Entrepreneurship RSS

  Shedding Misconceptions About Family Business 

Print Share

Given the lack of conclusive, quantitative data on family businesses, IESE Prof. Josep Tàpies set out to gain a more detailed understanding of the age, size and significance of family companies, particularly in Spain. To do so, he identified 2,254 Spanish companies reporting revenues of more than 50 million euros in 2005 – a sample 10 times larger than any used in prior research. The results are summarized in a new book, Empresa familiar: ni tan pequeña, ni tan joven (Family-Owned Business: Not So Small, Not So Young), which paints a truer picture, in terms of size and age, of family-owned businesses in Spain at the beginning of the 21st century.

The average age of a family company is 37 years, with some in business for more than two centuries, a milestone that has not been achieved by any non-family company. Some of Spain’s oldest family companies, such as Codorníu, Miquel Costas & Miquel, Gomà Camps and the Osborne group, were founded prior to the 19th century and are still fully active.

Ownership and management of the upper echelon of Spanish businesses is still highly family-based. Fifty-seven percent of Spanish companies with sales exceeding 50 million euros in 2005 were family ones. Their revenues account for 35 percent of the total generated, and they employ 42 percent of those working, in the sample of businesses analyzed. Revenues for the top 100 family companies ranged from 350 million to 15 billion euros.

The study also highlights the important role of family-owned businesses in certain sectors of the Spanish economy, such as food, construction, real estate, trade and metallurgy. Some family companies are the top revenue earners in their sector.

These and other statistics presented in the book serve to dispel some of the myths surrounding family-owned businesses.

Keys to Longevity
Why have some of the businesses studied achieved such longevity while others have disappeared in just a few decades? Following a qualitative analysis of specific cases, Tàpies concludes that the answer lies in the consideration given to the three basic concepts that constitute the strategy of the family business: vision, mission and values.

A company’s corporate vision must help everyone involved work toward a common goal, in a single direction, while serving as a guide in moments of doubt or difficulty. At the same time, it should be revised and redefined to ensure that the company continues to adapt to the changes in its environment. When defining the vision, numerous questions can be raised, such as: Who will work for the company? What will the project be like in a few years? What activities and needs must be satisfied? What will the company’s image be?

A company’s mission is its purpose. “This should not be a mere description. It must highlight the advantages, differences and values that will be the company’s hallmark,” explains the author. Defining the mission entails responding to such questions as: What business am I in? What differentiates my business from the rest? What are the driving values and principles of our project? How does my company view and treat its employees, suppliers, partners and customers?

Values are the nucleus of all corporate culture. In other words, they are the fundamental beliefs and ideas that support the company and must always be defended. According to Tàpies, “the more people identify with these principles, the higher the probability of success for the family-owned business. Values should carry far more weight in a company than technical or financial resources, since the latter, while necessary for success, are less transcendental.”

Keys to Growth
Finally, the study reviews the strategies most commonly used by businesses for achieving success, bearing in mind, of course, that no universal model exists.

A company may choose a niche strategy or a growth strategy. If it opts for a growth strategy, the company has several options: market penetration (done organically, through strategic alliances or the acquisition of competing companies); internationalization; vertical integration (backward or forward); diversification in related business areas or diversification in unrelated business areas.

With these concepts as its foundation, the book reconstructs multiple cases of successful family companies, which have either achieved longevity or have grown in a few decades to a size that places them in the top tier of the Spanish business world. The book also includes some examples involving long-standing foreign companies.

In light of the cases studied, Tàpies concludes that the longevity of a family business is influenced by the following parameters: the family’s unity, its commitment to the company, capacity to innovate and ability to adapt by sticking to its own philosophy.

This article is based on:  Empresa familiar: ni tan pequeña, ni tan joven
Publisher:  Fundación Jesús Serra
Year:  2009
Language:  Spanish
More articles from Tàpies, Josep