The family has been and continues to be one of the fundamental structures of economic production. From this structure, many businesses have developed, some of which have grown into significant companies and globally renowned corporations, even in our times.

In addition to facing the changing global environment in philosophical, social, economic, and technological terms, family businesses have the challenge of surviving in the long term and overcoming additional problems such as managing the transition between generations, conflicts that arise in the family-business relationship, and a lack of trust.

These conflicts, very natural from the perspective of human relationships, can escalate rivalry and generational competition within a family business. If there is no clear anticipation of these issues, they can even hinder the business’s development or lead to its division or extinction. For these reasons, it is necessary to develop agreements concerning the family’s relationship with the business to maintain family harmony.

The Dilemma of the Family Business

As mentioned, a family business must deal not only with the typical problems that any business entails but also with the needs, concerns, and desires of a family. A family business involves emotions and feelings, so finding a balance is not easy to manage.

One of the main challenges in most family businesses is finding a true balance between family and business. Unfortunately, in most cases, this balance is not achieved, and there is often a bias toward one extreme—either the family comes first, or the business does. A system biased toward the family prioritizes family needs, concerns, and stability over business planning, which affects management communication channels, performance measurement, decision-making, and the business’s strategic opportunities. A system biased toward the business neglects family issues and needs, affecting family communication, identity, loyalty, time with family, and emotions. Neither extreme is desirable; to ensure the long-term survival of a family business, a proper balance between family and business must be found to achieve good business performance with trust, commitment, and family harmony.

The Importance of a Family Protocol

The continuity of the family business depends not only on its success in the market in which it operates but also on the transparency and planning of the family’s rules concerning the business. The establishment of these rules aims to support the development of family agreements to clarify expectations around difficult topics such as money, careers, control, and succession, among others, thereby anticipating many of the most common conflicts in a family business.

In the family continuity plan, it is assumed that the family plays an important role in the business’s success and, therefore, must focus on creating new strategies to revitalize the company and promote future growth over time and across generations.

The process of defining a Family Protocol is complex and, in practice, requires an iterative process to reach final agreements. It is necessary to have the commitment of all family members participating in the process and the discipline to hold working meetings where different rules concerning the family business are defined and discussed. Additionally, it is crucial to determine whether the family is willing to work together to perpetuate the family business, accept the responsibilities this entails, and continue working together to grow their wealth beyond the current business.

For this reason, each process is unique and different, depending on the needs and expectations of each family. At the end of the day, the goal is to create a document representing their “family constitution,” with which all parties agree and commit to upholding. Our experience with over 150 families advised across Latin America helps us provide solutions to anticipate the conflicts that often arise in a family business.