12 July 2018

The reputation of family businesses in the face of digital transformation

Despite their diverging development and countless differences, these businesses share many characteristics and challenges. This business type is a major driving force behind the socio-economic development of the region, both due to its relative importance and economic representativeness, as well as owing to its commitment and contribution to the communities in which they operate and their goal of stability and durability over time.

The challenge of corporatization

The digitization already in place and the growing hyper-connectivity constitute an important risk, especially for businesses using the family’s surname: the impact on a family’s reputation is infinitely greater than that suffered by a corporation whose ownership is diluted among hundreds or thousands of shareholders.

We are experiencing a new reality in which digital transformation is disrupting various economic and social sectors. Although family companies may consider the impact of technology on the development of their business, it is not common for them to analyze how digital disruption might affect them and their owners’ good name from a communications point of view, when it could have a significant impact on the family’s reputation. Digital transformation has entirely changed how we relate with one another; hyper-connectivity has given way to hyper-transparency, and anyone unable to adapt to a transparent context runs the risk of damaging their reputation.

  • CEOs need to protect their digital identities as any other company asset.
  • Reputation management has, or should, become a priority to ensure the company’s sustainability in any unforeseen circumstance.
  • Thanks to social media, citizens are able to express their concerns and aspirations. Active listening is crucial in order to be able to adapt to their needs.

Family, business and values: the reputation challenge

Most family businesses convey and transmit their family values to their companies, pervading the corporate culture. This is why the purpose and legacy of the different generations and, consequently, their reputation, is the distinguishing feature of these companies in their respective sectors.

In a world where brands are principal assets of companies’ image, family businesses are also closely linked to the image and reputation of the families that own them. Even today, many of them do not have any kind of communications strategy or employee training on how to tackle communication and reputational challenges. These businesses have traditionally been recognized for their credibility, integrity and contribution, but they need to pay more attention to their image and transparency.

The three dimensions of communication in family businesses

Having a good communications strategy is important for any organization but especially family businesses. Managing ownership, administration and family becomes a strategic challenge for the good development of the business and a central issue in the family’s commitment to the company.

1. Communications within the family

The most important issue is the correct handling of communications within the family or between the different branches of the family. This is especially important for bonding the different visions of the participating generations. Many businesses currently have founding members who manage the businesses and belong to generations that have little in common, in form and substance, with the new generations of millennials or centennials who will naturally take over in forthcoming years. Within a decade, numerous family businesses will face the challenge of opening up executive positions to a new generation, the millennials, who see the world in a different light from their ancestors, generating a major transitional, business challenge. Are family businesses ready to face that challenge? Is there an intra-family communications strategy available to prepare the family members to successfully make the transition?

2. Communications between the family and the business

As management of the business is passed to the following generations, it becomes more complicated to reconcile the legacy of earlier generations or founders with the business purpose and goals of the new generations. Thus, an internal communications strategy is needed to clearly convey and understand the purpose of the business, its values and goals and even whether there are differing opinions within the family or families owning the business. With this in mind, it is critical to develop employee engagement policies designed to heighten employees’ pride of belonging and commitment to the business and family project, which is, ultimately, the best guarantee for enhancing the productivity, effectiveness and continuity of businesses.

3. Corporate communications of family businesses

In a world of “attention economy,” communications has become a strategic resource both for the performance and competitiveness of the business and building a sound reputational image. The main challenge for family businesses lies in being able to put across the updated, modernized founding purpose and being capable of conveying it in the regions and communities in which they operate, creating storytelling that engages the most important stakeholders. There is a frenzy of economic and social transformations, with new trends that replace, alter or affect those before them. Consumers see less differentiation in products and services, but they appreciate more differentiation in the reputation and good name of companies.

authors:
Javier Rosado
Partner and Managing Director North Region at LLORENTE & CUENCA
Javier Rosado has mainly led projects within the firm, specializing in the areas of Crisis, Litigation and Infrastructure Communications. Before joining LL&C, he was a communications manager at the Gibraltar-San Roque Refinery owned by CEPSA and directed the communications of Petresa and Interquisa. Also, for four years, Javier worked for the publishing house Planeta and over six years as a journalist for different media in Spain, including Cadena Ser, the daily sports paper Marca, ABC and the EFE news agency.
Pau Solanilla
Managing Director of Panama and operations in Cuba at LLORENTE & CUENCA
Pau Solanilla has a master’s in business management and organization, a post-graduate in foreign trade and international business management and extensive experience in the internationalization of companies, public affairs and negotiations in international and multi-cultural environments. He is fluent in Spanish, English, French and Italian and worked in Brussels from 1999 to 2005 in the delegation of the European Parliament for Central America and Cuba. Pau was also executive adviser to the secretary of state for the European Union in the Spanish Ministry of Foreign Affairs and Cooperation between 2008 and 2010.
Francisco Hevia
Senior Director of Corporate Communications at LLORENTE & CUENCA in Spain
Francisco Hevia has a bachelor’s degree in advertising and public relations from the Complutense University of Madrid and more than 20 years of experience in communications in both consultancy and corporate settings. He was a part of the LLORENTE & CUENCA team between 2000 and 2007, leaving to join the Siro Group as communications and human resources manager. For the past three years, he was communications and CSR manager at Calidad Pascual. At present, he is an independent director of the José María Group and chairman of the Spanish Association of Corporate Social Responsibility Directors (Asociación Española de Directivos de Responsabilidad Empresarial - DIRSE).
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