Over the course of his career, Julio M. Herrera Velutini has held various positions in the banking industry. Currently the chairman of an international bank based in Puerto Rico, Julio Herrera Velutini comes from a family of Venezuelan bankers that goes back 120 years.
Family businesses contribute greatly to the global economy. These businesses are not only limited to small neighborhood stores, but also include large corporations. More than one-third of the companies in the S&P 500 index are family run. So how can family businesses grow beyond their entrepreneurial beginnings to become large corporations and continue thriving for years? According to McKinsey, the answer is by ensuring these five dimensions are working well:
– Harmony within the family
Family conflicts over succession and money can take a company under. Family businesses that last decades have developed family ethos that guide relations between members within the company. They also establish clearly defined succession plans.
– Ownership structure that allows capital injection
Successful family businesses that last long balance family ownership with infusions of capital. For example, they regulate share sales and reinvest profits into the company or offer shares to private equity firms in exchange for growth capital.
– Strong board governance and a diversified business portfolio
A diligent, involved, and ethical board coupled with a portfolio that takes a long term view of the company will set a family business up for long term success.
– Wealth management
Owners of successful family businesses find professionals to manage their wealth, preventing waste and the excessive drawing of reserves from the company’s coffers.
– Establishing foundations
Family businesses that thrive have charitable foundations to instill values such as social responsibility in the next generation. These efforts also improve the company’s public goodwill.