Deck 3: Family Businesses

Question 1

Who to hire may well be the biggest management challenge that a family business owner faces.

Answer 1

True

Question 2

There is no agreed-upon definition of a family business.

Answer 2

True

Question 3

One of the disadvantages of a family business is that there are times when the interests of a family member may conflict with the interests of the business.

Answer 3

True

Question 4

Short-term stability is one of the advantages of hiring family members.

Question 5

Family businesses are less professional and rigorous in their behavior because of the relational nature of the business.

Question 6

Most data sources distinguish between small family businesses, such as the local pizza parlor, and large family businesses, such as Walmart and Ford.

Question 7

Family businesses feel they are stronger because family members are involved in their activities.

Question 8

A major problem with family businesses is that they seldom take a very long-term point of view.

Question 9

Family businesses face many challenges. Among them is the overlap of family and business issues.

Question 10

If good communication channels are not in place, one family member may end up dominating the business.

Question 11

The consensus is that a line does not need to be drawn between family and business discussions. Business can be discussed anywhere at any time.

Question 12

Family businesses have no difficulty attracting and keeping highly qualified managers.

Question 13

Family business owners have the same roles as the shareholders.

Question 14

Family businesses have problems with adapting easily to increasing competitiveness and technological progress.

Question 15

Family businesses exist along a continuum from small businesses to large corporations.

Question 16

Because of the relational nature of family businesses, communication tends not to be a problem.

Question 17

An important disadvantage of hiring family members is that a dispute among family members can spill from home into the workplace.

Question 18

Family members are not usually the first people hired when the business gets started.

Question 19

The image of being a family business offers a marketing advantage.

Question 20

Family businesses tend to operate more ethically.

Question 21

The core topics of management education-i.e., organizational behavior, strategy, finance, marketing, production, and accounting-are taught without differentiating between family and nonfamily businesses.

Question 22

In the worst case of family squabbling, disagreements over business can lead to lawsuits.

Question 23

The salaries of sons and daughters in family businesses tend to be pretty much the same.

Question 24

The cash flow of a family business is not affected by the compensation given to family members.

Question 25

Rivalries that spill into the workplace can lead to destructive behaviors.

Question 26

Family squabbling can lead to an uncomfortable and awkward atmosphere that can cost you employees and customers.

Question 27

Culture competence refers to an understanding of the different cultures of your customers.

Question 28

If the budget can handle, hiring a consultant in conflict resolution could be the best choice for dealing with conflict.

Question 29

The fundamental psychological conflict in family businesses is guilt.

Question 30

One of the more difficult challenges that a family business must face is determining employment qualifications for employees, both family and nonfamily.

Question 31

The typical understanding of conflict in family businesses is that conflict refers to both negative and positive conflict.

Question 32

An example of positive conflict in a family business is a disagreement between family members on the strategic direction of the family business.

Question 33

The potential for negative conflict in a family business is the same as for other types of businesses.

Question 34

Nonfamily members may feel that they will be automatically outvoted in decision-making.

Question 35

An example of negative conflict in a family business would be arguments over who will be the successor to the business.

Question 36

The long-term source of value for the customers of family businesses may rest with the belief that the businesses are customer-focused.

Question 37

Succession is about passing the business to the next generation.

Question 38

Emotional reactions to conflict are the same as problem-solving reactions.

Question 39

Family businesses find it relatively to accept a nonfamily member in management.

Question 40

A well-intentioned and well-designed compensation plan will eliminate jealousies, feelings, severed sibling relationships, and even lawsuits.

Question 41

Experts say that communication is one of the most difficult parts of running a family business. The approach to communication needs to include:

A) Commitment
B) Avoidance of secrecy
C) Always hiring an HR consultant
D) An understanding of the risks of bad communication
E) All of the above

Question 42

Employees in family businesses know the difference that family control makes in:

A) Acceptance of the business by the community
B) The company culture
C) Stakeholder values
D) State requirements for setting up the business
E) Roles of the stakeholders

Question 43

For most people, the two most important things in their lives are:

A) Family and work
B) Family and leisure
C) Family and food
D) Money and leisure
E) Family and money

Question 44

Family businesses can adapt to market fluctuations more easily because:

A) They are more likely to be technologically current.
B) The relational nature of the business makes things run more smoothly.
C) The shareholders can help out.
D) They can afford to be patient.
E) The decision-making is centralized.

Question 45

In general, family businesses feel that they are stronger because:

A) It is easier to sell stock in the company once the decision is made to go public.
B) There is a work option open to shareholders that is not available in other businesses.
C) Family businesses are more efficient than other kinds of businesses.
D) Family business owners believe that their family members can be trusted, will work harder and care more.
E) Family businesses are exempt from many federal and state regulations.

