The Torres family contributed this article. Their company Contempo Group are based in Bogotá, Colombia. The family are members of the FBN Colombia chapter.
Fate forced Colombia's Torres family into a generational succession, and a reinvention of the family business. Help from outsiders and a united family have meant this business has beaten the odds and evolved into a strategy- and growth-focused concern
It is difficult to visualise the past when one enters Contempo Group's newly-remodeled offices in Bogotá, Colombia. The sleek furnishings and sophisticated illumination defy tradition, and the company's CEO Ernesto Estefan, the first non-family executive in 37 years of history, speaks mainly of the company's upcoming projects and future growth prospects. In this setting, the only quiet reminder of the past is a series of austere photographs set on the walls, picturing several buildings constructed over the past 40 years in this country's capital. However, as the Torres family will attest, honouring and revitalising the past, while focusing on building family unity, was critical to the successful re-emergence of this family business.
The group was founded in 1969 by architect Luis Eduardo Torres with the purpose of developing real estate in Bogotá, Colombia's burgeoning capital. Contrary to most architects of his time who focused on selling their designs to construction companies, Luis Eduardo had a keen eye for long-term real estate investments and entered the construction business. He bought prime plots of undeveloped land, designed projects, partnered with a civil engineer to undertake construction and, whenever possible, kept ownership of the real estate in order to lease commercial spaces. Over time, his inventory of leased commercial real estate consisting mainly of offices and retail establishments grew considerably, providing a steady cash flow stream for the company that has given the family financial resilience during the cyclical downturns in the market.
Mr Torres' visionary business strategy perhaps worked too well. By the late 90s the company began to rest on its laurels, limiting itself to leasing its inventory of real estate. An economic recession, the first in Colombia since the 1930s, fostered this business approach. Additionally, several hidden pitfalls had developed along the way that became painfully apparent when a series of adverse circumstances hit the company. First, Mr Torres had run the company as a one-man show, and a one-man show only. Most of his employees had been with him for over 20 years, and his two most trustworthy positions had been held by the same people for over 30 years. This meant that no procedures manual existed and that most of the company's know-how resided in people's memory. Second, inefficiencies and inadequate financial management practices arose and went on unchecked due to a lack of checks and balances in the company's internal controls. Last but not least, Mr Torres contracted a degenerative neurological disease, limiting his ability to make strategic decisions and to make a series of necessary, yet crucial steps.
In 2003, Mr Torres' three daughters and son were practically forced to take the reins of the rapidly worsening situation. Eldest daughter Alejandra, recently back from the US, was attending board meetings at the company and filling in for her sister Andrea, who was completing her master's degree in interior architecture and design at the Academy of Art University in San Francisco. Alejandra had studied business at the Wharton School and had analysed companies for several years working as equity analyst and associate in a Latin American private equity firm. However, nothing could have prepared her for the situation she encountered: "The company was in a vegetative state, and I found employees mishandling resources. My father, due to his condition, could not take matters into his own hands".
After consulting with her siblings, Alejandra conducted a surprise audit on the company and found inadequate practices and inefficiencies. The family's decision was to perform a major restructuring to save the company's future. The better part of a year was spent working with labour lawyers, negotiating a graceful exit for the group's longstanding employees, hiring a new management team, recovering information, installing formal procedures and generally 'cleaning house'.
However, Alejandra decided that the best way to go about this restructuring was to involve her sisters and brother. "While I felt I could have done it on my own, I was making a series of decisions that would affect my siblings in the future. I knew the best way, if perhaps not the fastest, was to involve my sisters and brother in building a shared vision and in sharing the responsibilities of creating a new company." This strategy of consensual decision-making was crucial for building family unity and for making key decisions.
Upon Andrea's return to Bogotá in August 2004, the family hired two business consultancies focusing on corporate strategy and family issues. The objectives of these consultancies were to: redefine the company's corporate principles and strategy; act as an interim board of directors, and draft a family constitution with clear guidelines and conflict resolution mechanisms. As Andrea recalls, "We had to rebuild the company from ground zero. We were at the point where we didn't even know what business strategy we wanted to follow. The best part of this was that the four of us had to work together as a team to redefine our company. With the help of our advisors, we were able to rebuild things the right way".
The family selected VA Consultores, co-founded by Diego Velez and Andres Rico, both highly recognised family business consultants. Over time, Andres Rico spun off his own advisory firm called Nortem Advisors, from which he has continued to advise the company. Andres explained: "When we first got together the obstacles seemed impossible to overcome: a stagnant business and an unclear corporate path to follow. There was one thing that bloomed in every aspect of this family. Unity! That has been the main ingredient for success".
Everyone's involvement was crucial, including that of the father and the two younger siblings, Simon and Laura, who participated in the intensive meetings from the beginning.
Following a year-long process, the family consolidated a growth strategy that built on the group's longstanding know-how and published a clear and comprehensive set of family guidelines. The family also decided to appoint an external CEO with ample experience in the construction business and invite a majority of external members, recruited for their expertise in their respective sectors, on its management board. The externally-dominated board's critical questioning of the family's business strategy was crucial in taking the decision to embark on the company's growth path.
"The family was cautious about making every move. We were even careful in defining our new roles in the business," says eldest daughter Alejandra, now chairman of the board. We decided that a professional CEO is more conducive to corporate growth and also mitigates the conflicts that can arise when one sibling is boss to another. Andrea heads the architecture division at Contempo and led the recent revamping of the corporate headquarters. Simon, who participates on the board and on the projects committee, plans to join the group following five years of work experience in similar companies. Laura will define her role in the future, but participates as secretary of the board and as editor of the company's promotional materials. Finally, Mr Torres still attends board meetings as honorary chairman, contributing his wisdom and significant experience. According to Laura: "It is essential to define what the company needs and then define the roles of each family member. It is crucial to know what is best for the company and at the same time for the family. Although it is a difficult process, I have learned so much about the business which I was not involved in before.
Today, Contempo is under the management of Ernesto Estefan, who has respectfully acknowledged the strength of the family's past while leading the company towards a more aggressive growth strategy and consolidating a top-notch management team. The group is launching the first of a series of real estate developments, consisting of a top end office tower and hotel located in a prime location. According to Mr Estefan: "Contempo Group is set to achieve nationwide recognition as a reliable, creative and professional real estate developer, with a business model that adds value to the companies' customers, providers, investors, employees and shareholders. The management team and board of directors have undertaken market studies in the real estate industry finding a lack of real estate investment options. The project's proposed location, increasing demand for business hotels and top-end office spaces support the rationale for developing a state of the art building that will become a landmark in Bogotá, as well as a real estate concept to develop in other cities.
The most gratifying reward of the process, however, is a new level of family involvement and unity. The family continues to run a family council which meets once a month and which Simon presides. The council has served as a valuable discussion forum for potentially conflictive situations and has strengthened family unity. The family also meets informally for fun gatherings and runs two family assemblies a year, inviting the husbands of the two elder daughters and communicating any key decisions. Future plans include a governance code, a manual for conflict resolution, professional coaching and tailored education plans and a family office with its own procedures manual. As Simon says: "The family council gave order to our lives. Living the process of writing our constitution, of having to discuss every issue concerning it, and making it a way of life brought us together. I don't know any other family as united as us. Unity is the language spoken between our family members".
This story of overcoming personal and business obstacles is meant to inspire those who want to act as agents of change in their family businesses, and also those who want to build a family vision and commitment that will, over the long-term, nurture a growing business that contributes to the country's economic growth. After all, isn't this what makes family businesses so valuable?