Deepening family businesses

Family businesses are characterized by a constant interconnection between the family system, the ownership system and the management system (Tagiuri – Davis).

Below are the possible combinations of the 3 systems and the actors involved.

 

Family Business Systems

  1. Family members not involved in the business
  2. Shareholders of the business who do not belong to the family
  3. Employees who do not belong to the family
  4. Family members who have an ownership stake in the business
  5. Family members who work in the business but who do not have ownership shares
  6. Shareholders of the business who are not family members but who work in the business
  7. Family members, with ownership shares, who work in the company

Types of family businesses

 

Ownership model

Presence of the family in the Board of Directors and management bodies    

Size of the personal body

Domestic family businesses        

One person or a small number of persons

Board and management only family members    

Small

Traditional family businesses        

One person or a small number of people

Family-only board, family and non-family management

Small

Medium/large

Extended family businesses

A wider range of stakeholders

Board and management composed of family members and non-family members

Medium

Large

Open family businesses

Family and non-family members

Board and management composed of family members and non-family members

Medium

Large

 

Figure: typology of family firms according to Corbetta’s model (1995).

 

Main critical issues of a family business

  1. The tendency for the logic of family business to prevail over business first.
  2. Hostility to opening up to outsiders.
  3. The possibility of disputes and family tensions, with repercussions for the company.
  4. Undefined organizational structure: unclear definition of tasks
  5. resistance to change
  6. indulgence of family members: unequal reward system, not able to fill management roles

 

Lattanzi N., Family business and competitive scenarios.