Deck 5: The Family Business

Question 1

In the family business, family considerations affect only members of the family.

Answer 1

False

Question 2

In-laws not working in the family business may have a bad attitude about the family and its enterprise because of only hearing one side of an argument.

Answer 2

True

Question 3

A key responsibility of a younger generation member who desires advancement is to understand that a leadership position in the company is earned and not an entitlement.

Answer 3

True

Question 4

A family business involving two or more children may experience either sibling cooperation or sibling rivalry.

Question 5

Even if family members lack the capability to run the business, an entrepreneur should always select a successor from this pool of talent.

Question 6

Some family businesses benefit from effective collaboration among brothers and sisters.

Question 7

Research has shown that family-owned businesses tend to devote extra attention to succession planning.

Question 8

When hiring nonfamily employees, the owner should identify the positions, if any, that are reserved for family members.

Question 9

Research has shown that the biggest concern expressed by owners of family businesses about retaining family management is the fear there will be a lack of innovation on the part of successors.

Question 10

A major factor involved in grooming a son or daughter to enter the family business is the child's right to choose a career.

Question 11

One sibling dilemma in a family business has been labeled the predator/parasite conflict.

Question 12

When a senior generation member is planning for succession, planning should encompass family members, employees, and the owners.

Question 13

Husband-and-wife teams that own a business are popularly referred to as co-preneurs.

Question 14

A company run by the great-grandchildren of the founder would be considered a cousin consortium.

Question 15

For families that are not able to develop an atmosphere of neutrality, family retreats are best handled by an outside facilitator, who can help develop an agenda and set ground rules for discussion.

Question 16

On average, family businesses survive longer than nonfamily firms.

Question 17

In a family business, the family's primary function is to ensure the profitability and survival of the business.

Question 18

One of the first steps experts recommend for building a healthy family-to-business relationship is to hold a family retreat.

Question 19

The role of the entrepreneur's spouse in family conflicts can sometimes be described as that of a mediator in business relationships between the entrepreneur and the children.

Question 20

When a parent retires completely and turns the firm over to a son or daughter, the firm ceases to be a family business.

Question 21

The idea behind _____ is that gains and losses in nonfinancial characteristics of the relationship between the family and the business affect strategic and policy decisions regarding the company.

A) co-preneurship
B) socioemotional wealth
C) nepotism
D) altruism

Question 22

Which of the following is a negative of family businesses?

A) Close communication among family members
B) Long-range thinking by leaders of the firm
C) Lack of knowledge among those outside the firm
D) None of these are correct.

Question 23

Allan opened a hot dog stand in Central Park, New York City. He owns it and operates it six days a week, year round. Which of the following types of business is this?

A) A sibling partnership
B) A franchise
C) A cousin consortium
D) An owner-managed business

Question 24

Bret first opened his hardware store in 1946. His sons took over when Bret retired, and now Bret's grandchildren run the store. This type of family business is known as a(n)

A) sibling partnership.
B) franchise.
C) cousin consortium.
D) owner-managed business.

Question 25

A negative often associated with family businesses is when

A) nonfamily employees mistrust incompetent family employees.
B) nonfamily employees work longer hours than family employees.
C) extended family members share knowledge.
D) family members share a commitment to the firm.

Question 26

Federal law permits companies from having policies against hiring family members.

Question 27

When an in-law joins a company, effective collaboration may be achieved by assigning family members to different branches or roles within the company.

Question 28

In a family business, the family's focus is on emphasizing all of the following EXCEPT

A) unity.
B) stability.
C) flexibility.
D) cooperation.

Question 29

Chip and Dale are brothers who have taken over their father's business. This type of family business is known as a(n)

A) sibling partnership.
B) franchise.
C) cousin consortium.
D) owner-managed business.

Question 30

In a family business, the interests of the family and the interests of the business are best described as

A) overlapping.
B) conflicting.
C) coinciding.
D) having no relationship with each other.

Question 31

Mayer's philosophy of never using debt to finance operations or expansion was born during the Great Depression and passed on to his sons when they joined the family business. Today, the multi-million-dollar organization proudly follows Mayer's practice under the leadership of Mayer's great-grandsons and -daughters. This family's commitment is based on

A) family control and influence.
B) identification of family members with the firm.
C) binding social ties.
D) emotional attachment of family members.

