Deck 5: The Family Business

Question 1

In a family business, the family's primary function is to ensure the profitability and survival of the business.

Answer 1

False

Question 2

Some family businesses benefit from effective collaboration among brothers and sisters.

Answer 2

True

Question 3

A family retreat can bring family members closer together as well as strengthen the family business.

Answer 3

True

Question 4

When a parent retires completely and turns the business over to a son or daughter, the business ceases to be a family business.

Question 5

Two major factors involved in grooming a son or daughter to enter the family business are the child's aptitude and the right to choose a career.

Question 6

A family business's special patterns and beliefs comprise the business's organisational culture.

Question 7

One sibling dilemma in a family business has been labelled the predator/parasite conflict.

Question 8

When a senior generation member is planning for succession, planning should encompass family members, employees and the owners.

Question 9

In-laws not working in the family business may have a bad attitude about the company because of only hearing one side of an argument.

Question 10

Family retreats are best handled by an outside facilitator, who can help develop an agenda and establish ground rules for discussion.

Question 11

Husband-wife teams that own a business are popularly referred to as co-preneurs.

Question 12

In the family business, family considerations affect only members of the family.

Question 13

A company run by the great grandchildren of the founder would be considered to be managed by a cousin consortium.

Question 14

The role of the entrepreneur's spouse in family conflicts can sometimes be described as that of a mediator in business relationships between the entrepreneur and the children.

Question 15

A best practice for the family business is to promote family members above other, more skilled employees, so that the workers will understand who is in charge.

Question 16

A responsibility of a junior generation member who desires advancement is to understand that a leadership position in the company is earned and not a given.

Question 17

Even if family members lack the capability to run the business, an entrepreneur should always select a successor from this pool of talent.

Question 18

When hiring non-family employees it is only fair to identify the positions, if any, that are reserved for family members.

Question 19

A family business involving two or more children may experience either sibling cooperation or sibling rivalry.

Question 20

Non-family employees in a family business may be caught in the crossfire between feuding family members.

Question 21

As the only son, Ed's father expected to one day turn over management of the business to him despite Ed's protests that he wanted no part of it.Following graduation from college, Ed realised he did not want his father to let some outsider take over the business.Ed's commitment is based on:

A)family control.
B)identification with the business.
C)binding social ties.
D)emotional attachment.
E) renewal of family bonds.

Question 22

The close relationship of business factors and family concerns in a family business has been described as:

A)separation of domains.
B)a generational gap.
C)an example of blood being thicker than water.
D)overlapping.

Question 23

Bequeathing equal shares of ownership to children in a family business will probably create havoc in the future functioning of the business.

Question 24

In a family business, the interests of the family and the interests of the business are best described as:

A)overlapping.
B)conflicting.
C)coinciding.
D)having no relationship with each other.

Question 25

Steve, Harry and Chris, who own and operate a family auto parts store, are experiencing tough times during a downturn in the local economy.To help the store survive these conditions, the brothers agree to each take a 25 per cent reduction in salary for a one-year period.This decision:

A)demonstrates a weakness of financial management.
B)illustrates an important advantage of a family business.
C)reveals a lack of customer orientation in a family business.
D)reflects a lessening of entrepreneurial ambition in second-generation businesses.

Question 26

When considering the long-term health of a company during the transfer of ownership, tax advantages should be the primary concern.

Question 27

Kinder's Deli has been in business for three generations.A place was found for every Kinder child to work in the shop.The name Kinder meant fine deli meats.This family's commitment is based on:

A)family control.
B)identification with the business.
C)binding social ties.
D)emotional attachment.
E) renewal of family bonds.

Question 28

A benefit of strong family relationships is the greater willingness of family members to:

A)adopt new operating methods when needed.
B)act generously in compensating non-family employees.
C)sacrifice salaries and dividends when necessary.
D)emphasise short-run profits.

Question 29

A founder's core values may become part of the family business culture because:

A)the founder typically knows what is best for the company's culture.
B)others in the business absorb traditions and values established by the founder.
C)the values coincide with modern management theory.
D)family members follow family traditions without excessive analysis.

Question 30

Living over the workshop made it easy to involve the children in the daily business decisions.They knew from the time they could write they were expected to work in and eventually manage and own the business.This family's commitment to the business is based on:

A)family control and influence.
B)identification with the business.
C)binding social ties.
D)renewal of family bonds to the business through dynastic succession.

