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BoD Estrategia

Cantabria, 14 of April of 2011

Factor of success or failure of family succession

Business PASSION - Family Businesses

There are many articles, dissertations, analysis of different entities that try to explain why 80% of family businesses disappear after two generations.


There are many articles, dissertations, analysis of different entities that try to explain why 80% of family businesses disappear after two generations, making the shelf life of these companies is 25-30 years compared to others at an average of 40-50 year.

The main reason for the disappearance of these companies lies in intangible element that is constantly devalued in different sequences, this element has the name of "Passion."

Not in vain have we heard the famous words of Aronoff and Ward where he says: "It has been said that the three most important issues facing family businesses is succession, inheritance and succession ...."

Businesses arise at any given time thanks to the enterprising spirit of the creator, that large doses of hope, start, not a business, not a company but a dream and a way of understanding life that is embodied in a business project .
These doses of hope, dreams, lifestyle, are driven by the passion of the owner to build, grow and keep alive the spirit that motivated the creation of the company.

It's that passion that determines the vision and mission of the business and operations, perhaps not mentioned and certainly not written in most cases and ending values ​​and shaping a corporate culture that direct the destinies of the family business.

As other family generations are occupying leadership positions in the company, the original passion is transformed or diluted and those values ​​and corporate culture that had conducted the business plans that had been generated by the passion of the creator,
enter into a process of transformation, in the best, or a dissolution process which ends with the closing of the company in that 80% of the cases mentioned earlier.

How many times have we heard: "The child has neither the drive nor the leadership of Father ".... what they mean is "The child has no father's passion."
So, here is the key to maintaining the existence of family businesses: Managing in the transmission of the PASSION in succession.

Factors affecting the transmission of business PASSION:

Much has been made and the Family Protocol in order to have a clear system of management, organization and functioning in the family business so that any situation has to follow objective criteria. But let's go back in time. At first that begins to emerge the need for succession without confirmation that this occurs.
At this very moment, we might cite three points to consider in the management of succession:

The first relates to the opportunity given to new generations bring new value to the enterprise, ie whether there are vehicles through which new generations can feel identified with the project or are only "taking" the
project of its predecessors.

In most cases we find an "obligation" to continue taking the project from others and that certainly is not the best way to generate passion. The passion is generated from that there is an option that the contributions of the successors are reflected in the company.
This not only means that the project is converted in the minds of the new business as their own, but also lead to the desired involvement.

 
How do you articulate this first step?
This first approach can come in succession that they are the successors to implement the strategic plan for the following years, incorporating the results of their own analysis of market research options for improvement and diversification, among others.

The aim of this step is threefold: to make a strategic plan is to know the current status and in-depth company and add value is to investigate how the market is behaving and explore options for diversification, growth or improvement of operations with the incorporation of technology and innovation based on market conditions and, finally, for the new generation is an integral, one world view and a defense of his project.
At this point, the business is now part of the child.

Second, consider whether there are learning tools and training that we provide the successors, long before that become part of the business to 100%.

Since then, a successor can add value without knowledge and training process.
At this point, we should assess how much time is dedicated to the process of knowledge and how much freedom is given in the same.

And training is not only restricted to know how the factory, industry or company: the really important thing to know is how the successor company should operate and what degree of deviation is at that time. Does this imply that the parent companies are not working properly? No. It means that every company is capable of continuous improvement and this is where the new generation has the opportunity to create their own passions.
That empty space is meant to be filled by the successor.

The third point is the degree of cooperation, acceptance and objectivity with which the parents agree to the above two points.

This is one of the most critical, which is necessary to distance between the parties. This is where the child has the opportunity, through the strategic plan for the future, to realize their project: an objective view of reality, independently to create ways to improve and preferably guided by an external coach to ensure the separation of
parties, an independent process of training and that the plan set to be successful.

Thus, the parent will be the evaluator of the proposals of SON and is the son responsible for carrying out their own proposals.

So, in conclusion, we should ask, if they exist in the family business 4 levels of opportunity: opportunity to learn (to know, the father of the child's perspective and the child, the father's experience), opportunity to choose (from the
two parts, if it occurs or not the estate), chance to fail (freedom for children to make mistakes that will acquire its own experience) and opportunity to improve (with flexibility of the parent for the initial idea evolve).

These 4 levels of opportunity are the way to the creation of the Passion in succession.
And not only in succession but in the entrepreneurial passion of the younger generation.

SOME INTERESTING FACTS

According to the Family Business Institute in Spain, there are nearly 3 million family businesses, which represent 75% of private employment and account for 59% of Spanish exports.
Its total turnover is 70% of Spanish GDP and it is not surprising that of all Spanish companies traded 50% are familial.

In Cantabria, 80% of industries are familiar and their contribution to Gross Regional Domestic Product (GDP) exceeds 70%. On turnover, about 70% below invoice 1.5 million euros.
The average age of these companies in Cantabria meets the same national scheme: the half-life is 25 years and only 10% are over thirty.

To extend this information:
BoD Estrategia Press Office
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BoD Estrategia S.L is a strategic business consultancy firm which objective is to transform our customers in references in their markets through the management of their competitive advantages. BoD works in all business areas, providing and implementing realistic solutions that have a positive and measurable impact on customer’s business revenues.
The differentiation is based on the solutions adequacy in any particular area but bearing in mind the global business, analysing all the impact in all the business areas of the companies: BoD treats parts but considering the Whole Business.
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