The family business from a strategic point of view

1. Introduction

2. Planning the strategy

3. Starting my proposal

4. Conclusion

5. Bibliography

INTRODUCTION

What I present below is an extract from my personal life and how it relates to a series of investigations carried out by a large number of specialists in business organization and management. These articles that I investigated with a deep personal interest have given me great motivation to give shape to all those ideas that I had always had but that I had never dared to communicate and that now I understand the great value of carrying them out. Let me explain, I am part of a family business, which has been founded for 20 years and has not yet passed into the second generation, fortunately the founding partners are still in charge of the company but the day will come when the quartet of the replacement generation Let's take the reins of the company and we must prepare ourselves….Talking to my father one day I asked him what was the vision of the company? And he only replied that he did not know about the vision but that he did know of the fear that he had that when the day of their retirement (his partner and he) came, the company that they had built with so much effort would not be able to overcome the succession process with benefits. His concern alerted me that something had to be done and that is how I focused on seeking information on the strategic point of view of family businesses. I believe in the importance of the strategic vision, the business mission and the values, as well as in the fundamental and peculiar aspects of these types of organizations and in the special treatment that they should receive from the management and other members that make them up..

PLANNING THE STRATEGY

As I put the knife further into the butter I realized how damaging it can be for a family business to be managed like any other business. In particular, I was alarmed to learn of figures such as those provided by the Wharton Entrepreneurial Center, based on a study conducted on 200 successful family businesses between 1924 and 1984, which showed:

80% ceased to exist.

20% survived with the same name. Of which the:

5% were sold.

2% are not in the hands of relatives.

13% belong to the same family as in 1924. Of these

3% grew significantly. 3% did not grow. 7% declined in several ways.

I believe that these are not what a family wants for the destiny of their company. Blessed are family companies! Because our daily bread comes out of them, and in particular I would like my great-grandchildren to get the bread from the same place where I got it and to enhance that name that was once a dream and that so many nights revealed to its founders, but for that it is essential to prepare the ground at least 10 years in advance.

In view of this window that opens in front of my eyes, I have no choice but to start by specifying the steps that I consider necessary to start the restructuring project of a company that until then has been treated as a common organization, without meriting transform the structure of the company, but simply add aspects that we observe interesting and useful to improve its operation and allow us to give a certain guarantee of perpetuity to our company. First of all, we must Visualize what a Family Business is and the peculiar characteristic that gives them that special touch. Thus we find what some authors call the Model of the three circles: It is nothing more than a model that defines these organizations based on the union that exists between the three subsystems that make them up; Business,Property and Family, this combination of elements at the same time that it can represent an additional problem can also generate a competitive advantage as long as it is managed correctly, taking full advantage of the feeling of belonging that circulates among the members that comprise them. In my opinion, these elements are related to three concepts, with the Heart that contains the feelings between the family and those who have towards the company, The Financial Capital, belonging to the owners and that will require a lot of awareness when making use of the The same, since there is a risk that the two pockets, that of the company and one's own, become confused and the money of the company is used to cover personal expenses; and finally the Brain, which represents intelligence, professionalism,the preparation and training that must exist in the organization.

Figure 1. Model of the three circles

SOURCE: Davis and Tagiuris (1982)

Starting my proposal:

When the initiative does not arise from the founders but from their descendants as in my case, the first thing I focused on was gathering information that would allow me to have solid bases, statistical evidence, published cases and support material, which would allow me to support my proposal since it is not easy to communicate to people who have established the company, who have worked for it for more than two decades and who have known how to conduct it successfully that the time has come to plan what the succession will be and that for this, things must be done that They have been left as implicit and that it really is not the case, on the contrary, it is necessary to bring everything to light and as it is well said the cards on the table, because otherwise, if it continues to be left, it believes that everything is very clear, the same will happen. what happens to my father,They are afraid to think about the future of the company and not because they ignore the qualities and capacities of their successors, but often there is a resistance from the founders to accept their withdrawal because there is no plan to carry out the process, or because You are turning your back on the reckless decision of choosing one or two of your own children who will be the ones who will lead the company for the next few years, but you have to make them understand that if you don't plan, you run the risk of improvising when the time comes and making mistakes. in the decision or that the reluctance to delegate the helm of the ship can lead the company to stagnation, to the demotivation of the members of both the family that works there and the rest of the workforce, since it is always necessary to inject new proposals,ideas that identify the will to change that today's organizations must have. Failure to undergo changes leads to rigidity in the organization and this translates into losses, low returns and becoming chronic, even the disappearance of the company.

What hat do I wear?

Source: Euromadi News

Once the importance of the issue has been raised to the founders and they have been intrigued by our concern, we must continue the project with the definition of the company that is wanted with future expectations, paying attention to a key element to achieve survival of the company and I am referring to the capital management that the founders have been doing so far, they have a great advantage when they know what behavior is the most appropriate when making a decision, it is like having three hats, a first hat, that of Owner, a second hat, that of Entrepreneur and a third hat that of Family and they must recognize when it is appropriate to put on each one.

