How the best family businesses blend gut feeling with formal structure

Imagine building your own business from nothing and managing it successfully for decades. Years of hard work, emotional investment, and guidance go into helping it flourish. Eventually, the time arrives to step back and retire. Even with a succession plan in place, it can fail — not because it’s poorly drafted, but because leaving feels like losing your identity. So you resist letting go. Consequently, leadership fails to transition properly and the business struggles to expand. 

Structured governance doesn’t always sit comfortably alongside traditional ways of running a family business

This was the very real experience of one family business owner in Brazil. His story highlights the core challenge of choosing the right governance model for family enterprises. It’s one thing to have practical guidance from books and governance frameworks taught in business schools, but it can be a challenge to apply those ‘best practices’ in everyday life. Especially when you’re a close-knit family where decisions are made as much with the heart as with the head. In this case, the practical succession strategy lacked the nuance to address the psychological aspect of retirement, as it didn’t provide psychological safety. 

The problem with ‘best practices’

As a successful family business grows, its organizational needs become more complex. Informal management styles that once worked when making business decisions around the kitchen table begin to creak under pressure. More formal structures become necessary. But as our opening story shows, structured governance doesn’t always sit comfortably alongside traditional ways of running a family business. The key is to find a way to incorporate both the old and new ways of governing and ensure that more formal best practices don’t stifle the softer systems already in place. 

María José Parada, Professor and Head of the Esade and Andbank Chair in Family-owned Enterprises, and Luciana de Lima, Senior Research Fellow at the Chair, delved into this question by speaking with more than 100 members of Brazilian family businesses. These weren’t just formal boardroom interviews — they took place in kitchens, farms, and other real working environments. The goal was to answer a deceptively simple question: How do you make governance fit the people who must live by it? The conclusions of their study have been published in Entrepreneur & Innovation Exchange. 

Families are often advised to professionalize and adopt rigid governance models borrowed from large corporations. But these imported systems can feel alien — and in many cases, they hinder progress rather than helping it. 

Ignoring the informal governance systems of a family business is impractical and counterproductive

“Quite often, governance fails not because the tools are wrong, but because the timing, tone, and fit are off. What looks universal is rarely neutral — it carries assumptions that may not align with how a family actually lives, communicates, and decides,” says Parada. 

Subtle governance already exists

Family businesses don’t lack governance. They practice it differently. Instead of votes, they have conversations — talking things through until a decision “feels right.” Sunday lunches reinforce unity. WhatsApp chats help coordinate holidays and next steps. Even something as simple as a grandmother remembering every birthday plays a role in holding the family group together. 

These are not weaknesses. They are governance in a softer form, and the foundation on which everything else is built. This is especially relevant in Brazil, where 75 percent of companies are family-run. Ignoring these informal systems is impractical and counterproductive. 

Generational differences: instinct vs strategy

One of the biggest tensions in family governance today is not between right and wrong, but between instinct and strategy. 

Founders tend to lead by presence, not policy. Parada recalls a 90-year-old patriarch who still walked the shop floor every morning — listening, observing, responding in the moment to queries. Their leadership is rooted in proximity, intuition, and gut feeling. And it works by fostering connections, especially when everyone involved is family. 

The generational divide is also a gap between ways of knowing

But the next generation returns from business school touting the need to measure KPIs, integrate ESG frameworks, and formulate strategic plans. They speak the language of modern governance, which sounds foreign to their elders. As one daughter told Parada: “My father had a strategic plan all along, but only in his head. Talking to him about systems and processes felt like we were speaking different languages.” 

This isn’t just a generational divide — it’s a gap between ways of knowing. Both perspectives are valuable, but real governance can only begin when each approach is translated for the other to understand. It’s not a case of ‘out with the old and in with the new’, but rather about honoring instinct while building clarity and holding on to legacy while allowing change. 

Women as the invisible architects of governance

Parada’s research also revealed that women are often the emotional anchors within family firms. Even when they are not crowned with official titles, their influence is undeniable. A daughter revisiting the rules her grandmother lived by. A matriarch quietly mentoring the next board chair. A sister translating tension into empathy before it hardens into conflict. 

These are not only soft skills; they are structural competencies. They don’t replace formal governance but enable it. Care, intuition, and emotional fluency are not peripheral — they are the building blocks that keep the family and the business together. 

Ask questions before writing constitutions

Before family businesses draft governance documents or rewrite constitutions, Parada suggests starting with contemplation. The research offers a set of ‘compass questions’ designed to nurture reflection rather than impose hard rules: 

• What kind of decisions do we tend to avoid — and why?
• Who already helps us move forward when we’re stuck?
• What rhythms do we already have that bring us together?
• What are we already doing well that no one calls “governance”?
• How do we prepare the next generation — not just to take over, but to belong?
• How do we define our legacy — and what are we ready to evolve?
• How do we relate to external advisers — and what kind of support do we really need? 

These questions are not just a box-ticking exercise. They are a mirror, designed to reveal the governance systems that already subtly exist. The questions help decipher what must be formalized without erasing what makes the family unique. 

Governance as a living inheritance

The conversations with Brazilian business families revealed that when governance is shaped by presence, relational trust, and emotional fluency, it goes beyond a management tool and becomes a bridge across generations.  

Parada’s research may be rooted in Brazil, but it has a far-reaching global relevance. Family businesses everywhere grapple with the quiet tension between preserving legacy and accepting change — and with the conflict that arises when families don’t possess the tools to manage that transition. 

What if the next breakthrough in family business governance comes not from consultants but from the cousin whose relationship-building skills keep everyone at the table? Governance doesn’t fail just because someone skipped a step from the best-practice rulebook—it fails when someone feels unseen. The founder who couldn’t let go wasn’t resisting structure; he was protecting his identity. The real task of governance is not to replace him, but to reassure him that the effort he gave to the business continues to be important, even after he steps aside.