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Benefits and disadvantages of family businesses

The fact that family businesses are born with a very specific vocation and with their own philosophy and values ​​implies a different behavior if they face an international expansion . These characteristics suppose strengths but also weaknesses at the time of beginning the internationalization. A not insignificant percentage of Spanish companies is under the control of the same family, while maintaining that essence that can define it as a family business.

A type of entity that is usually transferred from generation to generation and where everyone knows and tends to be treated in the same way. Without a doubt, a whole Spanish institution. Now, not everything was going to be an advantage, because this type of company also carries its negative aspects. Hence, today we will see  positive and negative points of family businesses .

Benefits of family businesses

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  • There is greater complicity  among the members of the company, knowing first hand the values ​​of the entity and the personality of those in charge and in positions of less responsibility. In the same way there is trust among all, and that shows at the moment of truth; and many times also in the results.
  • The members of the family that make up the company will be willing to give more of themselves  and make sacrifices if needed, because an asset of the family is at stake that has been able to pass from previous generations. That is, everyone tends to give their best without the need for something in return.
  • There is usually a common point of view  among the members of the family: to guarantee the success of the company. For this reason, there are usually no major disagreements when reinvesting profits and generating long-term development plans.
  • Normally who is at the head of this type of company is the owner, a member of the family in which you probably have a lot of confidence. That is why he does not tend to doubt his decisions, he is left free to move  and the internal bureaucracy is greatly accelerated.
  • There is greater job stability  for employees and managers, because usually in this type of company friendship bonds are developed that make it difficult to seek profitability based on affecting basic employees. Something common in other types of companies.
  • As the capital is in the hands of the family, there is much less chance that people who try to distort and prostitute the essence of the company can enter the board of directors.
  • The work environment is usually very good, because it is common to find a panorama of camaraderie and respect.
  • They are usually companies that have a reputation , because they have usually been in the market for some time. Clients trust them, and much of this success is simply because the family has remained united in the front.
  • There are tax benefits  for family businesses

Disadvantages of family businesses

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  • In this type of companies there is usually the problem of financing, because members often tend to resort to self-financing in excess . A resource that is positive, but can lead to problems in the future.
  • Although the environment is usually very good, no less true is that in case of family problems, the situation can become very murky, even with members trying to get in the way, with irreconcilable differences in management and much more. There are usually no differences between private and professional life , and these problems usually arise from there.
  • Many times the members of the company are there because they are who they are and not because of their value. This means that in many of these companies there is very little training and experience among its members. In addition, in the case of vacancies, preference is given to family members over other employees or external personnel.
  • There is also the possibility that the heirs do not want to continue with the business, or even that they are not prepared for it. In these situations, the address can be entrusted to a professional manager; But of course, control is lost and the thing is no longer the same.
  • There may be problems when raising the positions of responsibility, the managerial organization chart or the succession in the board of directors.

Risks and benefits of a family business

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In the year 2006, the American writer Tom Roth, wrote a book under the title “Vital Friends”, which became a best seller and until now, is still selling like hot cakes. This text was based on millions of interviews with people from all over the world, who confirmed that they felt more committed to their work should they have a friend there. That is to say, it would seem that mixing friendship and business is something favorable for companies, since it generates greater responsibility for their workers.

In fact, today, there are many cases of people who decide to start a venture of the hand of a friend or relative. If you think about it, it is quite natural to start a project with someone with whom we have things in common. But if we are interested in business and friendship going well, we will have to maintain a fluid communication, clearly divide the roles and separate work moments from leisure moments.

Although it seems a modern concept, family businesses or friends have been around for a long time and as a clear example of this we have: Mexican companies Bimbo and Comex; the Walmart supermarket of the Walton family; Ford Motor Company of the Ford family; Cargill of the Cargill and Mac Millan families; American International Group of the Greenberg family; Koch Industries of the Koch family; Motorola of the Galvin family; Carlson hotels of the Carlson family; Gap; Levi Strauss; Rent a Car; Johnson; McGraw-Hill and The New York Times, half of which dates from the year 1850.

As we observed, there are several success stories that are obtained by mixing business and blood ties.

We will see some of the risks and benefits of working with friends or family:

Risks

  • Conflicts of interest may arise
  • There may be differences in criteria and objectives
  • It can be difficult to separate family issues from business
  • Competition may arise among some members

Benefits

  • From the beginning there is a strong sense of belonging, identity and common culture
  • The defects and virtues of each worker are already known
  • There is loyalty and commitment
  • There is long-term planning to continue the tradition

Everything can happen in any area of ​​life, you can plan the actions, but there will always be the surprise factor.

Tips for a successful  family businesses

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Ego competition and ignorance of functions are one of the most common reasons why a family business fails. In the management of a business, many people can participate and all have different functions, as long as everyone knows where they belong and what they have to do.

For Otis Baskin , international expert in leadership and decision-making in family businesses, challenges and opportunities are faced through the understanding that they are often the same thing. The members of a family business should always bear in mind that each challenge represents an opportunity .One of the mistakes that most lead to the decline of a family business is to believe that younger generations have to do things in the same way as previous generations did and each time is different, so it takes different action.

Baskin assures that the next generation has people with different capacities, skills and interests and they will face a reality that will present them with other challenges. They must understand that they have to respond to the challenges presented to them using their own reasoning and not necessarily see things as their parents would have seen them.

Family ties, unity and understanding are essential for a successful family business. “In Latin America, there are many family businesses and not necessarily because they have benefited from favorable conditions to do business or where they are established, but because of those strong family ties,” says Baskin.

Finally, a family business is one that belongs, is managed and controlled by members of the same family. To a great extent, their success is determined to define the functions, rules and roles of each member. It is demonstrated that the family businesses that manage to remain over time are only those that strengthen each day their values, mission, vision, communication, philosophy and family pride. According to the theory of resources and capabilities  part of the competitive advantages of family businesses has its origin both in the family control of property, as in its particular internal organization, which generates a whole series of intangible assets, unique and hardly imitable ( not appropriable) by other companies, which have accumulated over time. Taking advantage of the advantages and trying to fight against those weakest points, a family company can develop a process of internationalization satisfactorily.

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