Francisco Valera is an associate of Lansberg, Gersick & Associates, a family business research and consultancy group.
Family businesses must look to the future if they are to survive and the new generation in Spain is being given its chance
This article is based on more than seven years' experience with young people from the next generation of family businesses in Spain and clearly conveys a message, from Spain's next generation of leaders and owners, of hope and enthusiasm about the continuity of their family businesses in Spain.
I say this because I am aware that family businesses have many constraints, challenges and burdens imposed on them. Some of these include bureaucracy, non- family executives who don't understand family business, and dividend policies that end up polarising the needs of the family and the needs of the business. These can erode the energy, aspirations and enthusiasm that young people have for their family enterprise.
The message of hope here is founded on the faith expressed by several hundreds of young people with whom I have worked and had the opportunity of sharing and contrasting their views with my own. To connect the reader to this sense of hope and its origins, I will later describe a next generation development exercise and the issues it raised, carried out recently by members of the Catalan Family Business Association. This is followed by an excerpt of a round table discussion on these issues with eight next generation members from several of Spain's family business associations.
A personal experience
Our past experiences colour our view of the future at the present moment in time. If we were to open all the cupboards full of past experiences in our family businesses, some say half-jokingly that we would find them full of skeletons. But I prefer to think that when we open the cupboards that we would see lots of sets of coloured pencils, some more used than others. There would be drawings of all the dreams, the personal aspirations and the experiences that have been safely closeted away. These make up what some people have called the "multigenerational emotional operating account of our lives" – all the relationship deposits and withdrawals between parents, offspring and siblings.
Through my working experience with families in business, and from my own personal life journey so far, I've come to believe that the best solution may be not to go opening the cupboard of past dreams and aspirations at all. We cannot change the past (although we can work towards revising our perception of it and the impact if its consequences on us). But there is a weapon that is always at our disposal: the future. The problem is that the future is often used for correcting the past, returning time and again to the cupboard in search of those worn-out coloured pencils and faded dreams.
Designs on the future
What the young people from Spanish family businesses have shown me is a much more practical approach: we have to build a new dream with new actors and we have to use new coloured pencils to draw the future. This means that the next generation has to be given the chance to define what type of family business and what type of business family it wants to be. Succession is not just a question of transferring ownership, or dealing with issues of power, authority and morality between one generation and another. At its most fundamental level, it's about trying to engage those who will, one way or another, have to live with and work with the decisions that are taken now. It's about making both generations jointly responsible for future management and generational revival.
Giving the next generation the opportunity to actively engage in planning and structuring the future is a very healthy process for family businesses. As anybody who carries out or takes part in change management knows, it is very hard to overcome systemic or built-in resistance to change – unless we can help those in the system to create a vision beforehand - one that engages all the key players and makes them feel involved. We all have to agree on the route to be followed and the role we are going to play on that journey.
Defining the future
The process of entrusting the next generation with the task of defining future guidelines and parameters requires a generosity on the part of the senior generation which is even greater than the generosity involved in the transfer of property. It signals trust, confidence and responsibility. Letting the new generation decide their future has many advantages, over and above the emotional aspect, many of which have a practical effect on the operation of the family business itself.
Having the next generation define the future means:
- Creating a vision with an eye to the future, which is not only positive from the family point of view, but also from the management aspect.
- Involving everybody and especially those who have remained outside the family business.
- Developing a more neutral and professional attitude to building up the leadership and succession, free from questions of family, gender or other aspects.
- Enabling learning about the various roles and functions to be carried out in a family business, together with a greater understanding of each role.
- Developing a system of communication and conflict management that is open and transparent and, above all, free of emotional hang-ups from the past.
- Each person feeling free to choose his or her own destiny without impositions or conditions.
- Establishing from the start a fair and democratic process.
- Raising the level of commitment and responsibility of the new generation towards the family business
- Increasing the degree of receptiveness to innovation and the adoption of new models to managing and controlling the family business.
The Agora Experiment: a collective experience
At this point, I commend Antonio Gallardo, Chairman of the Catalan Family Business Association, as one the few to be totally convinced that if family businesses are to survive the passage of time, they have to devote time to considering the effect of the family, the importance of communication and the role to be played by the next generation in their success.
Thanks to his support and that of everybody at the Association, we were able to carry out the experiment we have called Agora, this being the name for the group of next generation members of family businesses in Catalonia, with whom I have had the opportunity of working in depth over a long time.
The experiment is based on the exercise devised by Ivan Lansberg in his book Succeeding Generations: realizing the dream of families in business (Harvard Business School Press, 1999).
The exercise gathered together 30 next generation members of prominent Catalan family businesses. They were divided into four groups of seven to eight people, each group representing a characteristic role in the family business system:
- Members of the board of directors;
- Managers or company employees;
- Non-working shareholders; and
- Family members who were not yet owners.
