“IS A MEXICAN FAMILY COMPANY ABLE TO CONFRONT THE POWER TRANSMISSION FROM THE FIRST TO THE SECOND GENERATION?”

Ximena Ocejo Fernández, María Eugenia Abiti Maldonado, Carolina Fernández Pedroarena, and

Rafael Idoyagabeitia García Universidad de las Américas, Puebla

Departamento de Administración de Empresas y Mercadotecnia Escuela de Negocios y Economía

ABSTRACT

For many decades, the family companies in Mexico, and surely in many other countries in the world, have been playing an important role in the development of their economic activity. The truth is that, although an enormous amount of family companies that exist in Mexico, only a few ones get to survive. Nowadays, more than 90% of the companies in Mexico are family companies (IPADE, 2002). One of the most common disadvantages with the owners of this type of companies is that they do not know how to manage the business growth and, in the other hand, how to maintain satisfactory family relations. In the present study, it will be important to determine the factors that cause the success of the power transmission in a family company, located in the City of Puebla in Mexico. It’s going to be explored the power transition of this company from the first to the second generation. In the same way, it’s going to be analyzed the family-company interaction in this private company. There will be identify too, the variables that influence in the success of their proper enterprise strategy; and finally, it will be important to obtain data from the proprietors and successors, who are in the case of the power transition, from the first to the second generation of the company. The main activity of the studied company is the manufacturing of textiles. It is recommended to carry out complementary studies on this subject, analyzing the textile and other important sectors. INTRODUCTION Family companies have made a contribution to the Mexican economy, although just a few of them survive because they could not separate the formal aspects of the company from the family relations. The family company is integrated by two or more members of the family, having its financial control (Donelly, 1964). Generally is common to associate family companies with small companies, lack of professionalizing. But really, the main definition of these companies is not their size, or their management’s quality, the important aspect is the fact of focusing in the property and the leadership, which is the responsibility of one or more members of the same familiar group. And it has to be an intention that the family continues having the company’s control. (Gallo, Lansberg, cfr., Dodero, 2002). When a company is managed by a family, the family criterion is the one who dominates over the entrepreneurial criteria. In a family system it dominates the emotional aspects, there are no changes and it exist an unconditional acceptance. In the other hand, in an enterprise system, they are focused in concrete aspects, there are a lot of changes, and there is a conditional acceptance. (Soto, Braidot, 1999).

Dodero (2002) says that the family system emerges naturally from man, where it receives the preliminary socialization influences. Norms born depending on the tradition, the values of each family, and the roles assumed are according to the father or the mother, or the brother or the sister. At the same time, each member contributes with their own personality system according with the family’s roles and culture. Family companies are permanently influenced by positive and negative forces which condition their results. (Soto, Braidot, 1999). The main advantages in a family business are: pioneer’s compromises, specific knowledge or “know-how”, time flexibility, long-term planning, pride and confidence, and static culture. In the other hand, the principal disadvantages are that they have routine procedures, low technology, frequent credits, emotional conflicts, lack of leadership, and the problem of the succession. This last one concept is the main aspect that it’s going to be taking into account in this study. According to Dyer (1986), family companies have an evolutionary process with predictable patrons. The principal stages in the growing of these companies are: creation of the company, growing and development, succession and second generation, public property, and professional administration. GENERAL OBJECTIVE The principal objective of this study is to know the success factors in the power succession from first to second generation of a Mexican family textile company. The specific objectives are: to analyze advantages and disadvantages of the selected company and know the level in which they can affect the power succession, to identify the variables which influence the success of strategies in a family company, and to obtain feed back of the founders and successors applying deep interviews. METHODOLOGY

Case methodology will be used to discover the principal variables which are involved in the family succession of a phenomenon. The case of a textile industry is going to be analyzed to contribute to the general objective. It will be studied the interaction between the more common problematic areas which are: business, management, family, property, succession; and the advantages of a familiar company: compromise, knowledge, flexibility, pride; to obtain a successful power transition. First of all, this study is going to be exploratory, including methods and ideas related to the main objective: the power succession. Later, a descriptive study will be used for identify the clues or variables which affect this phenomenon. (Maxwell cfr., Pérez, 2000). It will be used a questionnaire which will be applied to the founders of the company and their successors, it will contain deep interviews for getting more information of the phenomenon of the succession in a family company. The questionnaire will be divided in five parts: history of the company, family property, business, management and succession. Each part will have specific questions which include the most important characteristics of each block. It’s not necessary having a specific format, because the questionnaire will be applied as deep personal interviews spoken by the interviewer and the interviewed person. In addition, all this information will be recorded.