Question 32

When transferring ownership of a business, tax considerations tend to favor gradual transfer of ownership to all heirs.

Question 33

The socioemotional commitment of family members to the firm occurs along all of the following dimensions EXCEPT

A) continuity of the business's legacy.
B) identification of family members with the firm.
C) binding social ties.
D) emotional attachment of family members.

Question 34

John and his brother Jack started a produce farm 20 years ago and are thinking about retirement. Over time, their children have worked at the farm and so the cousins have started talking about taking over management. At present, this produce farm is an example of a(n)

A) co-preneur-managed business.
B) cousin consortium.
C) owner-managed business.
D) sibling partnership.

Question 35

The family endured great hardships together in the old country but vowed they would always watch out for each other in America. Together, they built a thriving business; it was the Muellers against the world. This family's commitment is based on

A) family control and influence.
B) identification of family members with the firm.
C) binding social ties.
D) renewal of family bonds to the firm through dynastic succession.

Question 36

Kinder's Deli has been in business for three generations. A place was found for every Kinder child to work in the shop. The name "Kinder" meant "fine deli meats." This family's commitment is based on

A) renewal of family bonds.
B) identification of family members with the firm.
C) binding social ties.
D) emotional attachment of family members.

Question 37

The close relationship of business factors and family concerns in a family business are best described as

A) separation of domains.
B) a generational gap.
C) an example of blood being thicker than water.
D) overlapping.

Question 38

Recent research findings suggest that companies that are successful in transferring ownership and management from one generation to the next are characterized by

A) centralized management.
B) diversification.
C) transfer of equal ownership shares among all heirs.
D) entrepreneurial behavior.

Question 39

In a family business, the business's goal is to

A) create value for family members.
B) create value for customers.
C) emphasize competition, flexibility, and unity.
D) emphasize stability, diversity, and flexibility.

Question 40

A family retreat formalizes the participation of the family in the business to a greater extent than a family council does.

Question 41

Betsy had always had decisions made for her, first by her parents and then by her husband. So when her father asked her to take over the family business, she had a fear of

A) failure.
B) success.
C) commitment.
D) disappointing her friends.

Question 42

A common problem for a founder in passing the business on to a daughter or son is

A) introducing the child to outsiders such as bankers.
B) finding a suitable position for the son or daughter within the business.
C) arranging the transition from part-time to full-time employment.
D) giving little thought to the child's talent, aptitude, and temperament.

Question 43

Tim is married to Susan. Tim's parents are his _____, and Susan's parents are Tim's _____.

A) family of attachment; family of origin
B) natural family; inherited family
C) natural family; extended family
D) family of origin; family of attachment

Question 44

Sibling rivalry in a family business

A) rarely affects nonfamily members in the firm.
B) may create disagreements about business policy.
C) is unusual if roles are determined before the siblings join the business.
D) is often good because it spurs business competition within the organization.

Question 45

"The more you can do, the more is expected of you." Josh already had his hands full managing just one of his father's retail stores. He didn't doubt his ability to do well managing an entire region, but still he was reluctant to accept the assignment. He likely has a fear of

A) failure.
B) success.
C) commitment.
D) disappointing his parents.

Question 46

Of all the relationships in a family business, the _____ relationship has been recognized for generations as the most troublesome.

A) grandparent-grandchild
B) family member employee-nonfamily member employee
C) parent-child
D) husband-wife

Question 47

The recruiter from IBM made William an offer almost too good to be true. The problem was William's dad, who always expected William to join him in running the family business. William's difficulty in accepting IBM's offer may be based on the fear of

A) failure.
B) success.
C) commitment.
D) disappointing his father.

Question 48

Fran and Bob (who are married) own and manage a cleaning service. A potential advantage of this arrangement is that

A) differences of opinion about the business likely won't carry over into family lives since they will see each other more hours daily.
B) it affords the opportunity to share more of their lives together.
C) the business isn't likely to dissipate their energies as they can each work on separate sections.
D) they can count on working fewer hours in the business.

Question 49

To protect the interests of both the family and the business in a family business, the owner should

A) recognize a basic obligation to supply family members with employment of some type.
B) refuse to hire family members but, instead, reward them with generous dividends.
C) personally make all personnel decisions affecting family members.
D) identify the positions, if any, that are reserved for family members when hiring nonfamily employees.

