Session 2: What makes FB different and unique?

Question 1

What 3 parts are there in the three circle model? By Davis & Taguiri

Answer 1

Family, Business & Owners

Question 2

Name the 5 uniqueness aspects of a family firm!

Answer 2

1. Governance structure
2. Human capital
3. Patient capital
4. Social capital
5. Survivability capital

Question 3

What is human capital?

Answer 3

Acquired knowledge, skills and capabilities of a person

Question 4

What is social capital?

Answer 4

Resources embedded in network, accessed through relationships

Question 5

Patient Financial Capital

Answer 5

Invested financial capital without threat of liquidation

Generational outlook; not accountable to strict short-term results; effective management of capital, allows pursuit of creative and innovative strategies

Question 6

Survivability capital

Answer 6

Pooled personal resources family members, loan, contribute, and share with business.

Helps sustain the business during poor economic times or redevelopment of the business - safety net

Question 7

Governance Structure & Costs

Answer 7

Costs associated with control of firm; examples include incentives, monitoring and control

Family owned and operated firms’ structures, trust and family bonds reduce governance costs.

Question 8

There are a few governance mechanisms in family business, name the ones in Business

Answer 8

1. Board of Directors

2. CEO and management

Question 9

There are a few governance mechanisms in family business, name the ones in Family (3 c 1 m)

Answer 9

1. Family council
2. Family meeting
3. Family commitees
4. Family constitution

Question 10

There are a few governance mechanisms in family business, name the ones in Ownership

Answer 10

1. Shareholder’s meeting
2. Family foundation
3. Family office

Question 11

Explain emotional dynamics in a FB!

Answer 11

FB are emotional arenas

• characterized by hybrid identities
• psychological ownership = “strong feelings of being “one” with the business”
• high expectations among family members

Question 12

Explain Hybrid identities

Answer 12

When loyalty to the family clashes with the loyalty to the firm. For example when a female business owner identifies herself as a mother, a board member and an owner and sometimes these identities may seem incompatible.

–> May lead to identity clashed and role conflicts with emotional off-prints

Question 13

Explain psychological contract

Answer 13

The underlying assumption of this is that one individual assumes that both parties will fulfill certain expectations. If mutual expectations are not met, a breach of violation of the psychological contract occurs

• -> feelings of anger, frustration and disappointment –> feelings of violation
• -> mistrust or disloyalty, skepticism, cynicism or hostility towards a person or the organization

Question 14

Explain emotional messiness

Answer 14

The result of a family member’s contradictory emotions related to an emotionally charged situation or issue involving his/her own and others multiple hybrid identities, psychological contract and ownership.

Positive: desire, gratitude, joy, pride and happiness
Negative: shame, fear, sadness, frustration, guilt