José Orihuel: “The family business must be nurtured”
Year after year, the pivotal role that family businesses play in the economy of our country is reinforced. Their importance goes beyond the significant wealth creation their activity generates (they are responsible for 57.1% of the private sector GDP, according to data from the Family Business Institute), to also position themselves as an essential engine in job creation (they generate 67% of private employment, with a total of more than 6.58 million jobs according to IEF data) and a constant source in key areas such as innovation and entrepreneurship.
Currently, we find family businesses spread throughout the territory that, beyond their size, carry out their activities in multiple sectors and range from the most local to the international scope.
To delve into the hows and whys of this prominent role of the family business in our economy, we spoke with José Orihuel, the chief editor of the newspaper Expansión in Catalunya and one of the people who knows the country's business fabric best.
When asked about the role that family businesses play in the country, Orihuel states with absolute certainty: “To say they are fundamental is an understatement. The origin of many companies is family-based and that is the reality, right now, for many projects, especially those with a longer history. The business fabric in Spain, and specifically in Catalonia, cannot be understood without the family business. It is an essential foundation of our fabric. That does not necessarily mean a small business. We have small, medium, large family businesses, and some may even be listed on the stock market, yet they retain their family character.” And he concludes by emphasizing: “Family businesses must be cherished”.
One of the key factors revolving around the management of family businesses, which can be crucial for their proper functioning, is precisely their ability to avoid mixing personal and work-related conflicts: “Family businesses must clearly distinguish between the business and the family, having well-organized structures to prevent confusion. We have splendid examples of family businesses that, thanks to proper management, have survived several generations, have grown, and today, are comparable to major leaders in their respective sectors”, states José Orihuel.
And it is that, in recent years, we have witnessed a professionalization of the family business which, while retaining its family character, has become more similar to the structure of large corporations: “Within that separation between the concept of business and family, or the management of the business and, if we may call it so, the management of the family, many companies of a certain size have chosen to introduce professionalization criteria. This means that not necessarily a family member has to perform executive functions. If there is one, it is desirable, but not because they are a family member, but because they are the right person to take the helm”.
Thus, “for decades, family businesses have been incorporating external professionals, who sometimes reach the highest executive level of the company; it is also increasingly common, once a certain size is reached, for them to join the board of directors or an advisory council. Obviously, not all family businesses have brought in external professionals, as it depends on the size, but generally the figure of an executive who is not part of the family is quite established. And I think that's good. I'm not saying that it's bad for a family member to be at the helm of the business, far from it. If they are well-prepared and possess the necessary leadership, charisma, and training, then go ahead. Because it's probably much easier for that person to continue the business/family legacy, as for them the family business is not just a stepping stone but something to grow and preserve”.
Precisely, this family bond, which on one hand can create a greater willingness to make the project successful, can also be a significant source of problems. As the journalist explains: "It can cause problems to the extent that the shareholding becomes fragmented and some partners may be occupying executive roles or working in the company and others not. Or if the company is not going through its best moment, some partners may want to sell, others may not... Are these problems solvable? Yes. In fact, various formulas and protocols have been studied. Obviously, it is much simpler to manage a sole proprietorship, where the company is yours. These conflicts exist and have existed. We all know stories of large companies where, for example, two siblings have parted ways. It happens from time to time, but the key is knowing how to manage it. Conflicts of a different nature also occur in non-family businesses. And sometimes they are very serious as well: if it is a publicly traded company, if there is an investor partner with a different profile, if an unwanted partner comes in, etc. Each company has its own issues"
Family businesses are not immune to the negative effects that the current crisis caused by the Covid-19 pandemic is having on the entire economy. Although as Orihuel states, “This crisis, if it is teaching us anything, is that it is not homogeneous, it is asymmetrical and depends a lot on the sectors. We all know the sectors that are most affected. Although none are completely spared, directly or indirectly, the effect is there, but obviously it will not be the same for everyone.” And he does not hesitate to express his wish: “What is desirable is that the greatest number of companies survive, as this means saving the largest possible number of jobs. And there we have a lot at stake as an economy and as a society, because in the end we are talking about people who carry out a professional activity, have a job, and need an income to support their families, etc.”
Reinventing oneself and adapting to new demands generated by the current situation seem to be some of the keys that could help to mitigate the impact of the crisis on businesses: "It is not the first time in the history of the economy and business that, due to a crisis, there is a change in activity or a new business line is started, which perhaps was already there as something residual and at that moment it is capitalized on. Without a doubt, it is time to think: we have a structure, we have talent, and we have productive capacity. For example, in the case of an industry or a service company, it is possible to pivot and analyze new needs to focus on them. Or, also, everything that has to do with digitalization, which is clear was already there, but now has much more prominence. Some companies, apart from digitizing their processes, can take advantage of new business niches that perhaps were not so well covered before. It could be an opportunity".
Before concluding, José Orihuel reminds us that it is important to consider that previous crises, such as those of 1992 or 2008, have left us with lessons that companies can now utilize: “the last crisis of 2008 taught us, among other things, that excessive indebtedness is a clear risk. Now, companies are not as heavily indebted, which is very good, and financing is cheaper. It's important not to overborrow for operations or for day-to-day activities because this will later have to be paid back seriously. This does not mean that there won't be, that there will be, bankruptcies, etc., but in general, the level of indebtedness compared to companies' own resources and income is now lower than it was in the previous crisis. We can say, in general terms, that the financial situation of companies is 'more comfortable'. But we will also have to wait for the expiration of all the loans that have been granted (ICO, etc.) to see what happens. If in these months a restart is achieved, the damages will be minimized. It's true that we tend to repeat mistakes, but we did learn something back then.”
