“We cannot leave everything in the hands of investment funds”

He is considered a guru on family business issues. Peter Vogel, professor at the Swiss business school IMD, was in Barcelona a few days ago meeting with some Catalan families in a hotel in the upper area to discuss the challenges of this business structure.

“Family control of a company is an advantage: they are more stable and immune to cycles”

Spanish family businesses represent 60% of GDP and 70% of private employment. Is it a sign of strength or weakness?

Of strength, without a doubt. He would say that it is a symptom not only Spanish or Catalan, but global. According to statistics, 70% of global companies are under family control. They are less likely to lay off and stay away from the ups and downs of the cycle. Therefore, they are more stable.

Wouldn’t it be better to leave the management in the hands of a professional?

It depends on the objectives. If the owners of a football club say: “We want to play in the Champions League and we aspire to be the first team in the world”, then they better not put their son in goal. Now, statistically it is true that Roger Federer’s son has a good chance of becoming a good tennis player, he has grown up in an environment surrounded by great players. So it’s a tricky topic, in both directions.

How to reconcile different interests?

It’s a triangle. On the one hand, there is growth. In the other is liquidity. And, in the third, control. Only two of the three can be optimized.

¿A trilemma?

If for a family business growth is the key and turnover must be increased by all means, then you hire a talent that is in line with this objective of expansion and diversification. But at the cost of a partial loss of control. On the other hand, if you consider that it is better to maintain family leadership, then you will have to give up one of the two extremes: either liquidity or growth. There are sectors in which having a very identifiable family member represents added value through personal relationships. For example, in agriculture or hospitality.

Are family and benefits incompatible concepts?

There is often a clash between two forces: the desire to maintain family harmony, opposed to competitiveness. It can be assumed that there is a contrast. But it can also be redirected. Think for example of the idea of ​​responsible ownership. We are talking about economic growth that is in line with family values, your purpose and long-term business relationships. Any family or business benefits from good governance, strategy or mechanisms to deal with adverse situations.

It is often difficult for an outside executive to deal with family.

I believe that professionalization is a good thing, but it does not necessarily imply that family members have to take a step back from operational roles. You have to be sure that whoever is applying for a job fits the position. There are studies that say that family-controlled firms do better in terms of results than those that are not.

What is the biggest risk these companies face?

The biggest one is when there is no clear separation between property businesses and family matters and everything ends up getting mixed up. For example, you have a board of directors meeting but then you end up finishing the job at home. The most effective businesses are those that have different spaces for each issue: the family council, the shareholders’ meeting, the board of directors, the general assembly, where specific issues are discussed at each headquarters.

And how is it done?

It’s not easy, because when you are an entrepreneur who builds a company from nothing, you are involved in everything. But sometimes family disputes end up being reflected in the board of directors, which is not the right place for it. And that’s how it is when we have employees who find out about family fights, which affects management.

Is there a common pattern in Spanish family businesses?

There is no Spanish family business as such. What there are are cultural patterns. The unity factor in Spain is greater than in Switzerland or Germany, where the culture is more individual. On the other hand, in the countries of Northern Europe this has completely disappeared and when you have to pass it from one generation to another, it is much more complex to align and transmit values ​​and a common mission of the family.

And wouldn’t it help to have a family protocol?

The document can be a way to involve those family members who are not very involved in the business. It’s a way of saying: this is who we are. But these documents are often not updated, they were written 30 years ago and are no longer applicable. And then they are of little use, because they also have no legal value: it is an agreement between gentlemen. It may be more effective to make a couple of ten-point sheets rather than writing a long document like the United States Constitution. Do something simple and practical. And better to have a text in which each one has contributed something.

What relationship usually exists between family businesses and the stock market?

There are points for and against. If you go public you become more professional when it comes to governing the firm and it is something that you cannot avoid if you need a capital injection or scale your business. But there have been cases of companies that did it and after 30 years they did not see the point because the market really did not pay much attention to them, they barely had any trading volume. Going into listing for the sake of listing is probably a bad idea.

Are family businesses competitive in such a globalized world?

Firms need a critical size to face the challenge of digitalization, the transformation of value chains. We see many family businesses that end up selling their business to investment funds and dedicate themselves to managing assets. From a regulatory point of view, we must support these companies, because we cannot leave everything in the hands of speculative funds, black holes where everything evaporates inside.

For example?

Austria eliminated the gift and inheritance tax, helping the ownership of a family business to be transferred more quickly, recognizing that these types of companies provide greater stability to the system.

And when a family sells, what usually happens?

You have to redefine your notion of unity. The question is: what are we going to do with all this money? Should a form of governance be established? An investment policy? Who decides? What if things go wrong? The biggest challenge is identity. When you have a company, you have an identity. You walk around the company, you have your employees, your products, your clients… And suddenly you have a lot of money in your checking account. There are families sitting on top of a pile of cash, but without a specific purpose it is not very rewarding.

But is there a model to follow?

There is no model, but there is a common error. Families cannot be passive and stop creating or doing things to do. It is necessary that things happen in the family. A bit like in relationships, right?