Designing For a Better Family Business

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Alaa Istaityeh
Aya Aburabie
Balqees Falah
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1.1: General BackgroundFamily Firms represent one of the most important pillars of the Palestinian economy, and basic components in the private sector. These firms are owned and managed by family itself which may include the grandfather, the children and grandchildren. Its possible to continue for a generation or several generations. Family firms offer significant opportunities for future generations, like learning from experienced administrators, improve and build their characters, build social relationships and create job opportunities for them.In Palestine, like other countries, family businesses represent the backbone of the economy, where they form 95% of the revenues of the private sector, employs 80% of the workforce and family businesses contributed about 50% of the Palestinian national income. (Mesleh, 2012)Family businesses are distinct from other companies when start establishment, members support financially and morally so they become more loyal to the project. These types of firms give a chance for boldness and speed in the decision-making process, so they become more risky than others.There are several factors for the success of family businesses, one of them that the objectives of the company must be clear and specific, family member must be committed to this goal, identify the foundations for long-term success, commitment to these principles, provide education and training programs for family members to strengthen the competencies and Establish a governance system.However this form of firms has many disadvantages such that conflict to take over managerial positions, presidential transition problem, and dissatisfaction of employees who are not belongs to the family because of cronyism, in addition to the absence of personal privacy and lack of separation between ownership and management.These firms face some challenges, some of them due to outside environmental causes, e.g. policy makers don't take into consideration specificity of family businesses others are insider causes like lack of talent in the family also conflicts between generations and the internal resistance to change.31.2: Problem DefinitionFamily business is alive and unique since it is composed of a flow of people through time with different needs, ambitions, abilities and rights. It has a unique fusion of ownerships, strategies and types of control. Its considered a special & significant since it has a bond that expressed as the strongest relationship human ever had. One of these owners defined it as The best and worst types of companiesRecent estimates suggested that %80-%90 of the world businesses is considered as Family Enterprises and more than 95% in Palestine. Since those companies helped in hiring some family members and decreasing the salaries in order to keep the businesses going ahead. (Shahla & Tabba', 2012) They were able to withstand the challenges that have devastated the Palestinian economy. Its common that the family firms dont gain enormous profits in the normal conditions but almost the only survivals in the economic collapsing. They also have a significant rule in Palestinian economy and a contribution in national income.Almost $10 million is the average annual revenue of family owned enterprises in the world, thats due to the features that make the family firms unique in the whole world. Trust, continuing planning, commitment, support of owners and dream of continuity and the decisions that is restricted by familys value.etc. are the inspiration of the major hit for these businesses. (Mesleh, 2012)There is an ongoing concern about family business. They dont withstand for more than the 3rd generation in more than%97 of the cases in the world. (Brookline, 2012)As they usually bankrupt or close down and lose the brand name that theyve been working on for the whole previous years. Economical specialists based that on the grounds of the misconnection between different generations, in addition to the different requirements and the conflict between needs for companys stability and requirements for a coherent business. Each new generation has a special adopted vision that doesnt suit the elder one. Family Enterprises is now a subject of thorny, that a lot of studies are dealing with.4Family Firms are now trying to survive through these contradictory economic conditions of the world, there are a lot of family businesses that are converting from success firms to failure and many still stumble between being success and failure.There are a lot of concerns that this transmission of companies will affect the economies of countries.In this project, a sample of family business companies specially the industrial ones are analyzed from the management approach in order to conclude the points that is wanted to be approved. Advantages of successful firms, disadvantages of failure or unsurpassed ones and the susceptibility or the tendency of companies to adapt the reasons of success are conducted. Management model for successful family businesses is assessed. Companies are compared in order to reach perfect model.Engineering tools are designed and applied on the companies to see their effects in the development criterion.The effect of the occupation was clearly obvious, since most of the cases suffered from the interference of the occupation army that obstacle their businesses. Some firms have to change their whole businesses, some have to cancel their development chances while others fought and still struggling for life.Through this study we concluded that the successful companies has the features of a clear organizational hierarchy, documentation of every detail, clear account system and the separation of family and work life which all by entirety guarantee its continuity.We defined successful firms as firms that continued for decades in stable without a lot of conflicts, good cash status, and good position in market and have a good brand name, Equalizing between members and stayed stable while moving from generation to another is an important feature for this type.While failure firms are the firms that have a lot of conflicts and problems between members, collapsed due to these conflicts especially while moving between generations due to misunderstanding between these different generations and lost their brand name.The reasons that make this study an important one, is that since more than 90% of firms in Palestine are family businesses, which have a major role in the economic field. So if5theres no enough importance given to this subject to reduce and eliminate the reasons that make these firms struggle, then after one or two decades the economic society will fall down and the Palestinian firms will suffer. No enough studies discussed the this hot topic, neither in Palestine nor in the Middle East1.3: ObjectivesFamily firms are a main key in business world; family business studies are dominant in different topics, such as succession, economic performance and firm governance. This project is being implemented to investigate family businesses as case studies and describe the extent of any problematic issues interfering with their business processes. It has been performed for the purpose of getting a more comprehensive overview of family businesses in Palestine, their characteristics, specific needs, the institutional framework and initiatives, summery for the success reasons of the attainment company and try to develop a special model and tools to apply it on existing enterprises to keep their businesses in good conditions avoiding the reasons that may cause them to disrupt.1.4: Boundaries and Constraints of the projectEach research faces problems as to be done. Especially if theres no special sector for Research and Development such as here in Palestine. In our project, these problems can be summarized in the following points:1- Confidentiality and fear of disclosure of information (From the FBs owners point views).2- Time limitations; as we only have two semesters to get everything done.3- Large number of family firms in Palestine; we tried to merge as possible as we could between food, wood, soap, bags and fibers industries and commercial sectors.4- Transportation difficulties between cities due to occupation issues; so we focused only on the west bank (Mainly Nablus and Ramallah).5- Lack of accurate statistical data about family businesses in Palestine.61.5: StandardsAfter an extensive search for precise standards to follow regarding family business, there was no specific standards may concern our project. Neither local nor global sources regard family business in specific way.1.6: CoursesAs an IEs (Industrial Engineers) we considered some courses being the core of our project, such as:- TQM (Total Quality Management), which is a modern philosophy to manage any organization by employing its tools, theories and processes, in a way which enables it to meet needs and expectations efficiently and effectively. So it was perfect in discussing the development of companies. This course was very helpful in applying its theories, such as Deming theory. It also helped us with the tools that were used in the project as the fish bone diagram and SWOT analysis.- Engineering Management and Economics, this topic was very effective in covering principal and ways used to justify companys economic situation, and in applying the basic concept management.- Computational Applications Lab. This significant course was very helpful in using and applying different computer software.