Family businesses are commercial or corporate organizations owned, controlled and managed by a family. According to data from El País, they have a very important value in the economic sector as they produce between 70% to 90% of the world’s GDP and, therefore, have between 50% to 80% of the jobs around the world.
Although it is known that less than a third of these companies survive the transition from the first to a second generation, those that have succeeded have done so through a special dynamic: Family Governance.
This term refers to the structures and processes that families use to organize and guide their relationships with the company. When the structure is well designed, the impact is extremely positive.
This approach is crucial nowadays, as it allows families to develop and implement strategies to diversify and manage risk, and protect the assets they have worked so hard to accumulate. Not having a plan in place can be catastrophic for a client’s family, both emotionally and financially. And it doesn’t have to be like that, when it is possible to have a structure such as Family Governance, as well as the support of experts in the sector whose main value is to provide reliability and security.
Among the great achievements of Family Governance are:
- to generate a stronger and more consolidated business family, by having the consensus of its members,
- to help in the planning of future possessions and exercises of patrimonial power,
- to allow planning the role of family members in the company,
- to collaborate in the creation of safe methods for the administration of wealth,
- to help obtain the necessary support to professionalize the company, reduce conflicts, and
- to reduce conflicts and strengthen family-entrepreneur relations.
These issues are precisely where the difference lies between companies that just do business and truly family-led companies that transcend generations. The flexibility to adapt to changes, the preservation of history, traditions and family values, having thoughtful policies on compensation, the purpose of benefits, responsibilities, present and future ownership as well as the willingness of its members to be accountable are key points for the durability of the company through several generations.
There are many things in life that we cannot control. Every day brings a certain level of risk, which can be mitigated and minimized through Family Governance, which is based on the implementation of customized strategies to diversify and manage risk and protect assets. Family Governance provides total certainty as it manages investment strategies and tax planning, thus ensuring that assets are not only preserved, but continue to grow and prosper.
In conclusion, Family Governance is the right choice for transgenerational success. Its reliability can be summed up in four points: patience, trust, dialogue and a common future.
By Alejandro Zubiria.