Analysis of advantages and disadvantages of family business

Family Business Advantages:

1, entrepreneurial period, with the family members of the special blood relations, similar blood relations, kinship and related social network resources, with a low cost to quickly gather talent, full-time investment, unity and struggle, even regardless of remuneration, can in a very short period of time to obtain a competitive advantage, faster completion of the original capital accumulation.

2, rapid response. In the overall interests of the family, in general, the consistency of the interests of the members of the external environment changes have a natural sensitivity, the external, especially the market changes in information can be quickly transferred to each member of the enterprise; At the same time, the authority of the patriarchal leadership can make the company's decision the fastest, in implementation, due to internal information communication smooth , it is easy for the members to reach a consensus, in policy implementation, decision-making, the family's overall interests make the family members themselves have a higher incentive to work hard, and naturally help the company's value trend to maximize.

3, the psychological contract cost is low, can help enterprises to reduce monitoring costs, so the total agent cost of family-owned enterprises compared to other types of enterprises low. Family members Trust and understand each other much more than other non-family business members, family business members may bear a lower psychological contract costs. Members of the special blood, kinship, so that the family business has a strong cohesion, coupled with the lower cost of psychological contract, coupled with the combination of management rights and ownership, the total agency cost of family enterprises may be lower than the non-family enterprises.

Disadvantages of a family business:

Hard to get the best talent. Enterprises should be bigger, to develop a breakthrough is an important bottleneck is specialization and standardization, family business is no exception. Absorbing a large number of professionals into the core layer of the company is the only way to specialization and standardization. The result of selecting talents in the family members is that the choice of face will become narrower and smaller, the available people will become less and fewer, and the long-term patriarchal management will make the leader conceited, always feel that he is the most capable, and this just repels the better talents of the society; In addition, internal trust based on family relations, Will naturally create mistrust for employees who do not have a similar relationship. As a result, the disadvantage of family business is first of all knowing that their business is not long because of lack of talent, but it is difficult to create an environment for acquiring and retaining talent.