They were asked to imagine that all of Catalonia's family businesses were fused into one organisation. There were two aims for the exercise, and both were ambitious. One aim was to see whether there a collective dream or vision for "Catalan family businesses" (as a concept) for the next 10 years could be articulated. The second was to provide an opportunity for the next generation to work together towards a definition of the future vision for this organisation.
To get the process underway, each role-group had to see first of all whether its members could agree on and articulate a shared dream from its role perspective in the family business world. This produced four different versions of a shared dream: the board's, the employees', the non-working shareholders' and the family's shared dream.
With these established all four groups then worked collectively to see if it was possible to forge a common, unified vision for the whole enterprise – for family business in its entirety in Catalonia. Of course, the point was to give people a safe place to recognise and learn how to handle the differences that their assigned roles imposed on their own vision of the future and its implications for managing the family business in the future.
The work was structured on four levels: personal, family, business and ownership/governance. Each group prepared a collage depicting the main aspects of each level. The following is my own view of the experience, together with the conclusions they came to themselves after some five hours' work.
I want to point out one fact that never ceases to surprise me every time I adopt this experiential approach to family business education. Adopting the role, and wearing the hat of a given role gives you the authority to defend arguments and positions which in your actual role in the family business you would never have dared to defend as legitimate. Doing so would probably have led to an argument.
So there were people who would normally be on the board of directors of their family company playing the part of owners – fiercely defending the need to distribute dividends.
In exemplary style, the hypothetical board of directors argued the details of a family employment policy with the most stringent conditions and levels of entry. They specified what training and preparation was required to be part of the company's management; that entry should be on merit; that there should be no pressure to join part of the family business; and that there should be freedom to enter and leave the company.
It was enlightening to observe how the group representing owner-directors supported the need for a regular flow of company information to non-working shareholders.
How easy it was for the board directors to accept the need to introduce independent external advisors. How difficult, I thought, to achieve this in fact. They even defended the need for in-laws to be informed about how the company is doing. What was happening?
In the first place, of course, we had distanced ourselves from our usual two-dimensional position. We changed personality when we swapped roles in this way, and at the same time we distanced ourselves from our own family concerns. In other words, we were inhabiting somebody else's skin, and this gave us a clearer and more objective viewpoint.
In the second place, and this is a purely demographic question, we had an armoury of unused coloured pencils and enthusiastic artists ready to perform. The emotional operating account was at least in balance, and the inter-generational past did not yet represent a barrier to its capacity for vision and rationality.
The importance of a family business education
Of course, we realised that the opinions these young people were voicing were not at all unexpected. They had already been investing nearly two years of their time in training and education in matters concerning the family business.
This exercise was proof of their ability to explore the perspectives of those with different roles in other parts of the system – one of the many pay-offs from their investment. Reasoning still prevailed over emotion when it came to producing the grounds for a given opinion. This is the Holy Grail for all family business leaders.
Constructing the family story
But I learnt even more from this exercise because every generation carries with it a common vision over and above what has been described so far in the exercise. Every generation, like every family business, constructs and shares its own common story. I believe that experiencing the Agora Experiment brought to life in a very visual way some aspects that are worthy of note:
Balance: the word that, regardless of role, united all those who participated. The need to harmonise every element: family, ownership, management and company. The family business is neither more "family" nor more "business", but the result of both together and no aspect of it can be overlooked.
Balance is the dominant feature that colours and lends form to the narrative, which will clarify the various aspects of the relationship between company and family.
Time: achieving a balance between work and leisure. They demonstrated an obsession with the availability of time as one of the key elements in their current lifestyle that they are most desperately trying to control. The family business is important, but it isn't everything. There is also my family and, of course, myself and my personal aspirations.
Social conscience: the balance between obtaining profits and protecting the environment, defining ethical standards of behaviour, the social environment in which the company operates.
Balanced growth: the balance between a model of management growth that takes advantage of global markets, and the stability, profitability and security required by the shareholder in order to feel comfortable in this context.
Balance between dividends and capitalisation: the company's requirements should not lose sight of the shareholder's needs, or vice versa; both have to receive five-star treatment and attention. The company is not a bank, but neither can it be tied to ownership with chains.
Training and information: these constitute the oil that lubricates all the parts, independently of the position they occupy. A large part of trust depends on how these aspects are managed.
Debating the issues
Those who took part must also have their say in reporting on the Agora Experiment. The exercise raised questions that were taken forward after the event into a discussion involving members of the Family Forum, Spain's committee of next generation members of the Instituto de la Empresa Familiar's 17 Regional Associations.
The following dialogue is taken from a round table discussion with eight members of the Forum, all of whom are actively involved in the succession process within their family businesses.
Francisco Valera (FV): From your perspective as the incoming generation, how would you define a successful family business?
Isidoro Alanis(IA), Managing Director of Eurodivisas: The main features of a successful family business all derive from a feeling of pride in a management project, from a dream or an idea, which, through great effort and dedication on the part of those involved, is converted into reality. In effect, the family business becomes one more member of the family and it can be the source of great joy, concern, excitement and confusion.
