Trucolour Inc. Case Study

Introduction

The purpose of this paper is to put forth the criteria(s) used by researchers to measure family firm success.  In doing so, we will be using the three circle model. A three-circles model is regularly used to demonstrate the three vital parts in a family-claimed or - controlled association: Family, Ownership and Management. This model shows how the parts may cover. We will be applying this model to TruColour Inc. to assess the success criteria of family businesses.

TruColour Inc. is a family owned paint manufacturing business. Located in Carrigaline, Cork, the business offers its customers top brands of paint (including those manufactured by themselves) for interiors and exteriors and marine paint. In addition, it offers paint accessories, casa deco wallpaper, other paint products (primer, varnish brushes, thinners, foam brushes) and services such as colour consultations, colour repair/fixation. TruColours is a small business, which can be said to be in its infancy stage. The board comprises six members of the Franklin family- Mr. Franklin (CEO and chairman), Mrs. Franklin, Bob, Carol, Al and David Franklin. Among them, Mrs. Franklin, Bob and David do not work in the firm.

Family role and Ownership Circle

TruColour Inc. was faced with a situation, wherein a large competitor subjected them to a buyout offer. David Franklin is a non-participating board member who gave his proxy to his mother, Mrs. Franklin. As the board faces off regarding the offer, every individual's announcement mirrors his or her part in the family and ownership circles. Mr. Franklin’s (the founder/father) role is that of the CEO, Chairman and a father and he believed that he fulfilled the duty well by keeping the company. Mr. Franklin’s role as a father was primarily concerned with providing for the family financially. He described the business as a ‘legacy” for his children. His role as the CEO focused on his authoritative position and the associated decisions that needed to be taken at that level with regard to the overall functioning of the business. As the chairman he put forth that continuing investment in the company by buying shares would be a sagacious decision. Bob Franklin, who is the second son of the Franklin family, was a vocal challenger for his father. Bob had a different role in the business and therefore, had a different perspective on the issue. He viewed the situation from the perspective of a non-employee, younger sibling and minority investor. Bob’s role is essentially to serve as a critique of his father’s decisions i.e. he observes the CEO’s management style and is a concerned investor. The other family members joined in the meeting. Carol, the youngest child (and only daughter) had a different view as compared to her father and older brother Bob. She was one of the new shareholders in the company, a promoted employee and a key manager. The oldest son Al, expresses his view which is in favour of keeping the company. After majority shareholder votes have been counted, it was decided that the company would be kept. As Mrs. Franklin and David could not be physically present in the meeting, Mrs. Franklin sent a letter containing her and David’s vote in case of a unanimous decision. Thus, we see that even though, they all belong to the same family; they have different personalities and therefore different perspectives, in addition to their existing roles in the business.

As this business is in its infancy stage, given its size and member composition, which consists only of the Franklin family, simplifies decision-making.

With regard to the ownership, the business has a controlling owner (i.e. Mr. Franklin). Mr. Franklin distributed share holdings among four of his children (David, Al, Bob and Carol).

Potential problems could arise in the future, when Mr. Franklin retires from his CEO position and the ownership shifts to the younger generation. In this business, positions are not assigned according to age or seniority, but according to capabilities and passion, as is seen in Carol’s case. Additionally, there might be changes in the business’ future in terms of individual movements across internal boundaries. This involves a family member becoming an employee or the transition from an employee to an owner/board member or a family member/employee being given share holdings.  

Analysis

As the business is a small business (currently) and is controlled by one person, most of the power lies with the CEO, this could cause resentment among other members of the business. The board comprised of family members, but did they have the necessary expertise to lead the business is a major question. Thus, the business’ growth prospects are questionable. As mentioned earlier, the business hired a member for a management position. There are many positives of doing so. These include enhanced client relations through family contact, intergenerational progression, long haul steadiness, shared qualities, faithfulness and responsibility, inborn trust, eagerness to give up for the business, passionate connection to the business; all the more eager to add to its prosperity and having a similar culture (Fowler and Edquist, 2003). On the contrary, there are certain negatives associated with hiring family members.

Families are not flawless, so a question among relatives can spill from home into the working environment. There is dependably the likelihood of administrative ineptitude. It may not be conceivable to separate family and work. Examples of contention will be established in early family encounters. Correspondence may separate. Kin competition may make issues.

Recently enlisted relatives may feel that they don't need to procure their positions; their prosperity will be viewed as connected to their name rather than their capacities.

The business might be liable to charges of oppressive employing hones if employment opportunities are not distributed (ibid). Family firms may bring about lower costs due to the more noteworthy eagerness of relatives to make money related penances for the business. Tolerating lower pay than they would get somewhere else to help the business in the more drawn out term or conceding compensation in an income emergency are cases of family philanthropic conduct (Gov.UK, 2011). This is very much applicable in TruColour’s business, as all the employees comprise family members. TruColour’s Inc. is currently in the “Working together” stage. In this stage, family firms are trying to balance or manage complex relationships among different family members or contributors to the family business. This is the phase that puts a premium on family correspondence and clear opening methods. It is likewise the phase when numerous families turn out to be significantly more mind-boggling themselves. There is presently a radical new era adding to the blend of marriage, separation and remarriage, and so on. Working together is not as easy as the name suggests itself (Gersick, 1997 ). When all is said in done, family firms feel that they are more grounded in light of the fact that family members are included in their exercises. Family proprietors trust that their members can be trusted, will work harder, and mind more, which will ultimately help create competitive advantage for the firm (Family Business Survey, 2008).

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