Deck 16: Organizational Behavior in the Family Business

Question 1

The proportion of family businesses that are successfully transferred to the second generation is______ .

A) 13 percent
B) about one half
C) 6 percent
D) 10 to 20 percent
E) about one third

Answer 1

about one third

Question 2

Your family business operates a chain of cafés and restaurants across three cities. Your uncle has been the company CEO for the last 20 years, and has announced he is planning to retire next year. He discusses his concerns with you.

-He is aware that family businesses can fail to achieve a smooth transition between generations for all of the following reasons except______ .

A) the founder may find it difficult to release control
B) rivalry may exist between siblings
C) parents may put pressure on the younger generation without considering their feelings
D) the company lacks a clear organizational structure
E) the children may not be interested in the family business

Answer 2

the company lacks a clear organizational structure

Question 3

You are a business consultant providing advice to a family company based in Alexandria, Egypt with 250 employees, involved in the design and manufacture of children's clothing. The company has identified an opportunity to expand into production of certain lines of adult clothing. They are trying to decide whether to invest in development of this new area of the business, and seek your advice.

-You notice that there is good cooperation among family members at the top management level, but it is organized in a very informal way. There is no identifiable board of directors. You advise the company to establish a board of directors for all of the following reasons except______ .

A) Family members who are not involved in the business are likely to be reassured that the company is being efficiently.
B) A logical management structure is necessary in order to retain family loyalty.
C) A family business is the same as any other business in that its success depends on having clear systems, processes and structure.
D) The absence of a clear organizational structure and board is likely to result in problems and affect performance.
E) It will lead to greater transparency because the board will account for decisions to external stakeholders.

Answer 3

It will lead to greater transparency because the board will account for decisions to external stakeholders.

Question 4

Qatar Computers is a family-owned business based in Doha. Due to substantial recent growth, the company needs to reassess its organizational structure.

-When planning how authority should be delegated, the Qatar Computers can use the concept of the chain of command. This will help them to establish ______ .

A) who reports to whom
B) which individual is in charge
C) the role of a board of directors
D) the span on control
E) the succession plan

Question 5

The following statements are typically true of non-family members in most family companies, except ______

A) non-family members in managerial positions may be discouraged when all business-related issues are addressed by either the owner or only family members.
B) excluding non-family members can negatively affect their performance and productivity.
C) non-family members are generally not considered for top management positions.
D) non-family members are likely to succeed to top management positions if they are properly qualified.
E) non-family members can become demotivated when they are excluded from management positions.

Question 6

Statistics show that______ of businesses in Asia, the Middle East, Italy and Spain are family controlled.

A) 44 percent
B) 35 percent
C) 65 percent
D) 79 percent
E) 95 percent

Question 7

Family businesses typically evolve through three stages. These are:

A) the birth stage, the family stage and the business stage.
B) the family stage, the ownership stage and the business stage.
C) the family stage, the entrepreneurial stage, and the professional stage.
D) the family stage, the business stage and the professional stage.
E) the entrepreneurial stage, the managerial stage and the professional stage.

Question 8

One major disadvantage of the family business relates to lines of succession, for all of the following reasons except______ .

A) members of subsequent generations are usually not as capable or visionary as the founder
B) subsequent generations may simply feel trapped in the family business
C) these may not benefit the organization because different generations will have different needs and demands
D) subsequent generations may have no commitment to the business
E) people who are not family members may not feel an emotional attachment to the company

Question 9

Unity of command states that______ _.

A) every person in the organization has some authority
B) all managers should be in agreement about the organizational structure
C) overlap of authority can be a useful means of encouraging discussion
D) managers have the ability to give direction and expect people to implement the decisions
E) a person should have only one superior to whom they report

Question 10

Your family business operates a chain of cafés and restaurants across three cities. Your uncle has been the company CEO for the last 20 years, and has announced he is planning to retire next year. He discusses his concerns with you.

-You talk to him about your knowledge of business continuity, which you explain as being______ .

A) the evolution of the company mission
B) the ability of a business to continue during and after a setback
C) the sale of the family business to a public company
D) the early identification of a named successor
E) a set pattern dictating the transfer of responsibility, e.g. to the eldest son

Question 11

When designing the organizational structure of a family business, managers need to address all of the following elements except______ .

A) work specialization
B) time period
C) chain of command
D) centralization and decentralization
E) span of control

Question 12

Your family business operates a chain of cafés and restaurants across three cities. Your uncle has been the company CEO for the last 20 years, and has announced he is planning to retire next year. He discusses his concerns with you.

