Ana Botin and the Goldilocks point


Nobody was surprised this week when Ana Botin made changes at the top of Santander. Botin, who took over as executive chairman of Spanish banking group in September when her father Emilio died, changed the CEO and the CFO.

Perhaps more significantly, however, she also made big changes to the board, getting rid of some family members and others who had a personal loyalty to her father. Nine of the board are now independent.

In other words, there are fewer family members in the family business. Is that a good idea? Probably yes, according to new research.

A recent paper by academics Francesco Chirico and Massimo Bau from the Center for Family Enterprise and Ownership at Sweden’s Jönköping International Business School argued that family members can have one of two attitudes towards the business: either a positive, long-termist stewardship attitude, or a fearful one where they become too worried about conserving the family’s wealth to make necessary decisions.

The academics found that while having some family members on the top management team leads to a stewardship attitude, a higher proportion of family to non-family means that the management tips over into the negative, fearful attitude.

Too many family members mean that management “support conservative efforts promoting stability and poor outcomes” and “the desire to preserve the family’s socio-emotional wealth results in an unwillingness to undertake necessary risks”. Conflicts between family members also affect decision-making, and family managers might be tempted to hire incompetent relatives for family reasons.

A graph plotting the number of family members in top management positions and performance would be an “inverted U-shape” and “a moderate percentage of family members [in top management positions] is associated with the highest level of firm performance,” says the paper. You might say there’s a Goldilocks point – not too hot, not too cold – that is best.

In other words, too much family is bad for a family business. Unsurprisingly, Ana Botin seems to know what she is doing.