It is not a dish of good taste to think that on a certain day death will knock on the door, but not planning what will happen when that happens is not going to make the date take longer to arrive. What it will do is make the procedures more difficult for those who stay. And if we talk about the family business, . Within the process of preparing the business, the professionalization of this type of organizations plays a fundamental role, which in Spain make up nine out of ten of the business fabric, according to data collected by the Family Business Institute for a report that will be presented at the coming weeks.
“It’s not just putting order, that part is the simplest. It is a complex procedure that makes the company less dependent on a specific person, generally the founder,” says Albero Gimeno, professor at Esade and researcher at the Esade Entrepreneurship Institute. For his part, Víctor Torrico, general director of the consulting firm Afianza, sees professionalization as a challenge for the company. While Lucía Coto, partner responsible for Family Business at PwC, links it to one of the biggest problems that threaten this type of business: survival. “More than 70% of family businesses do not pass through the second generation, that of the children. Of the remaining 30%, only 6% go to the third, that of the grandchildren,” says Coto.
José Carlos Casillas, professor at the University of Seville and president of the Spanish Society of Family Business Researchers (Safer), maintains that, although professionalization is generally understood as the entry of external people into the governing bodies, this process “of creating “a structure” can be carried out with family members, “as long as they meet the preparation required for this type of position.” “It is a plus, all things being equal, that the CEO is from the family,” he defends.
Precisely this presence of family members in the day-to-day management structure is one of the most complicated points when it comes to professionalizing a company. To avoid conflicts and suspicions, which may end up affecting the leadership of the successor, Coto recommends that the process be objective and done with advance planning. Sit down to design the organization chart and profile of each position, without having anyone in mind, establishing measurable, quantifiable and verifiable criteria. “A strategic reflection must be carried out and the weaknesses and strengths of the different people who make up the ecosystem of the family business must be detected in advance, objectively. Here comes the possibility that the continuation is within the family itself, because there is a person who meets the characteristics sought, or opening the door to third-party professionals,” he maintains, before warning that “subjective decisions end up creating conflicts.” ”. “What is not valid is to say that since he is my son I am going to make him general director.”
In this regard, Ricard Agustín, founder and director of the consulting firm Family Business Solutions, adds that many times in the outgoing generation “the logic of the heart prevails more than that of reason” and they are more lax with family members. when applying suitability criteria, which represents, in addition to a risk, a brake on professionalization. Agustín also detects difficulties when “the incoming generation finds it difficult to recognize its own limitations and aspires to occupy positions for which it is not properly prepared.”
The process, defends the PWC consulting firm, must be led by the outgoing generation. . “For some, after having started the business almost alone, it is difficult for them to learn to work as a team, to share decisions or to have to give explanations for them,” says Gimeno. For the Esade professor, it is essential that the founder gets involved, because he is the one who can transmit to those who are going to take over the company’s values and the knowledge he has acquired while setting up the company. “It is not just an analytical process, data transfer, there are other intangible factors.”
A topic that is difficult to deal with
Another hot topic is when to start the professionalization process. The experts consulted agree that it is better to do it in advance, even the sooner the better, as Gimeno says. “You don’t have to wait until the founder’s retirement is close, because anything can happen, such as an unexpected death, and you have to be prepared. “It should not be left to improvisation,” says Casillas, who, founder and owner of Mango, names Herberto Gut Beltrán, founder of Prosegur and its executive president, in a traffic accident in 1997.
“Businessmen find it difficult to leave. It is humanly difficult to talk about this topic of what will happen when we are no longer here. Furthermore, conflicts may arise when discussing succession. All this explains why the beginning of the process is procrastinating,” explains the professor from the University of Seville. A statement and a term, procrastination, that is also used by Coto, who assures that the decision is postponed due to the fear of creating problems among family members.
At this point Torrico introduces another element, beyond succession, to promote the professionalization of the family business. “It also depends on the ambition of the businessman. If you want to grow and earn more, it is a process that must begin soon. Although it is not easy to know for sure when to do it. Technology startups, for example, are professionalized from minute one.”
One of the options that arise after the professionalization of the company is for family members to step away from day-to-day work, but these are positions for which Coto also advises having the necessary training. “You have to educate yourself and prepare to be a good shareholder. Even if you don’t have a role in business management, you should worry about being informed, knowing how the company is doing, what decisions are being made in general terms. Maybe you only care about collecting dividends, when at the moment the most convenient thing for the company is not to pay them, but rather to reinvest in the development of the business. If everyone does their own thing, things will sink.”
One of the risks that Ricard Agustín sees, especially in “early generations” is that there is interference, which disappears “as the board becomes more professional and independent advisors and directors come in to ensure that good corporate governance practices are complied with.” ”.
But the presence of family members on the council also has positive points in Gimeno’s opinion, since “they contribute their vision and values. They are the ones who risk money.” But at the same time, he adds, the family has to “be able to develop competent advisors” and choose the members who will play the best role.
Little implementation
“Although I wouldn’t like to say it, I have to recognize that the lack of professionalization is one of the weak points of family businesses and one of the main causes of dissolution,” says Casillas, who values the work that in the last two decades Many companies “have learned” in order to comply with what they must do regarding this matter. Even so, “they are a minority,” says the president of Safer, who is surprised that “sometimes, firms of a sufficiently large size, which are very well managed, have this part quite weak. There are those that do not even have boards of directors and others that, if they do, are made up entirely of family members. It doesn’t have to be radically bad, it may work well, but there is a greater risk of problems. It is enough to bring in an external person so that the members speak to each other in the meetings in a different way and the formality when it comes to meeting certain requirements is different.”
