Only one in eight Spanish family businesses has a succession plan

Intergenerational succession is one of the greatest challenges facing family businesses. This is recognised by them individually and through organisations such as the Family Business Institute (IEF) and the Territorial Associations of Family Businesses. They all agree that succession should be one of the fundamental parts of the family protocol for planning and managing the continuity of the company.

Despite this widespread recognition of the importance of structuring succession in advance, the latest Sigma 2 survey conducted among Spanish family businesses shows that while 55% of the 851 companies belonging to the IEF network and territorial associations have a family protocol and/or succession plan, only 16% of the 2,390 non-member family businesses surveyed have a family protocol and only 12% have a succession plan. As far as the family council is concerned, 50% of member companies have a family council for decision-making, while only 26% of external companies have a family council.

More and more family businesses are organising their generational succession

However, these percentages show a significant improvement in recent years. The 2015 Family Business study showed that only 8.9% of family businesses had a family protocol, while in the 2018 Family Business Competitiveness Factors report the percentage was 11.3%.

The family protocol

With regard to succession planning, the Instituto de la Empresa Familiar and the Territorial Associations of Family Businesses have promoted the use of the family protocol among their members with the objectives of:

Define the access of family members to the management of the company;
It regulates the relationship between the family and the company;
Provide for the succession of the founders and the different generations to ensure the continuity of the company.

In addition, the family protocol is a document that makes it possible to articulate the organisation of the family business at multiple levels. For example, it creates the family assembly and the family council, determines the information to be provided to the family groups, defines interlocutors at family group level with the managers, outlines dividend and financing policies in relation to the family members or creates internal self-financing funds for specific situations.

The succession plan

Succession planning, on the other hand, focuses exclusively on achieving an orderly generational transition within the business family. This involves many issues:

Specify the requirements to be met by the successor, such as belonging to the family, experience, training, etc.
Establish the process for preparing the successor;
Specify the responsibilities of the outgoing leader;
Regulating investor relations;
Etc.

Not having a succession plan can lead to the end of a family business

Family businesses are increasingly aware of the importance of providing for an orderly generational handover not only at the top of the company, but also in all key positions. In practice, having a succession plan or not having one and opting for a standard will, for example, can make the difference between the company surviving from generation to generation or dying out with the retirement of its founder. This is undoubtedly one of the reasons why barely 30% of family businesses are passed on to the second generation.