The family businesses are very important in the economy of any country. To assess the importance of family businesses in Spain, it is important to highlight that they account for 90% of all companies, which contribute 65% of Spanish GDP and employ about eight million workers. The data worldwide are in the same line as the Spanish. In Argentina, for example, it represents 50% of GDP and 70% of jobs.
However, the very characteristics of ownership and management in the family business mean that these companies have clearly differentiated elements from non-family businesses. Obviously, it is not the same to be a manager in a non-family business, usually without direct relationships either with the owners or with the members of the board of directors, than to be a manager in the family business itself and a family member, frequently a member of the board of directors. administration and having blood relations with a good part of the remaining owners.
This causes a particular situation with both advantages and disadvantages. Among the advantages, the basic one is the greater commitment of the family members of the company with the company due to their own family ties. This concept makes many organizations start their journey being familiar due to the scarcity of resources with which most businesses start.
It must be taken into account that in a family business a complex situation arises due to the existence of three interrelated systems that are ownership, management and the family and that usually coincide in the same people, that is, that the same person he is a family member, owner and manager making the situation really complex. For this reason, it is necessary to reconcile the interests of the different groups involved in the ownership and management of the family business, a process that favors the existence, often latent, of tensions within these companies.
Family business problems
Only 40% of these family businesses reach the second generation and 15% reach the third. The rest either close or are sold, on many occasions, due to family problems or lack of competitiveness.
The great problems of family businesses can be summarized as:
- Continuity. Due to the fact that family businesses usually have a clear founder who is usually the owner, manager and head of the family, the succession is very complex due to the natural fears of death, loss of power and work activity, after decades in the company, lead him to normally resist succession. Organizational structure. In many family businesses, the organizational structure has not evolved, maintaining the same structure as in its beginnings with the important problems that are generated when the size of the company has increased and the structure has not been able to adapt to the new situation. Internal conflicts within the family and with non-family members. This is a series of problems due to the lack of a clear distinction between the company and the family, inheriting customs and family norms from the company environment. This causes problems both between family members and with non-family members of the company. Some typical cases are non-compliance with functions and responsibilities, non-compliance with schedules, remuneration not aligned with the rest of the members of the company, etc. Professionalization. The low degree of professionalization in many family businesses means that managers are chosen from among family members, which often leads to poor choices. As one manager and owner of an important family business said, "if it is difficult to find a good manager, who is also from my family, it is almost impossible." Loss of competitiveness. The very characteristics of the family business, with family managers, internal tensions, etc. on many occasions they do not help the competitiveness of the family business in a changing and complex environment.
recommendations
Although the particular recommendations will be different for each case and will require an individual analysis, experience shows that there are a series of practices that serve to facilitate the operation of the family business without jeopardizing the continuity of the business.
- Possibly the most important is to have a family protocol that internally regulates sensitive aspects as well as helping to solve different problems in the business-family relationship. The family protocol must deal with from the succession to the governing bodies, passing through many other aspects such as the remuneration policies for relatives, the exchange of shares, the characteristics required for the entry of family members and many others. Plan the succession of the founder. It must be planned with a lot of time to be able to choose both the best successor and the best moment for the succession.
It is critical to identify the most prepared successor, to be able to equip him with the necessary training and experience. In addition, the succession must be carried out at the right time since in many cases it takes too long, causing significant problems. In later generations, the succession, once the protocol has been developed, should be more routine.
- Professionalize management: attracting and retaining the best professionals for the family business is key to its competitiveness and for them to help the development of the company, whether they are family or not. Strong governing bodies. According to an IESE study, more than 32% of family businesses do not have a governing body because they do not consider it necessary. However, experience says that the creation of three governing councils is an interesting practice: the board of directors, the board of directors and the family council. The first two with their usual functions (better with independent members), the third being to speak and establish the role of the family in the business.
In conclusion, family businesses are very important in the economy of any country and it is essential that managers, both family and non-family, know their characteristics in order to correctly help improve their results.
