The problem of succession in family business: studies on SMEs in central and northern Portugal

Abstract

The objective of this qualitative study is to analyse the way Family Businesses (FB) manage succession, specifically in the central and northern regions of Portugal. This is the kind of business which often appears in the scientific bibliography. Family businesses do not only apply to small cafes and groceries, among other businesses, but also to businesses which contribute to the national economy for the wealth they generate and the jobs they create. According to data released in 2011 by the Associação Portuguesa de Empresas Familiares - APEF (the Portuguese Association of Family Businesses), it is estimated that more than 80% of the fabric of business in Portugal is made up of companies owned and managed by families, contributing to about 60% GDP, based on a study by Partner to Partner - Consultores de Gestão (Management Consultants), released in 2010. Reference to the relevance of this kind of business is made by Gersick et al (1997), for example, who regard the Family Business as a decisive factor for the health of the economy. More recently, Fernandes (2010) also highlighted outstanding examples of Portuguese and international Family Businesses that are important for the economy: Ford, Benetton, Zara, Jerónimo Martins, Espírito Santo Group, Luís Simões and Sonae, among many others.

Through an analysis of the state of the art on theoretical production on the problem of succession in Family Businesses in recent years, it was possible to record that the succession in the Family Business is a complex (Ussman, 2004), long, delayed (Adachi, 2006) process, depending on internal and external scenarios, which is influenced by factors that are intrinsic to each company (Bornkoldt, 2005). Based on research on two case studies which, for purposes of confidentiality, shall be called Company A Ltd. - an import-export company located in Porto - and Company B Ltd. - a manufacturing and marketing business located in the Agueda, the aim of this study is to provide clarification on the process of succession in each case in order to see how values are transmitted from generation to generation, and how they hope to manage succession in the future, based on interviews with three generations, internal documentation and direct observation. Field work started after a Case Study Protocol was signed with each company in 2011. In this document, objectives, research issues and sources of information were described and data confidentiality guaranteed.

From the point of view of the predecessors, the study concluded that, in both cases, family values are preserved and considered, but succession is not planned nor is there a document that deals specifically with it. With regard to the current successors, the senior management, it is not clear if the successors follow the guidance of the predecessors because it is not always possible to follow the same strategies, given the difference in the current business climate as well as in the business, with hypotheses of mergers or affiliations, emerging at times, which can reinforce the competitive position. That children always succeed the parents is a known fact. Future successors, in turn, want to follow the family project, but do not recognise the existence of a Family Protocol, a Family Council and an Administrative Council.

This study has several constraints: the lack of receptivity of companies to facilitate an analysis of conflicts and the confidentiality of a lot of the information are obstacles to further research. For future studies, it has been suggested that a sample of Family Businesses, with longer histories, be statistically extended to the population of Family Businesses in Portugal.