Family Business / Governance / Issues in the Family Enterprise / Law

Myths & Realities in Family Businesses in Puerto Rico

The Practitioner

Puerto Rico is one of the most developed countries in the Caribbean, located between North and South America where more family businesses successfully transfer ownership to the next generation than has been previously reported in the rest of the world. As well, more women than ever are ascending to higher managerial positions than in other areas of the world.

Business Transfer

In Puerto Rico, the family as an institution is still strong. At least 71% of the households live in families. Although there is not a census of family businesses, at least through my research, I found that 27% of the top businesses are in the hands of a family. In 15 of the main industries, family employees, not paid, are making a contribution to the business.

The lack of family businesses successfully transferring from the first to the second generation has been discussed in many studies and authors around the world. For example, John Ward (Family Business Review, 1988) writes that only 30% of family businesses successfully transfer the business to the second generation. In one of my recent studies, I found that 48% of Puerto Rican family businesses are in the hands of the second generation. Other family cases document that the succeeding generation is already collaborating with the current generation in Puerto Rican family businesses.

In Puerto Rico, the second generation members of the family businesses are Generation X, born between 1965 and 1980. They grew up in blended families where the grandparents were present and other members of the extended family. They were strongly influenced by the Baby Boomer generation that preceded them. They witnessed their parents sacrifice for the family and for the business. As a consequence, they developed commitment and respect for the business legacy. At the same time, they developed behaviors such as independence, resilience and adaptability. These are characteristics that could be used also to describe the Puerto Rican family businesses at this time in history, where they are keeping the economy of the country strong.

Members of Generation X work differently from their parents. The Baby Boomer generation is known as the generation who live to work. However, Generation X works to live. Gen Xers are innovating and working hard in their family businesses, but at the same time they try to have the life balance that their parents did not have. The children of Generation X, known as Generation Y, are the millennials, i.e., born after 1981. Generation Z are the Nexters, i.e., born after 2000. As the younger generation, they are more informal, more technological — claiming space, flexibility and freedom in everything that they do. These new generations were born with technology at their hands, but have not worked to purchase and keep that technology updated. Generation Y and Z can innovate in family businesses using technology, but they need to develop awareness of its value and the value of many other things that the previous generations provided to them without asking anything in return.

Women in Family Business

Women in Puerto Rico are ascending to leadership roles in their family businesses. Much has been mentioned in different studies related to the “glass ceiling” constraints that women face. Puerto Rican businesses do not have the same barriers that deny promoting women to upper level managerial positions in companies regardless of their qualifications or achievements. Twenty-three percent of family businesses in Puerto Rico are directed by a woman. Those companies are in primary industries such as hardware stores, construction, manufacturing, transportation, distribution of products and communication media. Although close to 77% of the family businesses in Puerto Rico are directed by men, women have outstanding positions such as controllers, vice-presidents, and managers of different strategic and functional areas. In general, women are part of the top level managerial teams of family businesses in Puerto Rico and have an important voice — as they have described to me in conversations and interviews.

Women are happy and successful with their family businesses. They are providing the harmony and balance that the businesses need in terms of managerial styles that are more empathic, flexible and socially responsible.

Implications

The implications that these two realities — transitions and the role of women — have for practitioners practicing in our country are various. Advisors to family businesses should be prepared to coach adults in the middle of their life, who are relatively young family entrepreneurs, leading the companies that their parents or grandparents founded. Generation X’s work values are work-life balance, team-oriented, dislike of rules, loyalty to relationships. Family business advisors need to understand these values in order to make better recommendations on how to help this generation transfer its businesses to the next generation, which may already be working at the company, but have different values and perceives life in very different ways.

Women are providing the harmony and balance that the firm needs in terms of managerial styles that are more empathic, flexible and socially responsible. Advisors need to coach these women in how to mentor the younger women in their family on how to make better contributions to their family business.

Family businesses in Puerto Rico are breaking the accepted reality of how businesses successfully transition from generation to generation and the role of women in family business. We still have many challenges but we hope that others can use some of the lessons we have learned to increase the probability of success.

About the contributor

Luz Vega is an associate professor at the Interamerican University of Puerto Rico, San Germán Campus. She can be reached at luz_vega@intersg.edu.

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