Question 31

A critical part of a family business transfer from one generation to the next is to discuss decisions with potential heirs as well as family members working in the company.

Question 32

________, the act of employing relatives, is often associated with favouritism.​

Question 33

The family endured great hardships together in the old country but vowed they would always watch out for each other in South Africa.Together they built a thriving business; it was the Muellers against the world.This family's commitment is based on:

A)family control.
B)identification of family members with the business.
C)binding social ties.
D)renewal of family bonds through dynastic succession.

Question 34

John and his brother Jack started a produce farm 20 years ago and are thinking about retirement.Over time, their children have worked at the farm and so the cousins have started talking about taking over management.At present, this produce farm is an example of ____.

A)co-preneur managed business
B)cousin consortium
C)owner-managed business
D)sibling partnership

Question 35

Mayer's philosophy of never using debt to finance operations or expansion was born during the Great Depression and passed on to his sons when they joined the family business.Today the multi-million dollar organisation proudly follows Mayer's practice under the leadership of Mayer's great-grandsons and -daughters.This family's commitment is based on:

A)family control and influence.
B)identification of family members with the business.
C)binding social ties.
D)emotional attachment of family members.

Question 36

Chip and Dale are brothers who have taken over their father's business.This type of family business is known as:

A)a sibling partnership.
B)a franchise.
C)a cousin consortium.
D)an owner-managed business.

Question 37

Bret first opened his hardware store in 1946.His sons took over when Bret retired, and now Bret's grandchildren run the store.This type of family business is known as:

A)a sibling partnership.
B)a franchise.
C)a cousin consortium.
D)an owner-managed business.

Question 38

Allan opened a hot dog stand in Cape Town CBD.He owns it and operates it six days a week, year round.What kind of business is this?

A)A sibling partnership
B)A franchise
C)A cousin consortium
D)An owner-managed business

Question 39

An inherent problem for couples involved in a family business is that:

A)conflicts in the business tend to carry over into family life.
B)hours of work may become longer for one person.
C)uneven division of labour, that is one person is only responsible for the menial tasks.
D)some husbands find their masculinity threatened when their wives are better managers.

Question 40

Jane and Joe are experiencing a strain with their family relationship after running their family business for five years.Which issue might be the most likely underlying cause of the tension?

A)Jane is the CEO while her husband is the CPA.
B)Joe started the business but has stepped down from the CEO position.
C)Jane and Joe's roles have not been carefully defined as the business has grown.
D)Their difference of opinions about a business matter is spilling over into their family time.

Question 41

To avoid a stifling atmosphere for non-family employees in a family business, the owner should:

A)promote only non-family members.
B)avoid all special consideration for family members.
C)make clear the extent of opportunity for non-family members.
D)minimise discussion about future management changes.

Question 42

While recent surveys show that a majority of owners of family-owned businesses want to keep the business in the family, owners think their main obstacle to doing so is their family's desire to run the business.

Question 43

"The more you can do, the more is expected of you." Josh already had his hands full managing just one of his father's retail stores.He didn't doubt his ability to do well managing an entire region but still he was reluctant to accept the assignment.He is likely afraid of:

A)failure.
B)success.
C)commitment.
D)disappointing his parents.

Question 44

Betsy had always had decisions made for her, first by her parents and then by her husband.So when her father asked her to take over the family business, she was afraid of:

A)failure.
B)success.
C)commitment.
D)disappointing outsiders.

Question 45

After college graduation, Terrence was expected to begin working in the family business but instead he continued to lead the playboy life, always postponing his decision about working for his father.Terrence probably has a fear of:

A)failure.
B)success.
C)commitment.
D)disappointing others.

Question 46

Sibling rivalry in a family business:

A)rarely affects non-family members in the business.
B)may create disagreements about business policy.
C)is unusual if roles are determined before the siblings join the business.
D)is often good because it spurs business competition within the organisation.

Question 47

A common problem for a founder in passing the business on to a daughter or son is:

A)introducing the child to outsiders such as bankers.
B)finding a suitable position for the son or daughter within the business.
C)arranging the transition from part-time to full-time employment.
D)deciding whether the child has the necessary temperament and ability.

