The two faces of emotional ties in family enterprises

Inma Puig, academic contributor to the Human Relations Management department of the ESADE business school in Spain, has written a book called “Family Portraits,” in which she analyzes family enterprises from several viewpoints, including emotions, feelings and relationships within the family-owned company. Puig does this through ten case histories. In an interview with Universia-Knowledge at Wharton, Puig analyzes the advantages and disadvantages of the succession process in a family enterprise.

Universia-Knowledge at Wharton:What advantages does a family-owned company have over other types of organizations?

Inma Puig:In reality, we cannot absolutely say that a family-owned company has advantages or that it does not. In many cases, intense emotional ties and family access to jobs can be considered an advantage but they eventually wind up causing problems.

UKnowledge at Wharton: Why is that?

I.P.: Because in family companies, emotions and feelings play a strong role, both for good and bad.

Emotions can be an asset when they become a motivating force but they can also act as a constraint if they lead to disputes and quarrels. If you don’t like talking with your boss or a colleague in your office, imagine what happens when your boss is your father or when the colleague is your own brother.

UKnowledge at Wharton: How does each member of the family view the company?

I.P.: Family enterprises are multifaceted. They have as many faces as the number of people who work and live in it. A family-owned company is one thing if you are talking about the founder of that company. It’s quite another thing if you’re talking about the spouse of the founder, and something quite different if you are interacting with their sons. It is quite different when you are talking about employees from outside the family. If we ask ourselves which of these is real, the answer is that all of them are real, and none of them are real, at the same time.

UKnowledge at Wharton: Why do you say all of them and none of them?

I.P.: All of them because they all have their own reality. None of them because when are all working together, you lose your objectivity. However, there is no objectivity whenever feelings clash.

Looking at the family enterprise merely from a business perspective is like driving a powerful car with one eye covered.

UKnowledge at Wharton: What are the principal mistakes that fathers make when it is time to arranging for their succession?

I.P.: Fathers are equally liable to succeed and to make mistakes. When something causes pain, we call it a mistake. We remember our mistakes a lot more than we remember success stories.

If there is one aspect of a family-owned company that is usually difficult, it is the succession process. That’s because when you talk about succession you are really talking about death, either biological or professional. And death is a topic that no one likes to discuss.

Also, when you talk about the succession process, you talk about an inheritance but with various connotations. Deciding on a successor means choosing someone for a job; for a position and within a hierarchy. The succession process means giving away some assets that belong to you.

UKnowledge at Wharton: What is the difference between succeeding someone in his or her position, and inheriting that position?

I.P.: Succeeding someone means occupying the post that he or she occupied now that he or she is no longer here. Inheriting it means acquiring assets that belonged to another person.

Both succession and inheritance have symbolic importance. Succeeding someone signals recognition of common values.

UKnowledge at Wharton: When it is time to prepare for succession, how much should you value the common characteristics of the successor and the predecessor?

I.P.:Usually, companies try to choose a successor who is as close as possible to his predecessor. If the person who is replaced is someone highly valued and admired, being chosen for that position is a form of flattery. Often, someone takes over for an outstanding figure who has acted as both a father and a successful entrepreneur. Such a person must be highly committed. That is precisely what every son hopes from his parents; being the favorite among all the brothers.

UKnowledge at Wharton: Is it easy for sons not to dedicate themselves to the family-owned enterprise?

I.P.: In some cases, not working for the family enterprise can be a successful way to resolve conflict within the company. In other cases, the fact that you don’t want to work in the family company actually leads to conflict.

Those sons whose families do not own their own company feel somewhat envious of those sons who do because they face no uncertainty about building their professional careers. We have to remember that it does not help your self-esteem when you get appointed to a job because of family reasons, not as a result of your professional qualifications.

Another possibility is that a son believes that working in a family company is not his best option. We need to remember that this is a totally legitimate option. However, in some cases the family views this option as a betrayal of the family and of the company that has brought him up.

UKnowledge at Wharton: Are sons who inherit a company fortunate?

I.P.: Often, people think that those sons whose families have their own company are doubly fortunate. If they want, they can work in their family company. If, on the contrary, they don’t want to do that, they can easily work outside it. However, on some occasions they encounter problems in their job interviews if they mention that their family has its own company and that they don’t want to work for it. This could immediately cast suspicion on them, and raise doubts about the reasons why they don’t want to work for the family company.

UKnowledge at Wharton: What is the role of women in a family company?

I.P.: The role of women in a family-owned company is usually as fundamental as it is within the family itself. You don’t have to spend hours and hours in a company to realize what it is happening in it and what is happening to those who work there.

UKnowledge at Wharton: What makes that role so important?

I.P.: They are an authority figure in reserve; someone who appears whenever the occasion requires. They do not appear in the organizational charts of most companies but everyone knows their importance and the enormous power that they exercise from behind the scenes.

Women are involved in neither day-to-day decisions nor those that are extremely critical. But at critical moments, when something serious or decisive is happening, they appear on the scene without any need to be invited or called to the door. If things turn out the way they should, these women do not intervene. But if there is an attempt to shatter the established order, these women are on the scene in order to prevent that from happening.

UKnowledge at Wharton: What is the impact of family problems on the way that a company is managed? What can be done so that management does not suffer when problems occur among relatives?

I.P.: As we saw that the start of this interview, every event, whether it serves out as an advantage or as a problem, has an influence not only on the company but also within the family. Often, that impact is much greater than it may appear.

So managers in a family-owned company need to be aware not only of how they are managing their company. They also need to be aware of the impact of their decisions on their own family.

A family-owned company has to have a center of gravity that enables it to be autonomous. Any family that has its own company must have a center of gravity so that the family can co-exist with the company.