-He tells you about the low rates of successful transfer between generations, and that only ______ percent of family businesses make it to the third generation.

A) 30-40
B) 20-30
C) 5-10
D) 40-50
E) 10-20

Question 13

All of the following are possibly options for transferring ownership of the business, except______ .

A) as a gift to family members while the founder is still living
B) as a means of bestowing assets without paying tax after the death of the founder
C) dividing the business among siblings after the death of the founder
D) as a sale to non-family members after the death of the founder
E) as a gift to family members after the death of the founder

Question 14

A publicly owned business is always focused on ______ .

A) the role of the next generation
B) prioritising employee security
C) sacrificing short-term considerations for long-term benefits
D) promoting a sense of continuity through financial considerations
E) short term financial results to keep shareholders happy

Question 15

The degree to which jobs within an organization are standardized is described as______ .

A) centralization
B) work specialization
C) formalization
D) division of labor
E) departmentalization

Question 16

When planning departmentalization, popular ways to group activities include all of the following except ______ .

A) by customer
B) by product
C) by functions
D) by geography
E) by division of labor

Question 17

Qatar Computers is a family-owned business based in Doha. Due to substantial recent growth, the company needs to reassess its organizational structure.

-When considering the degree of work specialization required, the managers at Qatar Computers should be aware that______ .

A) work specialization can be decided on the basis of functions, products, territories or customers
B) work specialization contributes to reduced job satisfaction
C) it is always better for one person to oversee an entire job
D) work specialization contributes to lower employee productivity
E) a family business is less likely to succeed when members are allocated specialized work

Question 18

In a family business, the absence of a board of directors is______ .

A) a valuable way to oversee day-to-day activities, but not essential for improving company performance
B) not a problem because family members remain loyal to the business whatever happens
C) just as likely to result in problems as it would be in non-family business
D) less important that in a non-family business because of the sense of mission and legacy of the family
E) an important way of involving family members who are not managers within the company

Question 19

To promote business continuity, the family business can be used as a vehicle for______ .

A) private investment
B) sibling rivalry
C) family cohesion
D) family division
E) short-term profit

Question 20

Family-owned businesses can offer advantages to employees that are harder for non-family businesses to offer, including all of the following except______ .

A) a focus on long-term success
B) shares
C) established relationships
D) dependability
E) security

Question 21

To promote business continuity, the business mission should be______ .

A) never reviewed
B) changed
C) conserved
D) adapted
E) refreshed

Question 22

You are a business consultant providing advice to a family company based in Alexandria, Egypt with 250 employees, involved in the design and manufacture of children's clothing. The company has identified an opportunity to expand into production of certain lines of adult clothing. They are trying to decide whether to invest in development of this new area of the business, and seek your advice.

-The company owner expresses a concern about investing the financial capital to expand into adult clothing lines. You recognize this response as a typical characteristic of family businesses, described as______ .

A) personalism
B) particularism
C) parsimony
D) unity of command
E) continuity

Question 23

The environment for innovation in family businesses improves when______ .

A) more generations of the family go to work elsewhere
B) decision-making is centralized
C) more generations of the owning family are actively involved in the business
D) the business is sold to a public company
E) there is less emphasis on the legacy of the founder

Question 24

The number of subordinates that a manager can efficiently and effectively direct is described as______ .

A) the division of labor
B) unity of command
C) the span of control
D) the chain of command
E) organizational structure

Question 25

To promote business continuity, governance should primarily focus on ______ .

A) changing the founder's legacy to keep up with changing markets
B) watching the competition
C) creating a new business culture to make succession planning easier
D) preserving the founder's/leader's legacy
E) avoiding any changes to current organizational structure

Question 26

Many small- and medium-sized family companies have trouble fully participating in global markets due to ______ .

A) personal factors
B) political influences
C) all of these options
D) none of these options
E) the lack of necessary resources

Question 27

Work specialization can be described as ______ .

A) the employment of individuals with previous experience
B) an entire job being done by one individual
C) ensuring every job has a high degree of routine
D) the degree to which activities in the organization are subdivided into separate jobs
E) appointing family members to specialized roles, regardless of their qualifications

Question 28

Within a family business, credibility and reputation can be described as______ .

A) the most valuable asset that the family business can hold
B) the main reason for success until the name is changed to a professional name
C) replacements for structured management systems
D) the primary way to resolve inter-generational conflicts
E) all of the above

Question 29

To promote continuity of the company as a family business, it is important that the business and family can exercise ______ judgment.

A) conservative
B) sensitive
C) independent
D) comprehensive
E) reasoned

Question 30

Business continuity can be defined as______ .

