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When the journey is more important than the destination

Anyone who visits Spain these days will find it hard to believe it was ruled by dictatorship until just under 30 years ago. Since then, the fast-paced process of democratisation has fuelled the creation of new businesses, global businesses and more efficient businesses. But what about family businesses? To what extent and how have Spanish families in business adapted to these changes?

Certainly, adaptations are very evident at the macro level.  Without doubt, the most notable is the creation 10 years ago of the Instituto de la Empresa Familiar (IEF – Spain's Chapter of the Family Business Network, or FBN). Thanks to the work of the IEF, Spain has earned a leading position among EU member states for its work on family business inheritance tax legislation, family business education and the preparation of the next generation.

This edition of Families in Business draws heavily on the IEF's work over the last decade. Readers from other countries will appreciate what can be achieved when family businesses mobilise and organise themselves at the macro level to influence national and international lobbying, research and education.  

A further macro-level adaptation is the introduction by many business families of family business constitutions, or protocols, as they are called in Spain. This is a document listing the rules for the family's ownership and governance of the enterprise, thereby defining the power and wealth relationships between the family, the owners and the board. Currently, there is a push to make a protocol a legal requirement in Spanish family businesses.

In the 1990s, as generational transitions were underway in the many Spanish family companies founded after the civil war, leaders looked for a means to define a structure for power and governance that would endure after them, and the protocol was the solution they sought.

There is some evidence, though, that adaptations taking place at the micro-level require a longer time-frame than those at the national level.

A prominent Spanish family business legal professional describes the protocol as a piece of legal machinery: that is, "a Memorandum of Understanding that does not guarantee family or business success, but clearly helps a lot". Recognising its limitations, he cites problems of implementation stemming from unenforceable clauses, and the inability to sustain cooperation among key players.

An international family business consultant to many family businesses in Spain  also explores some of the cultural factors  behind this. He notes that many of the protocols created in the last decade are being revisited by business families who have been disappointed to find that the document has not delivered its potential.

Families that have created protocols that work have concluded that the journey is more important than the destination – this is the message of the author describing the process of generational transition undertaken in his family business. This means that producing a document is not the most important outcome when creating a protocol. Rather, educating family members who will be the owners and leaders of the future – and helping them to engage with and feel invested in a process that requires them to communicate their different views – is what really counts.

So when an event challenges the document (for example, selecting family or branch representation on the board), the family can benefit from having a stock of experiences of working together towards win-win solutions to tasks that would otherwise have the potential to create a generation of winners and losers.

A protocol is a fine device for protecting the business from erratic decisions by an owning family with little sense of social responsibility, and it behoves business-owning families to assume this task as a personal, corporate and social obligation. But making a protocol a legal requirement makes the assumption that the owning family will be fully united behind the rules  in the first place.

Protocol legislation has, of course, led to a surge in demand by family businesses for consultation – and it is important that service professionals understand how to manage the family dynamics surrounding consensus when working out protocol rules and guidelines. Spain's professionals are moving in this direction with the recent formation of a multi-disciplinary nationwide association for family business professionals, which will also function as the Spanish Chapter of the global family business professionals' association, the Family Firm Institute.

Perhaps the real challenge that Spain faces in the next decade is how to assure business families that family harmony fosters healthy family communication and cohesion around their emerging protocol policies, and the protocol document itself is a worthy by-product because it demonstrates that the family takes its ownership function very seriously. 

ed note, Spain, Comment
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