What challenges do Spanish family businesses face?
In Spain, 89% of companies are family businesses, according to the Instituto de la Empresa Familiar (IEF). They are found everywhere and are of all sizes. Mercadona, El Corte Ingls and Ferrovial are also part of this group which, according to the European Family Businesses (EFB) association on a continental scale, includes within this typology all the companies that are owned by the family that founded it; They have the majority of the shares with voting rights, direct or indirect, and at least one of their members or their representative participates in the management. Spain is the European country with the highest share of family businesses. In fact, according to EFB, they generate almost 70% of employment in the private sector. These companies face challenges derived from their particular origin, such as the management of conflicts that may arise from family relationships and succession processes. At this time, in addition, they face the added effort of laying the foundations of their recovery, after a crisis that has put its resistance to the test and that has promoted its modernization and digitization. This has been a lifeline for many. Adaptation during the pandemic  Agility and resistance are two of the characteristics that define these companies, especially small ones, which account for almost half of family businesses (47%), while medium-sized companies account for 26% and large ones, 27%. , according to the document Family Business Report 2021, published in June this year by the IEF, in collaboration with the KPMG consultancy and the international research consortium Step Project for Family Enterprising. This resilience has been effective during the first wave of the pandemic, when entrepreneurs had to adapt their Business models to an environment marked by mobility restrictions, the paralysis of supply chains and the drop in sales and consumer confidence. The study highlights that, until October, when the second wave of infections forced the imposition of new restrictions, 63% of Spanish family businesses found that their income had decreased compared to precovid levels, while 25% maintained their sales and 12% increased them. Both those that maintained their turnover and those that increased it were able to do so thanks to their ability to adapt their products to a remote environment and to respond to new market needs. In addition, half of the family businesses implemented the telecommuting For all or some of their employees, 46% reduced office expenses and 43% assumed a higher indebtedness. Those that reached March 2020, when the outbreak of the pandemic occurred, with a more robust financial position and a more advanced digitization process, adds the IEF report, better weathered the effects of the crisis. However, the creation of new business lines and the promotion of digitization in operational and organizational processes have been some of the strategies that, in general, are allowing them to mitigate these effects and lay the foundations for recovery. To strengthen it, the Government plans to allocate 5,000 million euros from Recovery Fund Europeor, also known as Next Generation EU, to digitize, internationalize and increase the size of Spanish small and medium-sized companies (SMEs), a group to which 73% of these organizations belong. Advantages of the family business  Family businesses are entrepreneurial and very flexible. They react quickly thanks to the fact that ownership and decision-making is based on the family and therefore the nucleus that decides is made up of few people , explains Jos Antonio Clemente, academic coordinator of the Master in Financial Management and Management at the International University of La Rioja (Unite). Family participation provides another added value to this type of organization in which the welfare of the business as well as that of the ascendants and descendants is ensured: They have their own values, a series of commitments, a way of doing business. things in which there is a great emotional factor and an identity of its own is generated. And that, if it is managed well, is a great competitive advantage , says Clemente. These companies are more appreciated by consumers they consider them close, especially the smallest ones. For example, that the brand coincides with the propertys last name, is perceived as a guarantee, because nobody wants to risk their reputation, says Josep Tpies, emeritus professor in the General Directorate of IESE Business School and an expert in family businesses, who will lead the webinar Good practices for the sustainability of the family businessr, organized through HUB Empresa de Banco Sabadell. Sign up for the webinar Good practices for the sustainability of the family business, with Josep Tpies, emeritus professor in the General Management of IESE Business School and expert in family business, organized through HUB Company of Banco Sabadell. When: June 22, at 4:00 p.m. The management of the family business and its disputes  Juan Luis Falcn, partner at Garrigues and head of the companys Family Business Group, explains that in these types of companies, normally one family owns  although several may also be  with a relevant percentage of the capital stock and exercises political control and economic, in addition to actively participating in the management. During the exercise of this activity, disputes arising from relationships of a family nature may arise, but also from a particularity of this type of business: succession in command. All of these factors compromise their survival. Not surprisingly, family businesses have an average life of between 25 and 30 years, lower than that of others, located between 40 and 50 years, according to the study Succession planning: leadership respite plans, from the Chair of Family Business at the University of Valencia (UV). Only 9% of them reach the third generation and only 1%, the fourth. Currently, according to the IEF, the leadership of 43% of companies is in the second generation. Although there are exceptions. Codornu, for example, is considered one of the oldest companies in Spain. It was founded in 1551 and 18 generations have passed through it. Establish a family constitution  For Tpies, success comes from establishing rules that govern relationships between members. The important thing is to have conflict resolution mechanisms before they appear, he explains. Developing a document that regulates the internal functioning is an option. Creating a family constitution that reflects a common will around the project and from which some agreements are derived will serve. This code must include, according to the expert, the definition of the roles of each member, the hierarchical structure and the governing bodies, as well as the commitment of the family expressed through its values, the vision of the company and its mission. Clemente emphasizes the definition of the roles of family members, and adds the need to separate personal from work aspects, as well as to monitor the correct intergenerational coexistence. To achieve this, he adds, in addition to the family code, it is convenient to create a body that manages these aspects, something that only 12% of these companies do, according to the study Spanish Family Businesses Facing the Succession Challenge: Different Generational Perspectives, carried out by the Abat Oliba CEU University, Barcelona, the UV and the University of Extremadura (UEX). Establishing company-family governance mechanisms that can accommodate members who are not involved in company decisions, but who want to be informed, will also help avoid problems, adds Clemente. Communication and transparency are essential for this expert. The moment of succession  If not considered correctly and in sufficient time, the succession in the mandate of a family business can lead to a power struggle. This passing of leadership and ownership from one generation to the next is probably the most dangerous event in the lives of these businesses, the study warns. Succession planning: leadership relief plans. Replacing the person who leads a family business is a process with enormous difficulties because to the problems of change of leadership typical of all companies are added emotional and psychological problems related to the family, and all of them must be reconciled simultaneously, reflects this document. Despite the serious consequences it can have, only 28% of this type of company has a succession plan, the report concludes Spanish Family Businesses Facing the Succession Challenge: Different Generational Perspectives. It is a time of adjustment in which the generation in charge finds it difficult to leave the company and doubts about the preparation of the next one. By incorporating new members, the structure is altered and new labor Relations, Explains Tpies. As with dispute resolution, experts admit, succession will be easier if you have time to prepare and are defined in a strategic plan.