01 MAY 2002

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The institutional overlap of family run businesses

"In small family run businesses, the family values such as equality, belonging, loyalty and tradition, tend to interfere with business concepts such as competitiveness, merit, delegation and innovation. Indeed, this overlap of family and business values involves a number of advantages, but also has its disadvantages including conflicts and resistance to change". This was stated by Prof. Domenico Nicolo' from Messina University’s Economics Department during a seminar for BOV managers on the problems related to succession in family run businesses and the importance of the supporting role credit institutions have to play.

Professor Nicolo explained that "in the initial stages, the institutional overlap constitutes a point of strength in entrepreneurial values and introduces the spirit and ethics of sacrifice for both owners and workers. However, the majority of family run businesses start to face problems when they come to the stage where a succession in management is involved. At that stage, the family values are likely to impinge negatively on the succession process."

"Thus, appropriate planning for the management hand-over of family run businesses reduces the risks associated with succession crisis. He said that instead of taking the form of a traumatic event within the organisation, well planned successions reflect the characteristics of a preplanned development of the firm."

Prof. Nicolo suggested that "in order that the transition process runs smoothly, it is important to take the necessary steps to identify the required changes in the organisation's evolution and development. The training methodology and the timing of the entry of new leadership is also considered essential." Prof Nicolo emphasised the importance of the role credit institutions play in assisting small family businesses during the transition period of change in leadership.

Professor Nicolo’s visit in Malta was made possible thanks to the excellent relations that Bank of Valletta has with the University of Messina.



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Editor: Saviour Balzan
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