Deck 3: Family Enterprise

Question 1

If a business is to survive,its interests cannot be unduly compromised to satisfy family wishes.

Answer 1

True

Question 2

Family and businesses exist for exactly the same reasons.

Answer 2

False

Question 3

The process of preparing a successor for leadership in a family business often takes a decade or longer.

Answer 3

True

Question 4

The extent of limitations on nonfamily employees will depend on the number of family members active in the business.

Question 5

Professional and managerial requirements tend to become intertwined with family feelings and interests.

Question 6

A family business is characterized by ownership or other involvement by four or more members of the same family in its life and functioning.

Question 7

The leader of a family firm may safely ignore in-laws outside the business,though he or she must carefully consider the views of in-laws who are members of the family firm.

Question 8

Research shows any form of commitment to a business is better than no commitment at all.

Question 9

In a family business,the founder's core values must never become part of both the business culture and the family code.

Question 10

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

Question 11

In stage III,the child begins to work at an executive level.

Question 12

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

Question 13

A family business is a company in which family members are directly involved in the ownership and/or functioning of the business.

Question 14

An outside facilitator's main role is to mediate feuds that occur during family retreats.

Question 15

Family businesses refer solely to small businesses.

Question 16

In a family business,the family's primary goals are profitability and survival of the business.

Question 17

Guilt is often the primary motivator for obligation-based commitment to family businesses.

Question 18

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

Question 19

Family feuds make it easy for outsiders to maintain strict neutrality.

Question 20

In a family business,there is a possibility for either conflict or harmony between business goals and family goals.

Question 21

The distinctive values that motivate and guide an entrepreneur in the founding of a firm may help to create a competitive advantage for the new firm.

Question 22

Scott feels his family business is stagnating because the family members all think alike.He hires a nonfamily member to bring a fresh view and to explore different markets.Why did Scott hire a nonfamily member?

A) to bridge the gap between generations of family members
B) to set new directions for the business
C) to deal with change
D) to provide new skills and expertise

Question 23

CAFE is a national not-for-profit organization dedicated to research,education,and assistance for family businesses.

Question 24

What management concept is advisable in the family firm?

A) Rely on the competence of professional managerial personnel.
B) Show favouritism in personnel decisions.
C) Keep discussions of changes in ownership open with all employees.
D) Make a child a manager from a young age.

Question 25

The family firm is a competitive business,and disregard of this will pose a threat to the business and impose strains on family relationships.

Question 26

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

Question 27

Hard-working employees often feel that they deserve hazard pay for working in a firm plagued by an unusual amount of family conflict.

Question 28

A nonfamily employee is concerned about fair treatment compared to the owner's family members.How should the nonfamily employee protect her personal interests?

A) She should align herself with the CEO and all other family members that hold management positions.
B) She should insist that the manager clarify the extent of opportunities for promotion that are available to her.
C) She should seek assurances that she will receive consideration for promotion ahead of family members.
D) She should leave the firm and seek employment in a nonfamily business.

Question 29

What is often the most difficult decision for a founder when passing the business on to his children?

A) determining whether they should all receive equal shares
B) finding suitable positions for nonfamily employees
C) arranging the transition from part-time to full-time employment
D) dealing with tax implications on the transfer of ownership

Question 30

A founder of a family business is contemplating turning 20 percent of the business over to each of his five children.What would the most active child in the business (the leadership successor)then become?

A) a subcontracted employee with equal responsibility to relatives on the outside
B) an equal share employee with more responsibilities than relatives on the outside
C) a business owner that receives less return for work performed than relatives on the outside
D) a minority stockholder at the mercy of relatives on the outside

Question 31

The family firm's total culture always changes when a new generation takes over.

Question 32

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

Question 33

Transfer of ownership is the second-last step in conveyance of power from parent to child,that of distributing ownership of the family business.

Question 34

Susan has recently taken over a business from her parents and is feeling frustrated.Her parents continue to come into the office to direct the employees,including Susan,and to monitor operations.What problem exists in passing the leadership from her parents to Susan?

