Three Generations of Family Entrepreneurship, Conflict, and Connection

Abstract

This paper shows the impact that a family running a business may encounter. It is based on a study of a family that owned a large-scale business. The business was run by brothers who were in conflict at some point. The questions tackled are such as describing how successful the business has been at recognizing and satisfying stakeholder interests. Mechanisms available to manage relationships with stakeholders and to influence the strategic direction and performance of the company have also been discussed. An explanation of the board of directors for Space Center Enterprises’ success in its governance role and in meeting the challenges it faced has been discussed. Paddy’s qualifications to be a CEO have been given a general overview. The conclusion is based on a general overview of the paper.

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Success of the business that has been at recognizing and satisfying stakeholder interests

Space Centre Company expanded in size and the scope of its core businesses in the 1950s and 1960s. The company went through problems because of family crisis. However, Harry decided to settle on a framework for governance where outsiders joined the board. Having an independent board of directors for Space Center Enterprises became the start of the company’s success. Earlier on, the business had top family executives; an accountant, a family lawyer, and a good friend. For the success of his business, Harry formed a board consisting of independent directors. Selecting non-family members as directors, and their subsequent influence on the firm’s governance process was a road to their success.

Listening to the board was a way of recognizing the stakeholders. Entrusting the business with other people who were not family members was a success. The stakeholders being allowed to familiarize themselves with the business, governance, management, ownership, and finance aspects of the company was a clear indication that Harry trusted and respected them. Don and Harry did not dictate and rule over the directors but instead allowed them to make decisions for the business. Their children too neither continued with the business nor take an active role in the running of the business. The business was able to satisfy the stakeholders’ interests by allowing the executive to establish their own corporation, their own board of directors, and have their own objectives. The executives were free to make deals with other companies.

The board of Harry’s Space Center Company was faced with the reality of separate management and also with the issue of conflict, but Harry took care of all the costs for the management. This was a clear indication that he was concerned with the stakeholders’ interests.

The mechanisms that are available to manage relationships with stakeholders and to influence the strategic direction and performance of the company

To manage relationships, it is important to have all the roles of each stakeholder well spelled out so as to avoid any clashes in the line of duty. The independence of the board of directors should be maintained through transparent vetting of all the employees. Another way of enhancing relationships among the stakeholders is to have an open mode of communication through which all the parties involved can air their views and concerns. These could include routine meetings with the stakeholders and they could be weekly or monthly. The company may also choose to introduce a suggestion box so that the stakeholders who wish to remain anonymous can also have a say. The printing of newsletters enables the community at large to know about the company’s activities. Decisions made by the board of directors can be communicated by the use of memos and circulars within the company. To avoid any conflicts with the stakeholders, all decisions made should be in the presence of at least a representative of each group of stakeholders.

Why the board of directors for Space Center Enterprises was or was not successful in fulfilling its governance role and in meeting the challenges it faced

The board of directors for Space Center Enterprises was successful in fulfilling its governance role and also in meeting the challenges the company faced. One of the reasons that led to the company’s success is Harry’s support. According to Trostel, Harry listened to the board.’He was willing to expose himself to a great degree. The board would take him to task and he would listen. Sometimes he would drag on an issue for months but he stuck with us.” To fulfill the governance role, the board worked together as a team. For example, after Don and Harry separated, some of the managers who had unhealthy conflicts left, and those who remained worked together.

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According to Crawford (2007), some elements of good governance are truth, honesty, responsibility, and commitment to the business. The board of directors was independent thus successfully fulfilling its governance role. The family did not affect the decisions made by the board in any way. Family conflicts were kept away from the business and if any arose, the board, with Harry’s help, sorted it out. The board was made up of four experienced executives. One of the directors was a venture capitalist, an executive from Honeywell, Pillsbury who had a prior relationship with the business, and a professor at the University of St. Thomas School of Business. This selection of outsiders and Harry’s contribution was a turning point for the business leading to good governance.

For successful and fulfilling governance, the board had to familiarize themselves with all the previous business, governance, management, ownership, and finance aspects. They considered management proposals and reports. This helped them in coming up with various methods that would assist in the governance of the company. Since each board member had a unique talent, different responsibilities were shared.

Hitt, Ireland, & Hoskisson (2011) state that to meet the challenges they faced, the executive established their own corporation, their own board of directors and their own objectives. They were also able to make their own deals with other companies. With all this independence, and individual responsibility, the board was able to solve the conflicts that they had. They also enhanced teamwork. For example when Don pulled out, the company had to incur some extra costs to sustain the management. Teamwork indicates good governance.

Why Paddy was or was not qualified to fill in his father’s footsteps as CEO of the newly-merged Meritex organization, based on strategic leadership responsibilities

Despite the fact that Paddy spent 10 years in the banking industry before joining the family firm, and his expertise being on loans to commercial enterprises, both public and private, he was not interested at being his father’s successor. However, he was qualified to fill in his father’s footsteps as CEO of the newly merged Meritex organization. Having represented his family, he had experienced a new challenge. This led him to be sure that he wanted to run the family company. Paddy was doing well in his management role in the company. His credentials and experiences added an advantage for him to be his father’s successor.

Harry however was of the opinion that the shareholders should be responsible of choosing the next CEO. The board members had held several meetings and felt that Paddy had the managerial skill required to run the company as CEO. Paddy had the official role as a chief administrative officer which helped him sharpen his managerial skills. He also had a mentor, Wayne Brusewitz who mentored him at that time.

Having worked in another company, before joining the family company, Paddy had wide knowledge on how to respond to customers and clients who needed loans. This would be an added advantage in case he was appointed CEO because it would be an additional skill. Having worked for his father was a stepping stone. This is because he had acquired experience about the company, the stakeholders, the company’s finances and the objectives that the company had. Paddy was responsible in his duties and even performed some other duties that had not been directly assigned to him, making him acquire characteristics of a leader.

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Paddy demonstrated his hard work, his perseverance and his patriotism for the company when he asked to demonstrate his aptitude for the CEO position. He met with the board, presented his strategy, and discussed his potential role as CEO and chairman of the company. It pointed him out capable of being a general manager, a deal maker and a decisive leader. This qualified Paddy as having character traits for a leader and CEO.

Conclusion

Space Center Enterprises being a family business has faced a lot of conflict. It is important for a family that has a company to have a leadership that is independent and objective. This ensures that in case of family conflicts, the business will not be affected. Secondly, the welfare of the stakeholders should also be considered and put into practice. A business should be a family’s source of income and not bring in conflicts. It is important to have a responsible family member in the leadership of the business. This helps keep track of their resources, benefits and growth.

Reference List

Crawford, Curtis J. (2007). The Reform of Corporate Governance: Major Trends in the U.S.

Corporate Boardroom, 1977-1997. Capella: Doctoral dissertation, Capella University.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic management: Competitivenes and globalization, concepts and cases: 2011 custom edition (9th ed.). Mason, OH: South-Western Cengage Learning.

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Paperroni. (2022, January 8). Three Generations of Family Entrepreneurship, Conflict, and Connection. Retrieved from https://paperroni.com/three-generations-of-family-entrepreneurship-conflict-and-connection/

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Paperroni. (2022) 'Three Generations of Family Entrepreneurship, Conflict, and Connection'. 8 January.

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