Clements Family Case Essay

Clements Family Corporation

Understand Family Enterprise

Assignment #4

Date: 24/10/2016 

The Clements case shows how a regional family company, threatened by national competition, needs to make changes to its structure and way of doing business or face extinction of the company or sale. The case shows the steps the business takes to make it succeed, including restructuring that involves eliminating long-time family managers and planning for succession. It also shows shows post-transition successes and areas that still need work. In my respond paper I will evaluate possible solutions to the problem and explain which solution should be adopted in order to help the growth of family business.

The issue for this case has occurred in 1999, when Phil Clement, the President of the Clement Family Corporation was frustrated because of the lack of performance, therefore he submitted for resignation, however the board encouraged him to stay. The issues in the company were that return on net assets were below the median, the costs were increasing faster than revenues, capital projects were not yielding returns and the net earnings and return on capital was declining. There were several attempts such as engaging a strategy consultant however the team wasn’t satisfied with consultant’s ideas and never have gotten to the root of the problem.

There were three choices that are possible for the business to get back on track, which were stick to the same business plan and make no changes, selling the business or make dramatic changes. The first proposal is isnt a good idea since the business is in the decline making no changes doesn’t seem as a plausible solution. The business would probably go into further decline causing the board of directors to sell the business at lower price than current.  The second solution is selling the business and it would take a lot of guts to do that since the business has been operating for 100 years which can bring a lot of family members in jeopardy of loosing jobs and getting out of work, as well it is a bad reputation for the whole family since the business has progressed so much since John C. Clement started the business. The most viable option would be to make drastic changes. The change would be to focus more on the business than family which would increase performance, competitiveness and profitability however, the loyalty and family harmony would decline but it is needed in order for business to go back on track. Therefore, the goal would be to increase the stock value, dividends, liquidity and connectivity to business, as well as business improves the harmony would become a byproduct of performance. The aftermath of the change might cause some family members in disappointed since they would not be treated as they were before since a lot of family members are involved in the business and they are over identified with it, because of it the culture of loyalty and entitlement caused the business to depreciate. The change might cause for some family members to retreat from their position.