A) paternalistic mould
B) collaborative family mould
C) participative business mould
D) one-generation mould

Question 35

Carl's parents own a family business.Though he feels pressure to always be working for the business,it is good for his lifestyle because the flexibility it provides allows him to be home when needed for his wife and children.How do the interests of the family and the interests of the business interact in Carl's situation?

A) overlap
B) conflict
C) coincide
D) collaborate

Question 36

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 37

Obligation-based commitment results from a sense of duty or expectation.

Question 38

A child is experiencing difficulty getting the parent in a family firm to accept progressive new ideas that would benefit the business.What is the most plausible explanation in a typical family business?

A) The child has a major investment in the business.
B) The child is tied to the firm emotionally.
C) The child is in the pre-business stage.
D) The child and parent lack a mutual understanding of their respective roles and goals.

Question 39

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 40

Any family business is composed of both a family and a business.

Question 41

What does the process of family succession begin with?

A) determination of whether appropriate talent exists within the family
B) the terms of the financial buyout once the business is passed over
C) the level of participation of the family members who are retiring
D) the period over which the transition to the new family members will occur

Question 42

Cameron has turned 14 and has begun working within his parents' business two days during the week after school and on Saturday mornings.What stage of business succession is this family business in?

A) pre-business involvement
B) proof of competence
C) personal development
D) formal start in the business

Question 43

Carrie is disgruntled because she was passed over for a promotion given to a younger and less experienced employee who is a family member of the company's owner.What is the promotion of the family member an example of?

A) perpetuation
B) loyalty
C) nepotism
D) paternalism

Question 44

Every fall Colin takes the family members active in his family business to a resort in Northern Ontario to review the year,their relationships,and where the business is heading.What is the annual event called?

A) family council
B) family retreat
C) family review
D) family audit

Question 45

Which of the following applies to family councils?

A) They function as the organizational and strategic planning arm of a family.
B) They listen to nonfamily employee concerns about certain family employees.
C) They make all major strategic and tactical decisions for the business.
D) They are an informal advisory board for children of founders.

Question 46

A business owner tells her banker,"I'd like you to meet my son,John,who is going to help me take inventory." What stage of succession is this?

A) educational
B) pre-business involvement
C) proof of competence
D) formal start in the business

Question 47

A family business has a primary benefit which is derived from the strength of family relationships.What is this benefit?

A) The family business often gets special financial treatment from banks.
B) Customers receive higher quality products from family run businesses.
C) Suppliers tend to give better pricing to businesses run by family.
D) Family members have a unique motivation because the firm is a family firm.

Question 48

Scott feels his family business is stagnating since the family members all think alike.He hires a nonfamily member to bring a fresh view and to explore different markets.Which of the following best describes the reason Scott hires a nonfamily member?

A) To bridge the gap between generations of family members
B) To set new directions for the business
C) To deal with change
D) To provide new skills and expertise

Question 49

How should owners avoid a stifling atmosphere for nonfamily employees in a family business?

A) Promote only non-family members.
B) Avoid all special considerations for family members.
C) Make clear the extent of opportunities for non-family members.
D) Minimize discussion about future management changes.

Question 50

What does the extent of limitations on nonfamily employees depend?

A) how fond the owners of the company are of their family members who are active in the business
B) the number of nonfamily employees that want management positions
C) the level of education of family members vs the level of education on nonfamily employees
D) the number of family members in the business and the number of management positions available

Question 51

How should an owner protect the interests of both the family and the business in a family business?

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) Simplify management by making all personnel decisions affecting family members.
D) Arrange for hiring outsider leadership or supplements to family talent.

Question 52

Xiao has an advantage over his peers in his insurance licensing class because his parents can pass on important contacts from their family business.According to Sirmon and Hitt,what is this an example of?

A) firm-specific knowledge
B) shared social networks
C) focus on the long run
D) preservation of reputation

Question 53

Pat passed on his insurance business to his son-in-law,Ken.Pat stays in the business only to help guide Ken's decisions until Ken understands the business better.Which role is Pat fulfilling?

