Reputation in Family Business: much more than an intangible

Manuel Bermejo. Professor. IE Business School

31 October 2012

From renegotiating a loan to extending the business abroad. Reputation plays a key role in family businesses in these troubled times.


Reputation forms part of a set of intangibles that most family businesses simply do not pay enough attention to.  This is a consequence of too much focus on pressures of the moment, which means that important matters like training, brand image, corporate governance, or stakeholder management are pushed to one side. They may be the kind of things we remember to do when things are going well, but we forget all about them as soon as the going gets rough, as in recent times, bringing radically different scenarios.

Reputation is largely built using communications with the environment. In my opinion, if we talk about communication there is no room for ostrich strategies whereby company directors just stick their heads in the sand and don’t care if anyone knows anything about them or their companies, as happens all too often in the case of family businesses. They want no part of ostentation and wish to keep a low profile, or they don’t like the idea of a communication strategy. Internet has revolutionized the field of communication, as well as many other areas, whether we like it or not. The moment someone keys your name into Google they are building an image based on what they receive and perceive. If your company is not there, it looks suspicious, which is not exactly a healthy first impression. Your company has to be there, and it is better to be there in a way that conveys what you want people to think about it, using a smart communication plan that positions you in line with both your personal and corporate strategy.

As with so many intangibles, reputation is not missed on a day-to-day basis but rather in moments of crisis. For example, the current crisis is creating many situations in which the right reputation is a key asset, and will certainly make the difference.

The following are typical situations in which many family businesses find themselves in a crisis scenario:

- Situation 1: Extending to foreign markets. It is much easier with a well-known brand and a good image as a business family, bringing far greater guarantees of success.

- Situation 2: Debt restructuring. It is easier to approach a bank if you have the right kind of reputation, not only in the financial sense of the word but also in terms of personal respectability, meaning the entire family. For example, banks are going to prefer dealing with families that know how to separate family and firm, who use merit-based criteria, meticulous management methods, etc.

- Situation 3: Strengthening management teams to meet the challenges of complex global scenarios. Talent prefers companies with a good reputation which will be more likely to offer opportunities for personal and professional development.

I never tire of telling family entrepreneurs that they need to build the right kind of platforms for strategic reflection on how to address relevant issues to ensure the sustainability of their business and family relations. Without a shadow of a doubt, managing a firm’s reputation should be on the list of priorities of many family businesses who want to compete successfully in the complex corporate landscape of the 21st century.


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