Question 50

In considering the role of younger family members, the best philosophy is to recognize that

A) a child should have a right to a job in the business if he or she desires.
B) no family member should be hired at any level.
C) children should have a right to choose their own careers.
D) sibling rivalry will always be an issue with second-generation managers.

Question 51

Brandon always came in second-in birth order, in school and sports, and in his father's heart. When his older brother decided not to take over the family business as expected, Brandon was paralyzed with fear. This paralysis was likely based on a fear of

A) failure.
B) success.
C) commitment.
D) disappointing his friends.

Question 52

A document that states the principles intended to guide a family firm through times of crisis and change, including the succession process, is called the

A) business plan.
B) articles of incorporation.
C) family business constitution.
D) corporate by-laws.

Question 53

Ideally, the entrepreneur and his or her spouse who is not active in the family business

A) form a team committed to the success of both the family and the family business.
B) should divide the household duties to keep the entrepreneur involved with the family.
C) should insist on maintaining separate domains and spheres of influence.
D) All of these are correct.

Question 54

Family business consultants typically advise parents to

A) subtly, rather than openly, push a child toward a career in the family business.
B) let a child work outside the family business, for a time at least, to prove he or she can make it without help from the family.
C) introduce children to the family business at a later age.
D) never bring siblings into the family business as this will more than likely create competition and conflict.

Question 55

Bob and his sister Betty are co-owners of their late parents' business. Bob actively manages the business; Betty supplies capital from her inheritance but does not work in the business. They squabble over the distribution of profits from the business. Bob likely sees his sister as a _____, whereas Betty views her brother as a(n) _____.

A) predator; parasite
B) co-owner; employee
C) parasite; predator
D) stockholder; manager

Question 56

To avoid problems with nonfamily employees in a family business, the owner should

A) consider nonfamily employees before family members when giving promotions.
B) avoid all special consideration for family members.
C) make clear the extent of opportunities for nonfamily members when hiring them.
D) minimize discussion about future management changes.

Question 57

Liam's mentor had worked with him for several months to prepare him for the promotion. Now that the offer has been made, Liam is hesitant. His hesitation is likely based on a fear of

A) failure.
B) success.
C) commitment.
D) disappointing his mentor.

Question 58

Living above the workshop made it easy to involve the children in the daily business decisions. The children knew from the time they could write they were expected to work in and eventually manage and own the business. This family's commitment to the business is based on

A) family control and influence.
B) identification of family members with the firm.
C) binding social ties.
D) renewal of family bonds to the firm through dynastic succession.

Question 59

After college graduation, Terrence was expected to begin working in the family business; however, instead he continued to lead the playboy life, always postponing his decision about working for his father. Terrence probably has a fear of

A) failure.
B) success.
C) commitment.
D) disappointing others.

Question 60

Researchers have found that one of the most frequent and stressful roles performed by a spouse not employed by the family business is

A) making impartial decisions on controversial business.
B) providing balance in family matters.
C) entertaining potential clients.
D) serving as a mediator in business relationships between the entrepreneur and the children.

Question 61

Which of the following usually occurs in the first several meetings of a family council?

A) A board of directors is elected.
B) A code of ethics is generated.
C) A family constitution is generated.
D) All of these are correct.

Question 62

Match the term to its definition.
a.co-preneurs
b.cousin consortium
c.family
d.family business
e.family business constitution
f.family council
g.family retreat
h.nepotism
i.organizational culture
j.owner-managed business
k.sibling partnership
l.socioeconomic wealth
m.transfer of ownership
A business in which children of the founder become owners and managers

Question 63

Devon works at his family's hardware store. He is expected to take over leadership when his father retires. Devon is developing a personal action plan. At this stage, he should seriously assess whether which of the following questions is answered?

A) What are my core values?
B) Who am I?
C) What are the most important areas of my personal and professional life that I should work on?
D) All of these are correct.

Question 64

Jan and Jill started a business 20 years ago. Jill recently stepped down and her daughter Jenny has agreed to start managing the company with Jan's help. The eventual goal is for Jenny to run the entire company. This process between Jan and Jenny is called

A) a sibling partnership.
B) a family consortium.
C) mentoring.
D) nepotism.

Question 65

Explain the concept of family and business overlap in a family business.

Question 66

To ensure the success of a family business retreat, David Lansky, CEO of a family business consulting firm, suggests that which of the following guidelines be followed?