RESULTS

The questionnaire was designed using the model of the five circles of Amat (2000). It separates the company in five areas (family, property, business, management and succession) and questions were made to obtain information which was used for the results. The textile company selected for the study was founded at the beginning of the 60’s, this is a company that makes and distributes seam’s threads. This company started as a drycleaner and with the pass of the years it has become the second greater factory of seam’s threads in Mexico. Nowadays the company produces around 220,000 pounds a month. It has been in the textile market more than 30 years, which has given them the experience of producing a great quality product. The founder is the only shareholder of the company. At the beginning, the founder participated with 70% of the total shares. Twenty-four years later, this percentage was yielded to the founder making him the only person with share’s power. This company does not count with control systems which regulate the activities of the property like the advice of administration and the meeting of shareholders. This is because the power is focused just in one person, morally; his children share the business with him. This company is considered as a leader company in the seam’s thread manufacture. They use strategies that reflect their constant modernization. Their products are adapted according to the circumstances of the textile market. They have always known their clients in a 100%. They used only “mouth in mouth” publicity, and for that reason they have not realized textile formal market studies. They have experienced a great success and implemented technology in their process. In fact, the youngest son has been part of this success. They have also implemented information technology. Nowadays, they have a network which supports all their internal activities. Within this network, they have leagues which connect the stages of the process allowing to be updated with the route of the product, from its elaboration to its sale. Their marketing strategy is to sale a good product in a good price, to give credit and to offer an excellent service with an answer of reliable delivery. This strategy is implemented according to the textile market necessities. At the beginning, the company did not count with a formal organization; just the founder and his two sisters, really knew what happened internally, and the employees just followed and carry out the orders. It was until the successor’s incorporation when the company could be structured. They have actually 120 workers in list. In the administrative area, the decisions are centralized by the family members. In the operational area they are decentralized, nevertheless, are simple decisions that occur day to day. The founder thinks to yield the company to his children. This transfer has been planned for four years and it will continue three more years.

Due to the academic formation of the successor in a university dedicated to the administration of family companies, he knows what the succession implies. This has helped to the company and to the family. He has learned to be constant and patient with the daily work and with the relation with his father. During these four years of the succession process, he has applied his knowledge to improve systems. It’s important to mention the great interest that has shown with his work to maintain the company that his father created with pride and dedication. The company has shown harmony between the members of the family with the personal relations of father to son and vice versa, also the long term commitment with the family and the pride to the company. They showed a great communication between the members since the childhood. The successors must have experience, formation and readiness. The founder is the only stockholder and there are no conflicts for the leadership between the other members. This company does not accept new members. The company use modern strategies which are reflected in the constant elaboration of new products in the textile market and they constantly apply those strategies for the products, textile market and technology. They use technologic information and yearly they assign economic resources to the human resources, technological and material areas. The pioneer has already decided who will be his successor, and even tough he will quite his company, he will continue giving his ideas and knowledge to the successor. They have time for making an excellent process. Each son will be responsible of their own company and for this reason there won’t be any kind of problems between the members of the family. The pioneer and the successor are involved in the strategic and organizational renovation. CONCLUSIONS AND DISCUSSION

Some of the found advantages in the studied company are: The compromise between the founder and the successor is reflected in the daily work. The members of the family sacrifice the personal well-being for the company’s welfare. The company is able to plan and resolve any unexpected problem, due to their experience in the textile market. The pioneer and his successor show a great pride to the company reflected in the concerted effort that they do. This textile company has a solid structure, and it’s because the directive members are not constantly rotated. The mentioned disadvantages: succession, emotional conflicts, leadership and legitimacy, were not founded in the company. The only disadvantage could be that the succession has been spoken but never written, and maybe this could cause confusion between the families. There are tools used to plan and organize the growth of the company. The best way to avoid conflicts is preventing them, and this is done through the planning. Planning increases the options and capacity to change, it also allows others to discover the necessity of it. It generates more information which reduces uncertainty. It increases the capacity to understand the business operation and also aids to conserve valuable resources.

