Family businesses, present in almost all economies in the world, have been a fundamental pillar for the development of communities and industrial sectors over the years. These businesses, often founded by visionary entrepreneurs, face a complex reality: succession and generational change. The ability of these companies to adapt and overcome family transitions is, in many cases, what defines their long-term success.

According to a recent report by IPADE Business School, 32% of family businesses today are run by the first generation, while 28% are run by the second generation. Likewise, the founders still manage 23% of these companies. These numbers show a delicate balance between continuity and generational change, a critical stage that can determine the permanence and evolution of the company in the market.

The Institutionalization Process: A Key Challenge

One of the main characteristics of family businesses is that they tend to be born with a simple structure and often without the necessary formalization in administrative and management aspects. In many cases, the founder plays a central role and focuses key decisions, which can be effective in the early stages, but represents a challenge as the company grows and matures.

Institutionalization, understood as the formalization of processes, the implementation of clear governance and the creation of defined structures for decision-making, generally occurs during generational change. This transition does not always happen spontaneously or easily, but it is essential for the company to continue its growth and survive in the long term.

The passage from one generation to another requires a transformation in management, since the heirs usually have a different training and, in many cases, a more modern vision of the business. This change brings with it a unique opportunity for family businesses to professionalize, incorporate new technologies and adopt better business practices that allow them to be more competitive in the current market.

The Vision of the New Generations

Often, the new generations that take over the management of a family business have a fresh and updated perspective, which can become an invaluable asset for the business. These new visions not only respond to the academic training of the heirs, but also to their exposure to new global trends, technological advances and an increasingly interconnected business world.

Unlike the founders, who usually have started the business with a focus very focused on operation and short-term results, new generations have the possibility of broadening their vision towards innovation, digitalization and sustainability. In fact, this new vision is, in many cases, what drives institutionalization, since young leaders understand the importance of having solid structures to face the challenges of the future.

It is common for these younger generations to promote the modernization of internal systems, improve labor practices and implement new market strategies, thus ensuring the company's competitiveness. Furthermore, the tendency to globalize operations and expand business horizons is stronger in these generations, as they are more familiar with international markets and global business dynamics.

The Risk of Lack of Institutionalization

One of the biggest risks that family businesses face, especially in the first and second generations, is the lack of institutionalization. Often, the concentration of power and the lack of clear rules on succession can generate internal conflicts, disorganization and even put business continuity at risk.

When a company does not have a solid structure, it is vulnerable to internal shocks, especially at the time of succession. Lack of planning can lead to disagreements between family members, whether over the direction the business should take or who should take the lead. This, in turn, can lead to lost growth opportunities or, in the worst case, the dissolution of the business.

Institutionalization, therefore, is an indispensable process that must begin long before the generational change. It involves the creation of clear succession policies, the definition of responsibilities within the company and the implementation of a corporate governance system that facilitates decision-making objectively and based on the long-term interests of the organization.

The Impact of Generational Change on Business Continuity

The transition from one generation to another not only involves a change in leadership, but can also be seen as an opportunity to revitalize the business. Many family businesses that manage to overcome this challenge become stronger, since the new generations provide a vision more aligned with current market demands.

A notable case is that of those companies that manage to integrate technology into their processes, a trend that has been largely led by young people who take the reins of the organization. This technological adaptation is crucial, as it allows them to not only improve operational efficiency, but also open new sales channels and reach a broader customer base through digital platforms.

In addition, new generations tend to be more committed to issues such as sustainability and corporate social responsibility. This change in business philosophy not only improves the company's reputation, but also prepares it to meet the expectations of consumers and regulators in an increasingly aware world.

Family businesses, although they face significant challenges, have the potential to endure over several generations if they manage to institutionalize and adapt to new market realities. Generational change, far from being a threat, can become an opportunity to professionalize management, adopt new technologies and revitalize business strategy.

The succession process, when managed properly, can ensure not only the continuity of the company, but also its sustained long-term growth. Therefore, it is crucial that family businesses understand the importance of preparing new generations to assume leadership and implementing structures that guarantee their competitiveness in the future.