Deck 5: The Family Business

Question 1

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

Answer 1

True

Question 2

A major weakness of a family business is that it has greater difficulty than a nonfamily business in focusing on long-run decision making.

Answer 2

False

Question 3

Research shows that next-generation family members motivated by a need-based commitment instead of a desire-based commitment are the most likely to pursue long-term careers with the family business.

Answer 3

False

Question 4

A family firm's special patterns and beliefs comprise the firm's organizational culture.

Question 5

Though the distinctive values that motivate and guide an entrepreneur in the founding of a firm are important, these cannot serve as a foundation for competitive advantage in the firm.

Question 6

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

Question 7

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

Question 8

An advantage of a family business is that because key employees are related and trust one another, a firm can spend less on systems designed to reduce theft and to monitor employees' work habits.

Question 9

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

Question 10

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

Question 11

Family members with an obligation-based commitment may see their participation in the family business as a birthright that provides great job security.

Question 12

A 2007 survey of family business owners conducted by Mass Mutual Financial Group, Kennesaw State University and the Family Firm Institute concluded that the overlap between individual and organizational values may result in increased levels of employee loyalty, commitment and organizational citizenship behavior.

Question 13

Family members with a desire-based commitment in the family firm are the least likely to work hard because of their lack of passion for the business.

Question 14

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

Question 15

The Empyrean Management Group example cited in the text provides an excellent model for how families and their in-laws can work harmoniously, growing a company and a family together.

Question 16

Grateter's Ice Cream is managed by what is labeled a cousin consortium.

Question 17

One weakness of a family business is the tendency of family members to leave quickly when the business "falls on hard times."

Question 18

Many publicly traded companies have policies against nepotism - the hiring of family members. Wise family business owners would be wise to adopt the same policy.

Question 19

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

Question 20

One advantage of a family business is that there is no need to separate the business interests from the family interests.

Question 21

In the U.S., family businesses are estimated to represent what percentage of all enterprises?

A) 50-60%
B) 60-70%
C) 70-80%
D) 80-90%

Question 22

One of the "best practices" for the family firm is to promote family members above other, more skilled employees, so that the workers will understand who is really in charge.

Question 23

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

Question 24

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

Question 25

The process of preparing a successor for leadership in a family business can take more than a decade.

Question 26

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

Question 27

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

Question 28

A family retreat is the start of a process of connecting family members.

Question 29

In the declaration of succession stage the son or daughter is named president/general manager of the business and the parent is completely out of the decision making process.

Question 30

Which of the following is not an advantage of a family-owned business?

A) shared social networks
B) focus on the long-run
C) an objective business perspective
D) reduced cost of control

Question 31

The following are characteristics of the family except

A) competition is valued
B) a unit that balances relationships
C) perpetuates traditions
D) is characterized by unity

Question 32

In Stage IV of leadership succession, the functional stage, the successor enters full-time employment.

Question 33

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

Question 34

Family owned businesses are almost exclusively small businesses and represent less than five percent of the S&P's 500 Index firms in the United States.

Question 35

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 36

In Stage I of leadership succession, the pre-business stage, the child begins part-time work in the business.

Question 37

The process of preparing a family member to take over a family business typically takes about one year.

Question 38

In Stage II of leadership succession, the introductory stage, the successor becomes acquainted with the family business by playing on the business's premises or around its equipment.

Question 39

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

Question 40

Bequeathing equal amounts of ownership to all heirs, including those outside the business, is obviously the fairest and probably the most efficient way to perpetuate a family firm.

Question 41

A family member who believes that joining the business may be the best way to benefit from what the family firm has to offer is revealing a _____ - based commitment.

A) desire-based
B) obligation-based
C) cost-based
D) need-based

Question 42

People with higher levels of desire- and _____ based commitment are more likely to support efforts to promote change, which is common in small businesses and very important to their performance and survival.

A) need-based
B) obligation-based
C) cost-based
D) strategy-based

Question 43

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 become longer for the wife than for the husband.
C) wives get the menial tasks to perform.
D) husbands find their masculinity threatened.

Question 44

In a 2007 study conducted by MassMutual Financial Group ___ percent of respondents said family members share the same values.

A) 87%
B) 73%
C) 48%
D) 65%

Question 45

The spouse of the head of a family business may serve the family firm by

A) making impartial decisions on controversial business matters.
B) filling the role of a company director.
C) mediating family disputes.
D) staying out of the business.

Question 46

Family members who join the business because of a concern that they might not be able to reach career success on their own display a _____ - based commitment.

A) desire-based
B) obligation-based
C) need-based
D) cost-based

Question 47

A primary benefit deriving from the strength of family relationships is the willingness of family members to

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

Question 48

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 49

_____based commitment may motivate a person to go "beyond the call of duty" to protect or extend his/her financial interests in the company.

A) need-based
B) obligation-based
C) cost-based
D) strategy-based

Question 50

In considering the role of younger family members, the best philosophy is to recognize 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 prove themselves.
D) second-generation managers are doomed to failure.

Question 51

A family member who feels he/she ought to pursue a career in the family business is expressing a _____ - based commitment.

