Although the number of family businesses (FBs) that make it into the top 1,000 Spanish companies has been decreasing every year, due to the difficulty that many FBs have in growing, there are 64 FBs that have been there for more than 25 years. In their paper "Characteristics of Successful Family Businesses," Professor Miguel Á. Gallo and Research Associate Kristin Cappuyns of IESE analyze the behavior of these famously successful family businesses (SFBs) and the reasons for their success, and use their findings to describe a business model that may serve as a guide and aid to other FBs. They compare the business policies of SFBs with the generally accepted policies of successful non-family businesses, and of non-successful family businesses.
Data were gathered from 21 interviews with successful Spanish FBs in sectors such as beverages, food, perfume, the press, retailing, decoration, etc. At the time of the survey (1995), these companies had a high average age (90 years old) and were multigenerational companies. In a third of the companies in the sample, the founder was still active in spite of advanced age.
In each company, an interview was conducted with a family member occupying a managerial position or, where this was not possible, with a member of the management team and then with a family member. The questions concerned typical family business issues (strategy over the previous 20 years, organizational structure, dividend policy, alliances with foreign partners, etc.), as well as topics relating directly to the family.
After analyzing the data, Gallo and Cappuyns identified five common features that FBs in general would do well to take as guidelines or best practices to be imitated:
1. Strategic plans and organization. The strategy must be backed by an appropriate organizational structure. This is easier to achieve in non-family businesses, where there are only two groups with vested interests: management and owners. In FBs, there is a third group: the family. Whereas in the business world relationships are formal and may even be conducted exclusively on paper or over the phone, family relationships are highly personal. Moreover, ownership of a FB is more than property ownership, as it is tied up with the history of the family, the founder, etc., just as the family name is associated with the business.
2. Business culture based on "ELISA" values. A business culture has three components: "beliefs" (the conviction that there is a right thing to do in a certain situation); "artifacts" (the visible objects that are considered traditional and part of the business - the founder's office furniture, insignia, brand names, expressions that get repeated around the office); and "values" (held by the founder and, in time, kept alive and passed down from generation to generation). In nearly all of the successful family businesses studied, five values stand out. They are known by their acronym as "ELISA" values:
- Excellence in products, services, brand name, organization, etc. SFBs are willing to learn to maintain their level of excellence, even if it means learning from other companies, or from non-family managers, outside advisors, etc.
- Labor ethic: All of those interviewed agreed that, to succeed, you have to work hard, with absolute dedication.
- Initiative: Although FBs usually are reluctant to get into debt, they cannot entirely exclude the possibility, as that would limit their growth. The SFBs in the study financed business growth by reinvesting profit, in preference to indebtedness.
- Simplicity in the private lives of the members of the family who own the business.
- Austerity: SFBs are more prudent when taking on expenditures, since the money to be used belongs to the family.
3. Role of the family. The role differs at each stage of development: from that of the Working Family Business, where the owners work together closely; to that of the Managing Family Business, where the owners are still closely involved, but only a few family members actually work in the business - usually in responsible positions; and finally, to the stage of the Investment Family Business, where the family members are united in their investment decisions and supervision, but are not so involved in management decisions.
4. Management styles. In the SFBs studied, the management team is concerned with the company's short-term future and the design of new training systems for employees, and is prepared to change as needed. To a certain extent, it is free to steer the company in the direction it chooses, so long as the family nature of the company is respected. Those interviewed stressed that the inspiration for the business model they sought to establish was their desire for the firm to continue as a family business.
5. Pitfalls. What distinguishes SFBs from other FBs is their willingness to correct and learn from their mistakes. They have protection and value systems, and will seek expert help to avoid pitfalls, or to recover quickly if they fail to avoid them.