Question 1

The fundamental psychological conflict in family businesses is guilt.

1. True
2. False

Question 2

What accounts for the economic power of family businesses?

1. They account for 78% of the new jobs created.
2. They account for 60% of US employment.
3. They account for 50% of the gross domestic product.
4. They represent one of the fasted growing sectors of the economy because their new job requirements outpace their current employment rates compared to other businesses.
5. All of the above.

Question 3

Family businesses tend to operate more ethically. This is due to:

1. The absence of a cumbersome organizational structure
2. Ethical problems being quickly visible since the business is a member of the local community
3. Shorter supply chains that offer less opportunity for corruption
4. Smaller number of employees

E) Both (b) and (c)

Question 4

Family businesses exhibit more social responsibility than their competitors because:

1. It is easier to participate when you are geographically located in the community.
2. Local social responsibility activities are not usually very costly.
3. They are very concerned about their image and reputation.
4. The absence of a complicated decision-making process makes participation easier.
5. The competition does not see much benefit to community activities.

Question 5

Family businesses tend to be more resilient in hard times because:

1. They have less pressure from the stock market.
2. Family members get less pay than everyone else.
3. They have centralized decision-making.
4. They are willing to plow profits back into the business.
5. They have fewer employees.

Question 6

As attractive as family businesses are on many fronts, they also have disadvantages. These include:

1. They are generally not attractive to investors.
2. They tend to be unstable organizations.
3. Family closeness can lead to disruptive sibling rivalry.
4. The interests of a family member can conflict with the interests of the business.
5. Both (c) and (d).

Question 7

Family businesses have limited sources of external capital because:

1. They tend to avoid sharing equity with nonfamily members.
2. Most family businesses offer products or services that are generally not of interest to venture capitalists.
3. Family businesses have too high a percentage of employees that are family members.
4. The legal requirements for investment in family businesses are excessive.
5. The amount of money requested is too small for investors.

Question 8

The nepotism in family businesses can ultimately result in business failure. Why?

1. The business is less desirable to investors.
2. Inequitable reward systems
3. Tolerance of inept family members as managers
4. Both (b) and (c)
5. All of the above.

Question 9

Which of the following is NOT true?

1. A family business is more likely to be successful if it employs only family members.
2. Nonfamily members may feel that they will be automatically outvoted in decision-making.
3. Sibling rivalry may create problems in the business.
4. A line does not need to be drawn between work and family discussions.
5. Family and nonfamily members should have an equal opportunity to express their views.

Question 10

Which of the following should be done when developing a compensation plan for a family business?

1. Make sure that family values set the tone.
2. Consider fair compensation to be equal compensation for all family members
3. Make sure to compensate wives for the work they do
4. Compensate family members at a higher rate than nonfamily members
5. Include emotional pressures as a decision making factor

Question 11

In developing a compensation plan, what is the most pressing issue?

1. Accurate job descriptions
2. Research of the industry as the basis for compensation levels
3. Considering family members differently than nonfamily members
4. Fairness
5. Seeing fairness and equality as the same

Question 12

Why are compensation and benefits among the most frequent sources of conflict (as identified in the chapter), especially among members of the younger generation?

1. Compensation is inextricably linked to someone's feelings of importance and self-worth
2. There are emotions associated with being a member of the family that owns the business.
3. The younger generation only cares about money.
4. Both (a) and (c)
5. Both (a) and (b)

Question 13

A family member's compensation should be based on:

1. Family values
2. Fair market value
3. Fair market value plus 10%
4. Family member's housing and family needs
5. A percentage of overall sales

Question 14

The _____ of a family business is very different from that of a company you will find on Wall Street because, among other things, family businesses frequently take a very long-term point of view.

Question 15

The company may be subject to charges of _____ practices if job openings are not published.

Question 16

The benefits of an employment policy notwithstanding, the idea may be met with _____.

Question 17

An accurate _____ includes responsibilities, level of authority, technical skills, level of experience and education required for the job, and goals for an annual performance review.

Question 18

_____ conflict can be beneficial to a family business when it increases opportunity recognition, produces high-quality decisions, encourages growth, strengthens groups and individuals, increases the learning necessary for entrepreneurial behavior, and increases the levels of commitment to the decisions being made.

Question 19

_____ is one of the biggest dangers of working in a family business. Arguing with relatives will only reinforce to other employees that they are in a family business. This can quickly lead to feelings of disparate treatment, which, in turn, can lead to discrimination charges.

Question 20

If the compensation for the children in the family business is excessive, often based on housing and family needs of the family members, this will hurt the company's _____ because the amount of money available to spend on the business will be reduced.