Ramón Carbonell (RC); of Copcisa (acting Chairman of Agora, the Association of Young People from the new generation of Catalan family businesses): In my opinion, the main features of a successful business are: good management (as professional as possible) and a united board of directors.
FV: What about the family aspect of the family business?
Moisés González (MG); of Intra (and a member of the Madrid Family Business Association): The family aspect is a necessary and distinctive factor in success. You have to know how to convey to your clients and the company team that behind every business activity there are people who are very committed.
FV: Of course. That leads to the question of how family businesses can ensure professionalism in their management?
Ezequiel Arribas (EA); of Centerespaña (and Chairman of the Family Forum of the Castilla y León Family Business Association): Professionalism in management, continual growth, family planning (in every aspect) and constant communication through the appropriate structures (the Family Council and the Board of Directors) within the family are all essential.
IA: Professionalism in family business is very simple to my mind. It's based on the fact that the family members who work in the business should have a position in accordance with their capacities and skills. A family business achieves professional status when there are people inside the organisation, other than the owning family, who occupy higher positions than family members who lack the required skills.
Despite its simplicity, this is the principle on which the complexity of family businesses lies. The first point must be made clear so that it can be accepted as a principle by the shareholders. A great deal of humility and objectivity is also required.
EA: Every position, whether or not it's on the board, should be occupied by the most appropriate person, regardless of whether or not he or she is a member of the family. It should always depend on the characteristics required for the work in question and the talents of the person who should occupy the post.
Roger Balsells of Natursystem (RB):I believe in a combination of professionalism in management with a family member in the key posts.
FV: So what kind of family businesses do you want to be? Do you want to carry on being a family business even if the time comes when there are no family members in responsible management positions?
Marta Tey (MT) (from J Feliu de la Pena): It's a matter of setting out clearly and precisely the obligations and rights of the family, while at the same time establishing their limitations (through the family protocol) so that the company can always be run from a professional standpoint.
FV: So how do you think that family members who don't work for the company can still be involved?
IA: By providing them with lots of information about the business. By making them part of the great dreams, the projects and challenges that the company is facing. Once they feel that the company is part of their future, they have to see the economic return on their assets. A dividend policy is an incentive to involve those members who don't work at the company and it's not a bad idea.
EA: By informing them through the family network about how the company is developing, in all its aspects. It's a matter of having a pro-active attitude towards them.
MT: Nurture the idea of belonging in the family. Let them know their rights and obligations. Clearly and precisely set out the reasons for this.
MG: I think the only way is by making them experience the company, not from the management point of view but from that of ownership.
FV: What are the essential characteristics of family business leadership in your view?
IA: The basic and most fundamental thing, from my point of view, is that the leadership should be enterprising. It should aim to improve the organisation and make it grow through fresh management challenges. It should be imagining where the company will be in the long-term and assuming leadership also over the rest of the family. If a leader has this ability, the others will follow suit. If possible he should be both a fighter and a worker, motivating the other members of the family and the organisation. He should be self-critical and have the objective of continual improvement.
EA: The leader has to have the capacity for engaging in dialogue – communication with family members and with others. Skill in directing teams of people; a great manager; transparency and honesty.
Bárbara Jané (Grupo STE): Historically, each stage in the development of a family business reflects the skills and talents of the founder and of those who took over from the founder. It's the same today. What has changed, though, is the fact that tacit knowledge, which used to be valid for many years, now has a shorter span of validity. So one important skill (which is the result of modern thinking) is rapid decision making.
FV: What does "belonging" in family businesses mean?
MT: When you are the son or daughter of the owner as well as being an ordinary employee, you can be in a difficult position, because you can't really be on both sides. So one lesson or legacy I've learnt from my family business has been to calmly put up with this dilemma, and be able to maintain this while being objective and being aware of one's limitations.
One family member can't do everything in the family business. So we need to accept without resentment that a relative may be better prepared or qualified for certain positions. If the company is doing well, we are all doing well. We need to listen and learn from older people about facing the future.
RC: In a family business, you see this characterised by constant work without rest, talking about it at all hours of the day. The thrill and satisfaction of creating, maintaining and passing it on.
FV: Finally, what challenges has your personal commitment to the continuity of your own family businesses led you to face as a member of the next generation?
EA: First, to grow. Second, to succeed in giving all the members of the family a clear, preferably unified vision of what we want, how we want it and when we want it. We have to keep asking ourselves these questions again and again – even when we have achieved all our targets.
RB: A major challenge is to run the company so that it can adapt it to the reality of permanent change – but without losing our traditional management philosophy.
I would like to finish this article reaffirming the message that when you are working with the next generation who have had a family business education, when using exercises like these, you get a real sense of optimism and faith in their abilities to become the professional leaders and socially responsible future owners of Spain's family business.
I would like this to be a lesson for those seeking ways to develop themselves for future leadership, or for parents who are seeking methods to ensure they provide the right development opportunities for their children's future as the next leaders and owners.