family firm under the circumstances of ‘one family, one business’. Steier et al., (ibid) pointed out that, family businesses include types as multi-family and multi-business firms as well. Since multi-family and multi-business firms frequently facing unique agency problems, the common theories of family business might not appear comprehensive enough (Steier et al., ibid).
Economy and policy issues toward family business in UK
In UK, the overall performance of family businesses over the past few years has a mean turnover at nearly £900,000, which is approximately £400000 slightly lower than non-family businesses, and more than 40 per cent of family businesses have attempted to innovate or improve their products or services (GOV.UK, ibid). When it came to the proportion of doing businesses overseas in UK, family businesses (17 per cent) are narrowly 5 per cent behind non-family businesses (GOV.UK, ibid). Still, above 70 per cent of employees within family businesses consider their firms profitable (GOV.UK, ibid). Another good news is, over 65 per cent of both family and non-family businesses are willing to be responsible for decreasing the consumption or destruction they made (GOV.UK, ibid).
Furthermore, researches of GOV.UK (ibid) revealed that, practically 80 per cent of people who operating family firms perceive an economy obstruction while managing their businesses, and reasons including regulations, financial issues (taxation, cash flow, obtaining finance), lack of professional or managerial skills, and competitions in the market. Among all, financial issues have viewed the most serious obstacle, especially taxation problem (60 per cent), and after financial issues were regulations and competitions in the market, which both of them were nearly 60 per cent.
Due to the presence hinders for people managing family businesses, UK government established websites, phone lines, and service agents to assist people (GOV.UK, 2014). These supports contain BusinessLink.gov, Business Link helpline, Growth Improvement Service, the GrowthAccelerator and My New Business. The website BusinessLink.gov seems to be the most well-known service among owners. A surprisingly high percentage of people (70 per cent) in family businesses are conscious of the website (GOV.UK, ibid). The second famous government-funded support directs to Business Link helpline, which are known by generally 60 per cent of them (GOV.UK, ibid). Additionally, according to GOV.UK (ibid), the major issue people related to family businesses seeking for assistances or suggestions are accountant and financial problems.
Apart from government-funded services, under considerations of taxation issue, it is recommended that government should advocate tax relief for shifting properties while inheriting (GOV.UK, ibid). Another support government could provide may be having experts impart extra management and mentoring lessons for family businesses.
Conclusion
It is no doubt that family firms have a steady stand to influence the business market. Despite the fact that each family firm is formed in distinctive size and type, one point should always appear to maintain seriously, that is, seeking the balance between business role and family role. Within workplaces, each class of family firm has respective pros and cons, and a variety of issues waiting to be solved. Yet, when people attach their personal emotions to their work places, where people are expected to be professional and impartial, severe consequences may follow. And not only do influences would react to working outcomes and working surroundings, but also could impaction be brought back home and private lives. People begin a business to pursue greater welfare and happiness of life. Once individuals making business affairs part of their personal lives, it is possible to damage the quality of lives and the harmony of families or relatives.
Case study: HMG Paints Ltd
In 2015, a well-known family firm profited over £16.7 million last year had turned into 85 years old in Manchester (Jupp, 2015). HMG Paints Ltd has been established since in October 1930 as a family business, and is inherited to the fourth generation so far (HMG, 2015a). The company was founded by Herbert Falder, and the present chairman is Brian Falder, the grandson of Herbert Falder (HMG, 2015b). The business all started out with only three people working in a small place to pursue their futures, then, nowadays, it has become the largest independent paint manufacturer in UK, which merchandised over 3.5million liters of paint last year (HMG, ibid).
According to Miller et al., (2015), the location of the company is surrounding by numerous paint manufacturing companies. However, HMG succeeds to gain its survival among other companies, including some foreign manufacturers manage using pricing strategy to compete. One of the causes for its achievement is that HMG provides a variety of merchandises through global, contains wet paint, powder coatings and aerosols with diversity colors more than 200,000 to select (HMG, ibid). Moreover, products of HMG paints cover all kinds of industries use, from vehicles and rails to marines and airplanes, from decorative to industrial purpose (HMG, 2015c). HMG paints services all ranges of customers with appropriate choices.
In addition, in order to satisfy every customer coming to HMG Paints, the company offers customized services. Customers could utilize the specialty supports from HMG Paints while having problem matching painting colors, requesting advanced color design, or demanding any other technical assistants. Yet, other superiority will be the outstanding technical support. The company has strong faith in their technical and service team with every reason. From 1930, HMG Paints has been recruiting specialists and experts into their support team in a wide range of areas, which cover not only each product itself but other aspects of delivery and customer service (HMG, 2015d). In fact, innovation and specialty are always two entrepreneurial aims extremely important to be followed in HMG Paints. As Institution for Family Business (2015) reported, in 2011, HMG Paints set up a center dedicated to create fresh water borne coatings technologies. In 2013, another center named The Riverside Training Centre was built to be in charge of various training projects for staffs in HGM Paints (Institution for Family Business, ibid). The goal of those projects is to prepare each staff in every position to appear developing innovation, knowledge, and utilization. The motivation of establishing the two centers might just become another excellent example for what was mentioned earlier in this paper, that is, sustain implementation of innovation, and develop new products and services are the key paths for an existing family firm to maintain profitable and successfully (Dyer & Handler, ibid).