Daniela Montemerlo

Factors influencing the stocks and flows of bonding social capital in family firms

Drawing upon social capital and network theories, this article presents a conceptual framework of factors that influence the building of internally focused bonding form of social capital, in the context of family firms. The two sub-systems of family and business are treated as distinct units. Three factors – stability of membership, centrality of actors, and closure of each sub-system – are theorised to positively influence the stocks of bonds in the family or business sub-system. Simultaneous centrality of actors in family and business, closure of both sub-systems, level of interdependence, and quality of interactions between family and business, are theorised to influence the flow of bonds between the two sub-systems. Implications for research are discussed.

It’s the Process that Matters

We believe the process of developing the family agreement is more important than its contents. Our experience indicates that there are various types of family agreements with differing contents. A family agreement may or may not be successful. Chapter 7 will illustrate that most criteria for success are related to the process of developing the document, not to the document’s philosophies, principles or policies. (For more insights on process, see “Family Protocols in Spain: A Survey on 10 Years of Experience.”)

Types of Family Agreements

This chapter provides an in-depth examination of the different types of family agreements: ♦ Family statement ♦ Family business protocol ♦ Owners’ contract ♦ Family constitution

Purposes of Family Agreements

There are several reasons why a business-owning family may forge a family agreement. Consider the three main perspectives and the related general purposes for a family to develop such an agreement: 1. To foster the company’s successful development 2. To maintain ownership unity and commitment 3. To reinforce family strength as family

The Fundamental Components of a Family Agreement

The second generation of the Cordetto family in Argentina was considering the future for the eight cousins of the third generation. Several questions were making demands on people’s time and energy: What are the rules for next-generation family members to work in the business? Is the family committed to next-generation business involvement and ownership, and if so, why? How does the family make decisions? How can the family educate themselves to address these subjects? Who should participate in the educational process and decision making? Is it more important to rely on the family’s values and past experiences? Or is it better to set clear rules? If family members are expected to pursue higher education and outside work experience, can we still expect them to start at the bottom of the company as past generations have done? Will we need different compensation systems than in the past?

What Shapes the Family Agreement

Every family agreement is—or should be—unique, reflecting the distinct character and culture of the particular business-owning family, the nature of its business, and applicable laws. This chapter explores those factors, focusing especially on the influence of the family’s culture.

Successful Conditions for Developing Family Agreements

Chapters 3 through 6 explored family agreements in terms of purposes, contents, process, and types. This chapter goes deeper into understanding how family agreements succeed or fail.

The Contents of Family Agreements

Chapter 1 introduced the basic sections that can be found in a family agreement: the preamble (who?), family values and beliefs (why?), family business principles (what?), family business policies that govern family and business relations (how?), and the process to review and revise the agreement (when?). This chapter delves more deeply into each section, analyzes the content possibilities, and provides examples.