Values: A Key Asset to Family Business

Still pending: external and internal communication

19/01/2016 Madrid

Josep Tàpies

Directed by Josep Tàpies, the report analyzes how values are kept alive and passed on to succeeding generations in family businesses / Photo: IESE

Values are a key asset to family-owned businesses. A new report, led by IESE professor Josep Tàpies, analyzes how values are kept alive and passed on to succeeding generations in family businesses from Spain, Portugal and Latin America.

In Spain, 85 percent of companies are family owned, according to the Barcelona-based Institute of Family Business (Instituto de Empresa Familiar). Together, family businesses generate nearly 14 million jobs — that is, three out of every four private-sector jobs in the country. 

Faced with such figures, no one would question that family businesses are a pillar of the Spanish economy. But where does their strength come from?

In most cases, the core values that first launched the company continue to be key elements of the organization. But it can be difficult to keep these values alive under the pressure of generational differences, geographical distances between family members and the challenges presented by the company's growth.

These are the conclusions of the new report published by the Chair of Family-owned Business, run by IESE and Atrevia. It is based on qualitative and quantitative analyses of interviews, discussion groups and surveys conducted with managers of family businesses.

Participants included members of global companies such as Grupo Pascual, Damm, Gaes, Simões, Miguens and Proeza.

Handing Down Values

Most participants in the study agreed that belonging to a family-run business not only increased worker commitment, it also helped the business itself stand out. The family element, indeed, formed a basic part of the company's prestige and visibility.

In the survey, 70 percent of respondents considered that their company's status as a family business helped them to get ahead of the competition. Nearly 84 percent believed it to be beneficial to the firm's reputation, and almost 88 percent felt it added to the image held by the client or final consumer.

Communication at Family Headquarters

Even though family values are clearly defined (most companies have some sort of document that lays them out), it is often more difficult to make sure that everyone — family insiders and outside employees alike — follow them.

Communication is an indispensable tool for keeping these values alive, both within the family nucleus and throughout the wider business culture, as well as for spreading them beyond the limits of the firm.

Communication is also necessary to keep family members informed of the company's progress. Almost 60 percent of family enterprises lacked formal communication tools to inform other family members (who, when they were informed, often received the information at family gatherings) of how the company was doing. This lack goes some way to explaining the 42 percent of those surveyed who were not aware even of their firm's volume of business.

This absence of established channels was particularly striking given that survey respondents were well aware of their importance. A clear majority admitted that the existence of formal communication mechanisms influenced the level of family commitment to the company (79 percent), assurance of continuity (72 percent) and growth (69 percent). Moreover, 81 percent believed that such mechanisms helped pass on the family values that sustained their companies.

Communication Stops at the Door

Most of the companies surveyed also lacked strategic communication plans and protocols. This was in spite of the fact that almost all of the interviewees agreed that the family element was something to highlight in external communication. Indeed, 41 percent of companies used their identity as a family business to add corporate value.

Notably, over half of participants reported that their firms' public representatives had not received any training nor instructions on how they should communicate with the media. Only a quarter had a designated spokesman for times of crisis.

As a result, although many of the companies in the study invested resources in promoting their brand and their business, corporate communication received short shrift.