A) Give everyone a chance to participate.
B) Accomplish as many goals, both small and large, as possible.
C) Feel free to deviate from the agenda.
D) Always let an outside expert or facilitator coordinate early sessions.

Question 67

Jim, the founder of a family business specializing in real estate, is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This action would

A) be next to impossible because gaining consensus from that many people is difficult.
B) be inherently unfair if any of the children work in the company.
C) potentially be inconsistent with the future successful operation of the business.
D) require a possible change in corporate structure because the company deals in real estate.

Question 68

A family business constitution is sometimes labeled a

A) business plan.
B) by-law guide.
C) family creed.
D) succession plan.

Question 69

In preparing for succession, the senior generation has certain responsibilities. One of these is that the

A) estate of the senior generation should be settled and audited.
B) senior generation should hold the next generation accountable for their actions.
C) business should have a formal audit of the financial statements.
D) next generation should develop long-term plans for leadership and be held to these plans.

Question 70

The leader of a family-owned enterprise might decide to bring in a nonfamily member as an executive with the firm for which of the following reasons?

A) To deal with change.
B) To provide new skills and expertise
C) To bridge the gap between generations
D) All of these are correct.

Question 71

Which of the following actions is best for parents to decrease succession conflict among children active in the firm and those who are not?

A) Let those not involved in the company have a larger portion of an inheritance outside of the company, and allow those involved in daily operations have more ownership of the business.
B) Let the next generation reach a consensus about management of the company.
C) Change the ownership of the company so common (voting) stock is only given to those active in the firm's management and others receive preferred (nonvoting) stock.
D) Make decisions based on tax considerations, not what is best for the next generation or the business.

Question 72

Which of the following statements about family retreats is true?

A) A family retreat should use the founding entrepreneur as a communication facilitator.
B) A family retreat should avoid discussing sensitive issues for best results.
C) The talk at a family retreat should solely focus on business.
D) A family retreat should be one of the first steps implemented for building a healthy family-to-business relationship.

Question 73

Which of the following statements about using available family talent in the succession plan is true?

A) Younger family members working in the business should realize that mistakes early on in their careers should be considered in their future advancement.
B) If the available talent is not sufficient inside the company, the owner must bring in outside leadership or supplement family talent to avoid a decline in the business under the leadership of second- or third-generation family members.
C) If a younger family member would like to advance his or her career by working on a new direction for the company, a negative decision by his or her parent means he or she should not discuss his or her ideas with the board of directors.
D) It is rare a younger member will have the skill set to rescue a struggling company; therefore, younger members should not be considered for a succession plan.

Question 74

Explain the role of the entrepreneur's spouse as it affects a family business.

Question 75

Match the term to its definition.
a.co-preneurs
b.cousin consortium
c.family
d.family business
e.family business constitution
f.family council
g.family retreat
h.nepotism
i.organizational culture
j.owner-managed business
k.sibling partnership
l.socioeconomic wealth
m.transfer of ownership
Couples who own and manage businesses

Question 76

A family retreat is designed to

A) bring family members together to openly discuss family business matters.
B) focus on family business matters while avoiding extensive communication.
C) control the lines of communication.
D) announce the latest policy decisions and other changes in the business.

Question 77

Match the term to its definition.
a.co-preneurs
b.cousin consortium
c.family
d.family business
e.family business constitution
f.family council
g.family retreat
h.nepotism
i.organizational culture
j.owner-managed business
k.sibling partnership
l.socioeconomic wealth
m.transfer of ownership
The practice of employing relatives

Question 78

A parent might attempt to resolve a transfer of ownership by giving children active in the firm's management _____ stock and giving nonactive children _____ stock.

A) preferred, common
B) growth, speculative
C) common, preferred
D) more, less

Question 79

Match the term to its definition.
a.co-preneurs
b.cousin consortium
c.family
d.family business
e.family business constitution
f.family council
g.family retreat
h.nepotism
i.organizational culture
j.owner-managed business
k.sibling partnership
l.socioeconomic wealth
m.transfer of ownership
An organization in which either the individuals who established or acquired the firm or their descendants significantly influence the strategic decisions and life course of the firm

Question 80

Which of the following statements about family councils is true?

A) A family council should be created before holding a family retreat.
B) A family council is the organizational and strategic planning arm of a family.
C) The members of a family council should be appointed by the owner of the family business.
D) A family council should be looked at as a casual get-together.