What are the moments of truth for a family in business?

Débora González-Coviella, Senior Manager of Global Wealth, BBVA

interviews Tecla Keller, co-author of the report

Débora González-Coviella: Tecla, can you tell us what are the 9 moments of truth for business families that you have identified and that you delve into in the study?

Tecla Keller: We have identified 2 critical moments related to the evolution of the family itself:

1. Increasing complexity of the family structure makes it necessary to organize and formalize

2. Planning and executing handover to next generation

further 4 turning points coming from the business:

3. Evolution of the governance and management model required by changes in the business and the role of the family

4. Need for fundamental changes in the business, whether to grow, successfully compete in the core business, or diversify

5. Need for s substantial financial contribution to respond to a crisis, enable a leap in growth and transformation, or restructure shareholder structure

6. Responding to an offer to buy or preparing a planned sale

2 wealth-related one:

7. Managing surpluses and liquidity events for asset diversification

8. Development of responsible investment and philanthropy activities and a finally a complete transversal one:

9. Risk and crisis management in business, family and wealth and its implications for the survival of the family business and its legacy

Débora González-Coviella: How do you approach these moments of truth in your study?

Tecla Keller: First, with a comprehensive view of the "family business system". Whether they originate from the family or from the business or from the wealth management, the moments of truth involve fundamental decisions and therefore always have an impact on all 3 areas.

Moreover, often one moment of truth leads to another and so on.

We devote a great deal of attention to understanding these transversal implications, which means that our common thread is the situation of the family rather than the technical development of the subject, which is unusual in the literature.

Secondly, we seek a balance between providing a complete understanding of the problems and their technical solutions and, on the other hand, including first-hand testimonies and numerous quotes from the interviews held.

Débora González-Coviella: I understand that the subject is extensive, but can you give us some insights?

Tecla Keller: In the report we delve into many, some of which are more usual, such as the relevance of transparent communication and the separation of forums and conversations between the personal and the formal and business area, the need for formalization, etc. Other reflections are perhaps somewhat less common.

Business families tend to excel in long-term vision and short-term decision-making capacity, but they tend to fail in bridging the two, that is, in planning and executing in an orderly and consistent manner.

Also something that seems obvious, but is often overlooked: managing is not the same as governing, you have to learn to make the leap, separate and professionalize. In the same way, having successfully managed a business does not mean that you are going to be a good wealth manager.

In general, the generosity of family leaders in addressing the moments of truth will be decisive for their success and the consensus and unity within the family. Be willing to anticipate role changes.

This also brings us to the relevance of the moment: when is sometimes even more important than how. Having tackled an issue in time and having had external contrast and advice are two of the success factors that the interviewees most wanted to highlight.