Question 48

From the children's standpoint, one common reason that they may be reluctant to join the family business is a desire to:

A)make a difference in another industry.
B)prove their abilities without family assistance.
C)make a higher rate of pay.
D)help the parent avoid favouritism.

Question 49

To protect the interests of both the family and the business in a family business, the owner should:

A)recognise a basic obligation to supply the family with employment of some type.
B)refuse to hire family members but, instead, reward them with generous dividends.
C)personally make all personnel decisions affecting family members.
D)identify the positions, if any, that are reserved for members of the family.

Question 50

As the spouse of the founder of Stonyfield Farm, Meg Cadoux Hirshberg serves the family business in a typical but critical role of

A)making impartial decisions on controversial business matters when her husband, Greg, asks.
B)filling the role of a company director so as to provide balance in family matters.
C)mediating family disputes.
D)supporting Greg through the many hours the business requires.

Question 51

One of the most frequent and stressful roles performed by the spouse who is not active in the business is to:

A)serve as the mediator between the entrepreneur and the children.
B)be a good listener.
C)mandate they are given a copy of the books each month.
D)All of the above are activities of the non-active spouse.

Question 52

A document that states the principles intended to guide a family business through times of crisis and change, including the succession process, is called the:

A)business plan
B)articles of incorporation
C)family business constitution
D)corporate by-laws

Question 53

Fran and Bob (who are married) own and manage a cleaning service.A potential advantage of this arrangement is that:

A)differences of opinion about the business won't carry over into family lives since they will see each other more hours daily.
B)it affords the opportunity to share more of their lives and build something together.
C)the business isn't likely to dissipate their energies as they can each work on separate sections.
D)they can count on working fewer hours in the business.

Question 54

In considering the role of younger family members, the best philosophy is to recognise that:

A)a child should have a right to a job in the business if he or she desires.
B)no family member should be hired at any level.
C)children should have a right to choose their own careers.
D)sibling rivalry will always be an issue with second-generation managers.

Question 55

Brandon always came in second - in birth order, in school and sports and in his father's heart.When his older brother decided not to take over the family business as expected, Brandon was paralysed with fear.This paralysis was likely based on:

A)fear of failure.
B)fear of success.
C)fear of commitment.
D)fear of disappointing his friends.

Question 56

Liam's mentor had worked with him for several months to prepare him for the promotion.Now that the offer has been made, Liam is hesitant.His hesitation is likely based on:

A)fear of failure.
B)fear of success.
C)fear of commitment.
D)fear of disappointing his mentor.

Question 57

Bob and his sister Betty are co-owners of their late parents' business.Bob actively manages the business; Betty supplies only capital from her inheritance but does not work in the business.They squabble over the distribution of profits from the business.Bob likely sees his sister as a ___________ while Betty views her brother as a _____________.

A)predator, parasite
B)co-owner, employee
C)parasite, predator
D)shareholder, manager

Question 58

An issue that may become a problem for a couples-owned business is:

A)deciding who is boss.
B)managing child care.
C)spending too much time together.
D)establishing company goals.

Question 59

Which statement is the most correct about in-laws and possible complications in a family business?

A)Rarely do in-laws impact the business since they are only indirectly involved and have limited decision making responsibilities if at all.
B)In-laws may impact the business if they are employed in the business and are responsible for decision making.
C)There will be a complication only when in-laws are competing against another family member for a promotion.
D)In-laws will impact the business as they increase the number of persons who are either directly or indirectly involved in the family business.

Question 60

The recruiter from IBM made William an offer almost too good to be true.The problem was William's dad, who always expected William to join him in running the family business.William's difficulty in accepting either offer may be based on the fear of:

A)failure.
B)success.
C)commitment.
D)disappointing his father.

Question 61

A family business constitution is sometimes labelled a _____.

A)business plan
B)by-law guide
C)family creed
D)succession plan

Question 62

Senior management will be more receptive to the junior generation advancing if the junior generation:

A)decides what time is best for their personal lives.
B)prepares for ownership by concentrating on learning "big" picture skills as opposed to basic management skills.
C)designs life plans for themselves and the business that involves what happens if the business fails.
D)proactively shares their preparation for advancement and asks for advice for implementation.

Question 63

Patricia, a non-family employee of a family business, is concerned about competing with family members for future career opportunities.To protect her personal interests, she should:

A)align herself with the CEO to hopefully know when new positions will become open.
B)ask that the owner/manager clarify the extent of opportunities considering her skill set.
C)seek assurances that she will receive first consideration for promotion, ahead of family members who are not as qualified.
D)be realistic enough to leave the business and seek employment in a non-family business.

