Thursday, October 21, 2021

Family businesses: a holistic dimension

Luís Parreirão, Mota-Engil Managing Director

Family businesses (FB) have been there ever since there are companies.

What’s new about them, then?

They handle things differently and have their own methodologies. This approach combines many relevant sets of knowledge that help us understand the many dimensions of this reality.

The usual dimensions are combined with new approaches, often decisive. From psychology to the governance of families, from family law to social responsibility and the vocation of each family, from long-term planning to the rules of training and education of new generations.

We refer to family business when an essential part of its capital is family-owned and family plays a key role in its management. The relationship of the family with the company should focus on both continuity and on succession and on multigenerational transfer of ownership.

In Portugal, FB represent around 70% of companies and around 65% of GDP, accounting for 50% of employment.

Although the vast majority of SMEs are FB, it is wrong to assume that FB and SMEs are synonymous. In Portugal, FBs represent 40% of the Portuguese Stock Index 20.

FBs have therefore a clear socio-economic relevance.

But they are also a complex reality, which, given the myriad of individual dimensions raises a number of issues given its specific nature in many aspects.

Let us focus on some of them: conflicts between partners occur as is commonplace or they reach new levels once they occur between siblings, cousins or parents and children? As for decisions about people, are they based on individual merit or preferences? And when it comes to decision-making are managers bound by affection or reason?

Today, as we know, we witness a significant increase in life expectancy and this results in permanence in working life until much later. Are the new generations prepared to wait longer’ How many will be willing to live with the “Prince Carlos syndrome”? Will decided to pursue a professional activity outside the family business?

FBs are currently confronted with new realities, new, and more global approaches, with a much greater requirement for plasticity, the ability to look and understand the phenomenon as a whole, appealing to different areas of knowledge and differentiated techniques.

In these times of uncertainty(s), FB have to be stronger and have a more flexible, strategic planning, both for themselves and for the shareholder family (s).

A holistic approach is now required, and even more so in the future, in order to turn the many aspects of this phenomenon into an integrated and coherent reality.

In order to respond to new concerns entrepreneur families have been adopting a set of normative and organizational instruments, of which it is worth mentioning: the signing of family protocols, the approval of different governance rules for families and companies and the creation of family offices.

We now witness the presence and the growing relevance of powerful family offices in the market, many of them operating on a global scale, and with an investment capacity that was traditionally only there in banks.

FBs are beginning to take the place of entrepreneur families.

Finally, it should be said that it is not possible to address issues related to FB by resorting only to specific technique or branch of knowledge. Rather, it appeals to a plurality of areas, and it’s not easy to identify one as dominant.

FBs, like families and the human beings that form them, can only be understood taking a holistic perspective, whereby each part can only be truly understood when looking at the whole.

This is a challenge that the current pandemic and, above all, the Investment Plan that follows, will put to the test and which we must win.

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