A) the continued growth of a company into new markets
B) the ability of a company to continue increasing its profitability
C) the continued development of new products by a company
D) the ability of a business to continue during and after a setback
E) the continued loyalty of the business's customer base

Question 31

It is likely that over the next century ______ .

A) family businesses will decrease in number as they are bought out by multinational corporations.
B) succession planning for family businesses will be much less of a challenge.
C) family businesses will find it harder to be successful in the competitive environment.
D) family businesses will continue to play a great role in world economies.
E) family businesses will resolve most of their current disadvantages.

Question 32

Qatar Computers is a family-owned business based in Doha. Due to substantial recent growth, the company needs to reassess its organizational structure.

-Until now all decision making has been centralized, with important decisions taken by the CEO of Qatar Computers. The company is considering becoming more decentralized because ______ .

A) the span of control is currently too narrow
B) this is likely to lead to higher job satisfaction of employees
C) the current CEO is unreliable
D) non-family members will not have as much power
E) managers need more training

Question 33

Characteristics of a typical family business include all of the following except______ .

A) If the family business stops growing, then the overlap of family, management, and ownership will leave the business helpless during succession.
B) The unique competitive advantage that a family business can gain if the family members remain unified.
C) The family members themselves, with all they have to offer the business.
D) The dream of the owner to ensure the business remains in the family and a strong will to continue from one generation to another.
E) The willingness of the business to use its financial resources for entrepreneurial activities.

Question 34

Which of the following is not a good description of a typical family business?

A) It is inevitable that conflict will arise because the family and the business have separate rules, roles and requirements.
B) Entry into a family business is by birth.
C) Family businesses provide the only location where family issues and business issues overlap.
D) The family business is a complex dual system made up of the family and the business.
E) Family businesses are always small, informal businesses run only by family members.

Question 35

Organizations that are less centralized have ______ .

A) more standardized jobs
B) a greater amount of autonomy for employees
C) lower-level managers who carry out top management's decisions
D) a higher degree of decision-making concentrated at a single point
E) lower job satisfaction

Question 36

You are a business consultant providing advice to a family company based in Alexandria, Egypt with 250 employees, involved in the design and manufacture of children's clothing. The company has identified an opportunity to expand into production of certain lines of adult clothing. They are trying to decide whether to invest in development of this new area of the business, and seek your advice.
There has been some disagreement among family members about the potential expansion. The family is considering setting up adult clothing as a separate company under the leadership of one of the senior family members. Based on your knowledge of organizational behavior and the characteristics of other family companies, what is the best advice you can give them?

A) Setting up a separate company is a good idea because it is best to avoid conflict at all costs.
B) The only way to resolve the dispute will be to bring in non-family members.
C) The vision of the owner was only about children's clothing, so it is best not to consider expanding into other product areas.
D) The product expansion is a long-term plan, and for now it would be better to focus on short-term profitability.
E) Family businesses have a unique competitive advantage if the family members remain unified, so it would be best to keep the new product lines within the existing company.

Question 37

Internationalization of the family business becomes more likely when______ .

A) the company founder retains control for as long as possible
B) there is a focus on beating regional competitors
C) younger family members are involved in managing the company
D) the company can streamline its operations as much as possible
E) the company has redeveloped its IT systems

Question 38

To promote business continuity, strategy should primarily focus on______ .

A) continual development of new products
B) a continued search for new leadership from outside the organization
C) continuing the value proposition of the business
D) avoiding any changes to current organizational structure
E) continual development of new markets

Question 39

Because the family name and reputation is at stake, family businesses may be more likely than non-family businesses to do all of the following except______ .

A) focus on quality goods and services
B) take riskier investment decisions
C) act more ethically
D) think more long-term
E) put in longer hours

Question 40

Keys to business success in a family company include all of the following except______ .

A) the ability to listen to others
B) having good role models within the family
C) mutual respect
D) the ability no to take business issues personally
E) keeping management solely within the family

Question 41

Sometimes family businesses are divided among siblings to ensure everyone has some level of authority.

Question 42

Nasser Saidi of the Dubai International Financial Centre listed five major challenges with regard to succession planning in the GCC. These included all of the following, except ______ .

A) addressing the issues of dilution in big families
B) difficulties of bringing the younger generation into the business
C) the reluctance of markets to invest in family companies
D) businesses facing pressure amid the latest economic crises
E) how to face up to the crisis of competition, with the opening of regional and global markets

Question 43

Ownership of the family business may be transferred while the founder is still living or after death.