A) facilitator
B) counselor
C) mentor
D) advisor

Question 54

Mohammed foregoes purchasing security cameras for his company's inventory department because the employees are his cousins.According to Sirmon and Hitt,what is this an example of?

A) reduced cost of control
B) shared social networks
C) focus on the long run
D) preservation of reputation

Question 55

Jagdev wants family members to stay on track and discuss business matters during the annual meeting for his family business.He hires an outsider to help manage the meetings.Which term refers to this outsider?

A) facilitator
B) mediator
C) arbitrator
D) counselor

Question 56

Why do overlap of family concerns and business interests complicate management of a family firm?

A) All profit should go to the founder of the business.
B) Its leader must struggle with making all the decisions.
C) Good non-family employees may get overlooked for advancement.
D) Children of the business's founder are expected to take over the business.

Question 57

The mother in a family business changes her role from meeting with overseas clients to running operations so that she can stay home to teach her daughter how the business is run.What is her primary family concern?

A) nurture
B) profitability
C) survival
D) debt avoidance

Question 58

Patricia knows she will soon pass the business reins to her children.She writes a formal document to guide this transition.What is this document?

A) family business bible
B) family business constitution
C) family business contract
D) family business agreement

Question 59

Eleanor and Richard are married and run a successful business.They attribute their success to Eleanor's social skills with clients and Richard's business and financial skills.Which term best describes this couple?

A) co-preneurs
B) corporate duo
C) partnership
D) business team

Question 60

How long does the process of preparing a family successor for leadership in the family business customarily take?

A) weeks
B) months
C) two or three years
D) a decade or longer

Question 61

Jodie has often made decisions to forego immediate profits in order to develop relationships that she knows will benefit her children when they take over the family business.According to Sirmon and Hitt,what is this an example of?

A) reduced cost of control
B) shared social networks
C) focus on the long run
D) preservation of reputation

Question 62

Name four parental concerns with passing on the business to the next generation.

Question 63

Which statement best describes a family business?

A) The total investment in the business comes from one owner.
B) The son works in the business part-time during the school year and full-time during the summer.
C) The business is extremely small,with less than $100,000 annual sales revenue.
D) The owner of the business treats it as a "cash cow," using its income to pay college tuition for her children.

Question 64

Jacintha hired a nonfamily executive who has experience working in the overseas markets that the company has begun selling within.No family member is familiar with these markets.Why did Jacintha hire a nonfamily member?

A) to bridge the gap between generations of family members
B) to set new directions for the business
C) to deal with change
D) to provide new skills and expertise

Question 65

Describe the advantages and disadvantages of a husband-wife team running a business.

Question 66

Describe a "family council."

Question 67

Describe what the CAFE organization can do for family businesses.

Question 68

Identify and explain five "best practices" for family enterprises.

Question 69

Discuss the transfer of ownership within a family business.

Question 70

Which of the following best describes the close relationship of business factors and family concerns in a family business?

A) separation of domains
B) generational gap
C) sibling rivalry
D) overlap

Question 71

What is a family business?

Question 72

Describe two of the four reasons why members of a family joined the business.

Question 73

Why do the founder's values become part of the family organizational culture?

A) The founder insists that the values are sound.
B) The values work and become accepted by the group.
C) The values coincide with modern management theory.
D) Family members follow family traditions without excessive analysis.

Question 74

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

Question 75

What is CAFE?

A) a consulting firm providing advice to family businesses
B) an expression that denotes relaxation time for the family at a local café
C) a radio talk show for family entrepreneurs in distress
D) a not-for-profit agency providing assistance to family businesses

Question 76

Of all the relationships in a family business,which relationship has been recognized for generations as the most troublesome?

A) sibling rivalry
B) parent-child relationship
C) spousal relationship
D) in-law rivalry

Question 77

Describe the model of succession in a family business,giving particular attention to its stages.