A) desire-based
B) obligation-based
C) cost-based
D) need-based

Question 52

In-laws create complications in a family business

A) rarely, since they only married into the family.
B) only if they are employed in the firm.
C) only if they are directly competing against another family member for a promotion.
D) because the more family members become involved in the firm (even indirectly), the more difficult the fairness issue becomes.

Question 53

Sibling rivalry in a family business

A) rarely affects nonfamily members in the firm.
B) may create disagreements about business policy or about siblings' roles within the business.
C) is unusual since only one child will normally be employed in a family business.
D) is often good because it spurs healthy business competition.

Question 54

From the children's standpoint, one common reason that they may be reluctant to join the family firm is

A) teenage rebellion.
B) a desire to prove their abilities in another company.
C) a desire to make a higher rate of pay.
D) a desire to help the parent avoid favoritism.

Question 55

While running a family business, a couple is experiencing a strain on family relationships. Which of the following might be the most likely cause of the tension?

A) The wife holds the top position in the firm.
B) The husband started the business.
C) The roles of both parties are carefully defined.
D) They have a difference of opinion about a business matter.

Question 56

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 57

Those with a _____based commitment, a deep-seated sense of identity with the enterprise, are the most likely to work hard because of their passion for the business.

A) need-based
B) strategy-based
C) cost-based
D) desire-based

Question 58

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

A) the founder insists that the values are sound.
B) others in the firm learn what's important and absorb traditions established by the founder.
C) the values coincide with modern management theory.
D) family members follow family traditions without excessive analysis.

Question 59

One of the most common problems for a founder in passing the business on to a son or daughter 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 60

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 weather these adverse conditions, the brothers agree to each take a 25 percent 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 61

Stage III in the process of succession is the

A) pre-business stage.
B) proof of competence stage
C) formal start in the business stage
D) education and personal development stage

Question 62

A document that states the principles intended to guide a family firm 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 63

Family business constitutions are sometimes synonymous with _____ but the latter are usually more comprehensive.

A) business plans
B) by-laws
C) family protocols
D) succession plan

Question 64

To avoid a stifling atmosphere for nonfamily employees in a family business, the owner should

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

Question 65

A nonfamily employee of a family business is concerned about competing with family members for future career opportunities. To protect her personal interests, the nonfamily employee should

A) align herself with the CEO.
B) ask that the manager clarify the extent of opportunities.
C) seek assurances that she will receive first consideration for promotion, ahead of family members.
D) leave the firm and seek employment in a nonfamily business.

Question 66

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

A) recognize a basic obligation to supply the family with jobs of some type.
B) refuse to hire family members but, instead, reward them with dividends.
C) keep management simple by personally making all personnel decisions affecting family members.
D) identify the positions, if any, that are reserved for members of the family.

Question 67

The process of preparing a family successor for leadership in the family business often takes

A) weeks.
B) months.
C) about one year.
D) a decade or longer.

Question 68

Fran and Bob Smithers (wife and husband) 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.
B) it affords the opportunity to share more of their lives.
C) the business isn't likely to dissipate their energies.
D) they can count on working fewer hours in the business.

Question 69

When a son or daughter begins working at the family business full-time, he or she is in _____ of the process of succession.

A) Stage I
B) Stage II
C) Stage III
D) Stage IV

Question 70

A nonfamily 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) point out the fact that family members always have the inside track, even though this 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) shrug his shoulders and acknowledge that a tension always exists and that it can never be satisfactorily dealt with.

Question 71

Billy Newton works part time in his mother's garden supply wholesaling business. According to the results of Sue Birley's survey of the children of owner-managers of family businesses, how likely is Billy to work somewhere else before entering his mother's business?

A) 25 percent
B) 40 percent
C) 55 percent
D) 70 percent

Question 72

Tom is taking over the family business because it was what his parents told him all his life that they wanted him to do. Tom is showing _____ commitment.

A) cost-based
B) obligation-based
C) desire-based
D) need-based

Question 73

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

A) distributed, undistributed
B) growth, speculative
C) common, preferred
D) dowry, canonical

Question 74

Which of the following is the most appropriate and useful role for the entrepreneur's spouse in maintaining good family relationships in a business?

A) Worrier
B) Listener
C) Evaluator
D) Appeals judge

Question 75

Concerning the need for good management in the family business, which of the following is one of the "best practices" identified in the textbook?

A) Resist preparing successors for leadership to avoid demoralizing those who are not selected.
B) Maintain rigid guidelines based on family traditions to guide the company into the future.
C) Emphasize the attraction and retention of family members.
D) Stimulate new thinking and fresh strategic insights.

Question 76

The text presents _____ stages in the process of succession.

A) 4
B) 5
C) 6
D) 7

Question 77

When fathers train their children in the family business, the typical problem is

A) ambitious fathers.
B) disloyal children.
C) reluctant fathers.
D) capable children.

Question 78

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.

Question 79

A founder of a family business is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This would

A) be impossible.
B) be inherently unfair to the children.
C) potentially hinder the future functioning of the business.
D) require an S corporation.

Question 80

Family retreats, which open lines of communication,

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