A family protocol is a written document which expresses the relation between relatives and their policies with the company. The family establishes a mission that will guide the familiar and businesses relations. All the family members related with the company have to participate in debates and assemblies. The elaboration of the protocol begins with the interest of any member and finished with its elaboration and approval by all the family. There is a first meeting which is made by people who is more interested in the project. They talk about the importance of being in harmony with the family and the company, the importance of conserving the company and the contribution of its continuity. In this first meeting they have to choose an internal or external moderator. At the end of all the meetings, the protocol will be made, and it must be approved by all the members. Maybe some of them won’t agree in all the clauses but they should approve them if the other votes are majority. The family protocol has factors which should be known by everybody like: freedom, compromise, family values, and the relation with all the family members. The structure of the protocol depends on the family, their values, their beliefs and their culture. It must content the values to transmit to the young members and the following generations, efforts and sacrifices, opening or restriction to more members of the family, ways to maintain good relations, harmony and how to solve conflicts, agreements to share free time, succession of the property; the possibility of strategic alliances and joint ventures, the development of the leadership capacity, and the requirements to the members of the family who wish to work in the company. Using the protocol it can be inferred that this company is leader in the textile market, strong in their family relations inside and outside the company, with a healthy structure and an ample knowledge about the succession process. It’s recommended to do another family protocol in order to give continuity to the succession process. It’s suggested the analysis of the company in ten more years to verify how does the succession process finalized. It is recommended to carry out complementary studies on this subject, analyzing the textile and other sectors, focusing the successor’s professional experience before getting up itself to the family business, to get information about the professionalism of the family companies in Mexico, and finally, to explore the personal feelings of the non-family workers towards the family company in which they are working for. BIBLIOGRAPHY Amat, J. (2000). La continuidad de la Empresa Familiar. (2a ed.). Barcelona. Gestión 2000. Beckhard, R y Reuben, T.H. (1998). Transiciones organizacionales, administración del cambio. (2a Ed.). Delaware. Addison-Wesley Iberoamericana. Dodero, S. (2002). El secreto de las empresas familiares exitosas. Buenos Aires. El Ateneo. Donnelley R. (1964). The Family Bussiness. Harvard Bussiness Review. 42(4). Dyer, G. (1986). Cultural change in family firms, anticipating and managing business and family transitions. San Francisco. Jossey-Bass.

Gersik K, Lansberg I. Desjardins M. (2003). El cambio como una oportunidad. Gestión de negocios. 3(6). Ginebra, J. (1997) Las empresas familiares su dirección y su continuidad. México. Panorama. Granbinsky S. (1994) La empresa familiar, guía para crecer y sobrevivir. México. Del verbo emprender. Jauli, I., Reig, E y Soto, E. (2000). Gestión del cambio en organizaciones. México. CV ediciones. Kinnear y Taylor. (2000). Investigación de mercados. (5ta ed.). Colombia. Mc. Grawhill. Lansberg, I y Perrow, E. (1991). Understanding and working with leading family business in Latin America. Family Bussiness Review. 4(2). Longenecker, J y Schoen, J. (1978). Management succession in the family business. Journal of small business management. 16(2). Lea, J.W. (1993) La sucesión del management en la empresa familiar. Argentina. Granica-Vergara. Pérez, W. Sarabia, F. (2000) Metodología para la investigación en marketing y dirección de empresas. Madrid, ediciones Pirámide. Saldaña, M. (1998). La sucesión de poder en una empresa familiar. México. Grupo Editorial Iberoamericana. Soto E, Braidot N. (1999). Las PYMES Latinoamericanas: herramientas competitivas para un mundo globalizado. Argentina. Ifema. Ward, John. (2003). Planificar para la continuidad. Gestión de negocios. 3(6). WEB SITES www.ipade.mx Lozano, M. El protocolo en las empresas de propiedad familiar. 2000. www.icesi.edu.co