Question 44

All of the following are common reasons for the failure of a family business to make a smooth transition to the next generation, except______ .

A) the founder is unwilling to let go of control of the business
B) rivalry can exist between siblings
C) the younger generation may not be interested in the family business
D) parents have assumed the business will pass on to the next generation without considering the feelings of their children
E) the founder wants to transfer control before younger generations have gained qualifications

Question 45

The following are all common criteria for defining a family business, except ______ .

A) active management by non-family members
B) percentage of ownership by the family
C) active management by family members
D) voting power of the family
E) involvement of the family's generations

Question 46

One of the most important challenges for family businesses is that when it comes to succession planning they often______ .

A) plan too far ahead
B) have too many natural leaders
C) have to follow a particular sequence of steps
D) are dependent on external factors
E) fail to establish succeeding generations of leaders

Question 47

One definition of a family business is that it includes two or more relatives and has at least two generations working together.

Question 48

The life cycle of a family business involves all of the following except ______ .

A) diversification
B) growth and development
C) ensuring of public ownership and professional management
D) succession to the second generation
E) creation of the business

Question 49

The managerial stage requires expertise, financial discipline, structure and accountability.

Question 50

The family business is in a completely different category from other types of business, and does not need clear systems and processes.

Question 51

Internationalization becomes more likely when younger family members are involved in managing the company.

Question 52

A psychological contract is______ .

A) a verbal exchange between company managers
B) an unwritten employment contract
C) an unwritten understanding of the company performance targets, shared between employees and external stakeholders
D) a verbal agreement between a company and its suppliers
E) an unwritten agreement that sets out what management expect from an employee and vice versa

Question 53

Family businesses create an estimated ______ of global GDP annually.

A) 35-50 percent
B) 55-65 percent
C) 90-95 percent
D) 20-30 percent
E) 70-90 percent

Question 54

Departmentalization determines the degree to which activities are subdivided into separate jobs in a family business.

Question 55

Particularism can be described as ______ .

A) the overlap between the family and the business, found particularly in family businesses
B) emphasizing the value of the individual person within his or her social, political or familial environment.
C) the individual vision of a founder of a family business, that makes the business different from its competitors
D) exclusive commitment to the interests of one's own group or family
E) the unwillingness of a business to use its financial resources

Question 56

Families have their own loyalties and culture that non-family businesses usually have more difficulty in creating.

Question 57

The founders of family businesses create organizations to fulfil their needs and desires.

Question 58

Entry into a family business is dependent on experience, expertise and potential.

Question 59

Over 30 percent of family businesses don't know how much domestic capital gains tax they or their companies might be liable for.

Question 60

The main reason that resistance to change is especially strong in family firms is because ______ .

A) certain family members see change as a threat to their power and security
B) change produces conflict
C) non-family members are more likely to threaten the business
D) change makes younger family members less likely to be committed to the company
E) change disrupts the organizational structure

Question 61

The first stage of a family business life cycle is its growth and development.

Question 62

Independent judgment cannot be achieved unless the business remains in the hands of the same family.

Question 63

Unity of command is the ability to give direction and expect people to implement the decisions.

Question 64

Non-family members are frequently excluded from decision-making processes.

Question 65

Family businesses typically evolve through the entrepreneurial stage, the business stage and the professional stage.

Question 66

Founders usually see change as a positive influence within the organization.

Question 67

To ensure business continuity, governance should primarily focus on preserving the legacy of the founder.

Question 68

Credibility and reputation are the most valuable assets that the family business can hold.

Question 69

The professional stage is directed by what is best for the family and specific goal-setting.

Question 70

The majority of small- and medium-sized family companies are well prepared for expansion into international markets.

Question 71

Lines of succession may not benefit the organization because different generations will have different needs and demands.

Question 72

All individuals show a preference for the freedom and flexibility of organic structures.

Question 73

Fewer than 13 percent of family businesses stay in the family for more than 60 years.

Question 74

Ensuring public ownership and professional management is the fourth stage of the family business life cycle.

Question 75

Family businesses may think longer-term than other businesses, because the family name and reputation are at stake.

Question 76

Business leaders often attempt to discount, ignore or separate the family factors from the family business, and refer to the traditional strategy models.

Question 77

If a job is highly formalized, the employee has minimum influence over what is to be done, and when and how it is to be done.

Question 78

Formalization is the degree to which jobs in the organization are standardized.

Question 79

Lack of planning is not usually the fault of the founder, but of subsequent younger generations.

Question 80

Family businesses account for about 95 percent of businesses worldwide.