Question 46

Family businesses tend to be more resilient in times because:

A) They have less pressure from the stock market.
B) Family members get less pay than everyone else.
C) They have centralized decision-making.
D) They are willing to plow profits back into the business.
E) They have fewer employees.

Question 47

Which of the following is NOT a disadvantage of family businesses?

A) Family members will frequently be expected to work harder.
B) Family members often get paid less than other employees.
C) Family businesses may be more open to flexible or part-time schedules or choosing your hours.
D) Someone from the family may be promoted even if they don't have adequate skills for the job.
E) Relationships between parents and children or among siblings have a tendency to deteriorate due to communication problems.

Question 48

Family businesses have limited sources of external capital because:

A) They tend to avoid sharing equity with nonfamily members.
B) Most family businesses offer products or services that are generally not of interest to venture capitalists.
C) Family businesses have too high a percentage of employees that are family members.
D) The legal requirements for investment in family businesses are excessive.
E) The amount of money requested is too small for investors.

Question 49

As attractive as family businesses are on many fronts, they also have disadvantages. These include:

A) They are generally not attractive to investors.
B) They tend to be unstable organizations.
C) Family closeness can lead to disruptive sibling rivalry.
D) The interests of a family member can conflict with the interests of the business.
E) Both (c) and (d).

Question 50

The culture of a family business is very different from that of a Wall Street company because:

A) Family businesses frequently take a very long-term point of view.
B) Family businesses will make investments that they don't expect to pay off for many years.
C) The culture is more frequently based on very personal and emotional values.
D) There are deeper roots.
E) All of the above.

Question 51

Family businesses, in general, have greater independence of action because:

A) They are less regulated by the state and federal governments.
B) They are easily able to attract top tier managers.
C) The chain of command is clear to everyone.
D) They have less (or no) pressure from the stock market.
E) They have much less competition than other forms of small business.

Question 52

The nepotism in family businesses can ultimately result in business failure. Why?

A) The business is less desirable to investors.
B) Inequitable reward systems
C) Tolerance of inept family members as managers
D) Both (b) and (c)
E) All of the above.

Question 53

The agreed-upon definition of a family business is:

A) Any business that is more than 50% owned by members of one family.
B) Any business that is actively managed by more than one generation of one family.
C) There is no agreed-upon definition of a family business.
D) Any business that has been managed by the same family for at least five years.
E) Both (a) and (b).

Question 54

Family businesses tend to operate more ethically. This is due to:

A) The absence of a cumbersome organizational structure
B) Ethical problems being quickly visible since the business is a member of the local community
C) Shorter supply chains that offer less opportunity for corruption
D) Smaller number of employees
E) Both (b) and (c)

Question 55

Some family businesses may have difficulty attracting and keeping highly qualified managers. Why is that?

A) Family businesses have a pattern of discriminating against women.
B) There is limited potential for professional growth.
C) There aren't many positions available.
D) Decision-making tends to be too haphazard.
E) There tends to be little commitment to business planning.

Question 56

Why are family businesses often seen as ideal?

A) Family members tend to exhibit more dedication to their common goals.
B) There is less conflict.
C) Most family businesses experience a smooth transition to the next generation.
D) Family businesses are of greater interest to people who want to buy stock.
E) Shareholders can participate in the operations of the business if they want to.

Question 57

Family businesses exhibit more social responsibility than their competitors because:

A) It is easier to participate when you are geographically located in the community.
B) Local social responsibility activities are not usually very costly.
C) They are very concerned about their image and reputation.
D) The absence of a complicated decision-making process makes participation easier.
E) The competition does not see much benefit to community activities.

Question 58

Which of the following is an advantage of family businesses?

A) They frequently have entrepreneurial spirit, flexibility, and opportunism.
B) They are easily passed from one generation to the next.
C) They frequently outperform public companies.
D) All of the above.
E) Both (a) and (c).

Question 59

What accounts for the economic power of family businesses?

A) They account for 78% of the new jobs created.
B) They account for 60% of US employment.
C) They account for 50% of the gross domestic product.
D) They represent one of the fasted growing sectors of the economy because their new job requirements outpace their current employment rates compared to other businesses.
E) All of the above.

Question 60

One of the main reasons that is given for the low percentage of family businesses that are passed down successfully to the third generation is that technological change moves so quickly that it bypasses the older generation.

