ORGANIZATIONAL STRUCTURE IN A FAMILY BUSINESS

Topics: Management, Small business, Corporate governance Pages: 8 (1831 words) Published: March 10, 2015


My family business started around 18 years back by my father and my elder uncle (father’s elder brother) joined it after 7-8 months. The business is distribution of surgical and pharmaceutical items to the hospital all over the eastern INDIA.

1. The Seed :- Stage 1

Finance Head Sales Head

Production Head

This is where I see my family business. In this level the firm has simple strategy i.e. the goal of the organization is very limited. This is the initial step of the family business’ existence. The business is entirely owned and managed by the founder(s). Most founders might seek advice from a small number of outside advisors and/or business associates but they will make the majority of the key decisions themselves. This stage is usually characterized by a strong commitment of the founder(s) to the success of their company and a relatively simple governance structure. Overall, this stage contains limited corporate governance issues compared to the next two stages since both the control and ownership of the company are still in the hands of the same person(s): the founder(s). Perhaps the most important issue that will need to be addressed during the life of the founder(s) is succession planning. For the family business to survive into its next stage, the founder(s) should make the necessary efforts to plan for their succession and start grooming the next leader(s) of the company. The first stage of growth is known as The Founder Stage. A family firm generally begins by being owned and managed by its founders. While these individuals might seek some advice from specialists in certain fields (e.g. banking or product development), they will make most of the decisions themselves. Stage 2:- This stage is often characterised by high levels of commitment and passion by the owners who are involved at every level of the business, and are driven by a need to succeed. This can be essential to getting a business off the ground in a competitive economy. This also means a fairly simple governance structure as all decisions will go through one key individual or a very small group who are in constant contact. Perhaps the most important issue to be considered at this stage of a business is succession planning.

Stage 3 :- In this stage the group of people plays a very important part. While the business might be in its infancy, if it’s to succeed, it’s never too early to start planning for the future. This means putting in place a succession plan and grooming future leaders within the business to one day take charge. This will ease a necessary transition in leadership at a later stage as the business grows and the founders’ needs and aims change.  The entrepreneur has come to the realization that there is indeed a need for what he or she can provide. He is making a name for himself and, while the road is rocky, he can see the light at the end of the tunnel. The entrepreneur still works hard, but now there are others to help share the load. And these are the group of unseen layer within the organization between the owner and the employees. They are part of the employees’ level only but due to better communication or relation an unseen layer is formed.

Admin group of people Tech, Sales

Stage 4:- The Value stage:- Establishing a proper and culture for the organization is the key aspect. The business is maturing and has created a serious niche for itself. People and systems are humming along and this business has become a cash cow for the entrepreneur-owner. Life is good and the rewards are flowing from the pump priming which took place in stages one and two. If life could only continue in this stage the entrepreneur and everyone around him would be happy.  Every organization has its unique style of working which often contributes to its culture. The beliefs, ideologies, principles and values of an organization form its culture. The...
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