Question 64

Explain the role of the entrepreneur's spouse as it affects a family business and show how it can be made most effective if the spouse does not have an active part of daily operations.

Question 65

Jim, the founder of a family business specialising in real estate, is contemplating turning the business over to his five children.One possibility, the founder believes, is to divide ownership equally among the children.This action would:

A)be next to impossible as gaining consensus from that many people is difficult.
B)be inherently unfair if any of the children work in the company.
C)potentially hinder the future functioning of the business.
D)require a possible change in corporate structure since the company deals in real estate.

Question 66

Explain the concept of family and business overlap in a family business.

Question 67

A non-family employee of a family business complains that the recent promotion of a family member was unfair.The owner should:

A)enter into a discussion of the roles and opportunities for both family members and outsiders.
B)clarify that family members always have the inside track, even though this fact is disappointing to the bypassed employee.
C)get the employee to think more positively by describing other attractive features of the employee's job.
D)acknowledge that a tension always exists and that it can never be dealt with satisfactorily.

Question 68

In preparing for succession, the senior generation has certain responsibilities.One of these is that:

A)the estate of the senior generation should be settled and audited.
B)the senior generation should hold the next generation accountable for their actions.
C)the business should have a formal audit of the financial statements.
D)the next generation should develop long-term plans for leadership and be held to these plans.

Question 69

Jan and Jill started a business 20 years ago.Jill recently stepped down; her daughter Jenny has agreed to start managing the company with Jan's help; and the eventual goal is for Jenny to run the entire company.This process between Jan and Jenny is called ____.

A)sibling partnership
B)family consortium
C)mentoring
D)Two of the above are true.

Question 70

Which statement is true concerning using available family talent in the succession plan?

A)Younger family members working in the business should realise that mistakes early on in their careers should be considered in their future advancement.
B)If the available talent is not sufficient inside the company, the owner must bring in outside leadership even if it is not perceived as a favourable decision by the family at large.
C)If a younger family member would like to advance their career by working on a new direction for the company, a negative decision by their parent means they should not discuss their ideas with the board of directors.
D)It is rare a younger member will have the skill set to rescue a struggling company; therefore they should not be considered for a succession plan.

Question 71

A family retreat is designed to:

A)bring family members together to openly discuss business matters.
B)focus on business matters while avoiding extensive communication.
C)control the lines of communication.
D)announce the latest policy decisions and other changes in the business.

Question 72

What could a founder do to make a succession plan successful? Using the Three-Circle Model of Family Businesses, identify issues the founder should discuss with each group.

Question 73

What step is best for parents to decrease succession conflict among children active in the business and those who are not?

A)Letting those not involved in the company have a larger portion of an inheritance outside of the company and allow those involved in daily operations have more ownership of the business.
B)Letting the next generation reach a consensus about management of the company.
C)Changing the ownership of the company so common (voting) shares is only given to those active in the company and others receive preferred (non-voting) shares.
D)Making decisions based on tax considerations, not what is best for the next generation or business.

Question 74

A family council is most effective when:

A)it is viewed as another type of casual get-together.
B)it works behind the scenes to maintain harmony between family and non-family employees.
C)it comprises both family and non-family members.
D)it provides governance to the organisation and engages in strategic planning and family succession planning.

Question 75

Betty decided to hire a non-family member as her successor instead of selecting one of her children.What might explain her decision?

A)Bety didn't think her children wanted the job.
B)Bety wanted to bring in new skills and expertise.
C)Bety's children could never agree on anything.
D)The competition had stepped up its game.

Question 76

A parent might attempt to resolve a transfer of ownership by giving active children in the business's management _____ stock and giving non-active children _____ stock.

A)preferred, common
B)growth, speculative
C)common, preferred
D)more, less

Question 77

The socio-emotional commitment of family members to a business occurs along five dimensions.What is the acronym for these dimensions and what do the letters in the acronym stand for?

Question 78

Family retreats, which open lines of communication:

A)use the founding entrepreneur as a communication facilitator.
B)avoid discussing sensitive issues for best results.
C)involve family members but not in-laws.
D)may result in formation of a family council to continue discussion.