Question 61

A family member's compensation should be based on:

A) Family values
B) Fair market value
C) Fair market value plus 10%
D) Family member's housing and family needs
E) A percentage of overall sales

Question 62

Which of the following is an advantage of hiring nonfamily members:

A) Increase the sources of investment capital in the case of hiring a professional manager
B) Increase the chances for business success
C) Increase the chances that the business will go public
D) Can offer stability by offering a fair and impartial perspective on business issues
E) Both (b) and (d)

Question 63

Which of the following is NOT a source of customer value for the family business?

A) Quality
B) The business is seen as wholesome, with continuity
C) High priority that is placed on community involvement
D) The belief that family businesses are customer-focused
E) The belief that family businesses have much better hiring practices.

Question 64

Which of these factors does NOT work against succession planning?

A) The founder is reluctant to let go of power and control
B) Norms against favored siblings
C) Fear of change
D) Industry trends
E) Cultural values in the business

Question 65

In developing a compensation plan, what is the most pressing issue?

A) Accurate job descriptions
B) Research of the industry as the basis for compensation levels
C) Considering family members differently than nonfamily members
D) Fairness
E) Seeing fairness and equality as the same

Question 66

Which of the following is(are) true of family businesses and technology?
a. Technological change moves so quickly that it bypasses the older generation.
b. The commitment of a family business to digital technology will be a precursor to the integration of e-business solutions.
c. The commitment to e-commerce should be seen as a necessary response to the Internet.
d. Family businesses will have different technology needs depending on size, industry, and growth objectives.
e. All of the above are true.

Question 67

Passing the business to the next generation is known as ____.

Question 68

Why are compensation and benefits among the most frequent sources of conflict (as identified in the chapter), especially among members of the younger generation?

A) Compensation is inextricably linked to someone's feelings of importance and self-worth
B) There are emotions associated with being a member of the family that owns the business.
C) The younger generation only cares about money.
D) Both (a) and (c)
E) Both (a) and (b)

Question 69

Rivalry in a family business can occur between all of the following parties except:

A) The current head of the business and competing venture capitalists
B) Father and son
C) Husband and wife
D) Father and daughter
E) In-laws and members of the family that own the business

Question 70

If good communication channels are not in place, which of the following can occur:

A) Family members assume they know what other family members feel or want
B) Personal ties inhibit honest opinions being expressed
C) Personal resentments become business resentments and vice versa
D) One family member ends up dominating the business
E) All of the above

Question 71

Which of the following is NOT an advantage of hiring family members:

A) Improved customer relations through family contact
B) Short-term stability
C) Intergenerational continuity
D) Shared values
E) Both (a) and (b)

Question 72

Which of the following is NOT a negative effect of family squabbling?

A) Unprofessional image
B) Discrimination
C) The person who wins the fight gets to create the strategy
D) Uncomfortable environment
E) Legal troubles

Question 73

Which of the following should be done when developing a compensation plan for a family business?

A) Make sure that family values set the tone.
B) Consider fair compensation to be equal compensation for all family members
C) Make sure to compensate wives for the work they do
D) Compensate family members at a higher rate than nonfamily members
E) Include emotional pressures as a decision making factor

Question 74

Which of the following is NOT true?

A) A family business is more likely to be successful if it employs only family members.
B) Nonfamily members may feel that they will be automatically outvoted in decision-making.
C) Sibling rivalry may create problems in the business.
D) A line does not need to be drawn between work and family discussions.
E) Family and nonfamily members should have an equal opportunity to express their views.

Question 75

Family businesses account for ____ of the gross domestic product (GDP).

Question 76

Which of the following was NOT identified as a source of conflict in a family business?

A) Rivalry
B) Differing vision
C) Jealousy
D) Succession
E) All of the above can cause conflict

Question 77

Each of the following is likely to create tension in a family business except:

A) Discussion about the future strategy of the business
B) Decisions about who can and cannot work in the business
C) The setting of remuneration levels for family members actively involved in the business
D) Decisions about the role of shareholders in the business
E) Performance of family members actively involved in the business

Question 78

Which of the following is NOT true?

A) Cultural competence is important when hiring an outside manager.
B) Professional managers are not always prepared to deal with the special nature of family-owned businesses
C) Nonfamily members are typically not offered stock opportunities if and when the company goes public.
D) The absence of an employment policy can result in the business ending up with more employees than it needs.
E) There are no rules that dictate the content of a family business employment policy.

Question 79

Which of the following is NOT a disadvantage of hiring family members?

A) A dispute among family members can spill from home into the workplace.
B) It may not be possible to separate family and work
C) Short-term stability
D) Communication may break down
E) There is always the possibility of managerial incompetence

Question 80

What percentage of all family businesses makes the transition to the second generation?

A) 50
B) 25
C) 33
D) 15
E) 40