How to professionalise the family business without conflict

In the family business there are three concepts that are constantly intertwined: ownership, company and family. The three have much in common, but they are also separated by many divergences. Not the least of these are emotional differences. For this reason, professionalising relations within family businesses and bringing in external professional experts is the first step towards leaving personal and family emotions behind, so that there is a difference between a family meal and a shareholders’ meeting. Making this separation allows more rational decisions to be made.

The relationship between professionals and ownership

Professionalisation is one of the great challenges that family businesses usually face from the second generation onwards. On the one hand, it is essential, but on the other hand, it can be a source of internal conflict.

It is clear that being a member of a business family does not automatically give you the training and skills needed to manage a company. Therefore, as the company grows, it must delegate the management of finances, human resources, marketing, R&D, etc. to competent professionals. Despite possible reluctance within the family, entrusting part of the development and even leadership of the project to competent outsiders brings great benefits and new points of view to the family business.

Professionalise management with an external administrator from outside the family

In fact, it is even possible to delegate the entire management of the family business to professional administrators from outside the family. This is a frequent possibility in the case of unexpected deaths or even when the natural successors are not interested in taking over the company.

These professional directors are subject to personal liability, which is enforceable not only by the company but also by third parties. This is the same as in any commercial company. This is a potential source of conflict, because the owner can give the professional director orders at the general meeting which he is obliged to comply with, but for the result of which he is responsible.

There are also common conflicts of interest in companies that opt for professional management. For example, when part of the family wants to distribute dividends and the professional administrator, on the other hand, considers it a priority to strengthen the treasury in order to undertake a certain investment.

Professional managers are not spared from this kind of tension. Because business families are not only present on the board of directors as owners of the company. They often also exercise their management on the board of directors. Pressure can even come from outside the company. From family members who are partners but do not hold a position within the company.

Avoiding conflicts between the business family and external professionals

Every business family is made up of diverse individuals, perhaps many, each with their own personal visions and goals. But to make the business profitable and continue to grow generation after generation, it is vital to create a shared vision of the ‘collective self’, to align personal interests with corporate interests.

The family protocol can be a useful tool to help minimise conflicts. Because they mark the roadmap to be followed at key moments such as the succession process or the progressive incorporation of new generations into the company. They also determine the role of each member and their relationship with the company.

One thing that all successful and long-lived family businesses have in common is that they have trained their new generations and have opted to professionalise the management of the company in key areas.

By Manuel Urrutia