Having commented on this ability that the founders must have to be able to think about the future, I consider that the time has come to work on the realization of the Vision, Mission and Values of the company, this is something in which all members of the family or those who are motivated to do so, because from there the direction will result, the direction that the organization will follow and that will be a legacy transferred to us by the founders and will pass from one generation to another, it is important that it is communicated clearly and encouraging to make everyone feel committed and identified with that great force that will be able to generate the power necessary to crystallize the corporate image that is desired in the long term.

It usually happens in family businesses, when they are small or medium-sized that there is no organizational scheme of the place that each member occupies (family or not) within the company and of the functions they must fulfill, much less have specific objectives to be achieved For each functional area of work, in a certain way there is a degree of informality in the way of evaluating the work performance of the members of the company, especially those of the family, which makes it difficult to know who are really efficient and who, on the contrary, need More attention. Now, can you imagine how difficult it is for the founders to choose one or more of their descendants when in reality there is no clear measurement of the abilities and abilities of the successors?In such a way that it is essential to raise this need and recognize how much this can help when deciding who will be the future head of the company, taking into account the good judgment of the founders regarding the choice of hat that should be worn, in my opinion should select the employer, it is a matter of skills.

Continuing our family business project, the next step to follow will be to write the “Family Letter” or the “Family Protocol”, which is defined by some authors 1 as: “A consensual and unanimous agreement of wills, developed between the members of a family and the family business that makes possible the appearance of a code of conduct that regulates the actions between the two. The moral force of the Protocol is unquestionable if the process has been done correctly and the Family has been free to express what they really think ”. In simpler words, it is simply to write the rules of the game by which the relations between the different members will be governed from this moment on. In one of the texts that I consulted I found an example of a Family Letter belonging to the PUIG companies,which can guide us on the content of it. Mentioning some aspects as an example, we have:

• In-laws are not on the company's executive board.

• No shareholder may use the shares as collateral for his personal purposes.

• If a member of the PUIG family decides to leave the company, he or she will not be able to have assets that could compete with the company. On the other hand, the family group is obliged to have a financial reserve with an established price that can buy the shares of the leaving member.

And thus, because of the style, the key in the preparation of this Family Letter is that it must be tailored to the expectations of the members, without it becoming a reason for controversy but rather convergence.

If we have survived all this, and the founders have not fired us from the company but have understood that our intention is to be spokespersons for a series of elements that surely had not been considered, then we are on the right track in our presentation and our next The proposal would be the creation of the Family Council, which will act as a sufficiently informal body that will serve as a meeting place to communicate the family's plans to the company and vice versa, it is therefore an informal meeting where it will be abandoned, for For a few minutes, the role of managers to deal with company issues that affect the family, will then be a kind of arbitrator who will help channel all the concerns of the family members,I believe that these Board meetings could be held quarterly or when the situation requires it.

With all these steps that we have proposed to carry out, we have shaped the "Strategic Plan of the Company", which aims to clarify patterns of behavior, purge the company of old problems and set the guidelines to continue satisfying customers, increase profits and revitalize the company for the next generation.

We are already on the threshold of the succession process, and we need to point out some important aspects in which the support of the founders is essential in preparing the replacement generation to face future challenges. When we find ourselves in a stable, secure job, we tend to think that we do not need to do anything else because we work in a solid company, of the family and our job is not in danger, that is a thought that in the long run can become our heel Achilles, because the environment is constantly changing, it becomes demanding and we most likely have not bothered to know even against whom we compete, what are their competitive advantages, will we be able to respond to those demands of the environment?The skills we acquire as a result of our years of experience in the labor field alone are not enough, it is necessary to go to the forefront in terms of formal knowledge (Human Resources, IT, Management, Knowledge Management, Administration, Accounting, etc..) that complement and enrich our work performance; It is a matter of managing our time and feeling motivated by any area that we are interested in studying, and that information that we are adding should be disclosed within the company and thus we would be constantly preparing and strengthening it for what may come, even more so in a economy as changing as ours over which we have no control;But if we have control over the strengths that we can add to the companies and the weaknesses that we can emerge from, then we cannot sit back and see how other companies surpass us and how the life cycle of our company passes from a stage of Maturity to a stage of decline. It is up to us to inject into our company that strength it needs to continue growing and guarantee a future for future generations.

CONCLUSION

These are the topics that I consider basic to expose in a first meeting with the creators of the company, who should internalize this exhibition so that it has continuity in a next meeting that they themselves convene and that includes the rest of the family to lay hands to the work and give an opportunity to strengthen ties and concert efforts.

To close this work, I want to send you something that I read and that seemed to me to concentrate the essence of what a family business should have, this is how (Fernando Soria) states that dialogue, training, consensus, flexibility, Professionalism or love between family members and between the members of a family company are some of the characteristics or skills that must always be present in a Family Business.

Today it is essential that organizations are very receptive to all issues related to strategic management, because in such a competitive environment and with companies like these that are really vulnerable, it is necessary to have an action plan that allows us to be proactive and eliminate those reactions to the changes so characteristic of rigid companies with an uncertain future. Having a well-defined course and a very capable and knowledgeable Captain of the environment in which we find ourselves is a sign of survival for the organization, as long as the special treatment that these firms should have due to their condition of converging in them is very clear. three subsystems: Family, Property and Company.

Thus, the ground must be prepared so that the succession process occurs generating the least possible impact for the company and the family.