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Unexpected succession – a widow in charge

Antonio García (18) worked for Mr Garza in a laboratory preparing food supplements. Antonio was a committed, hardworking and loyal employee. Mr Garza (72) wanted to retire and have some time to enjoy life. He had no children and decided to sell the lab equipment to his faithful employee, Antonio (24). He also gave him the formulas of two of the products as a wedding present when Antonio married Dolores (20) that same year.

Dolores and Antonio worked hard and not only produced and sold the two products that Mr Garza gave them, but also included three more products in five years, and six products more in the next five years. The business was ready to begin sales overseas and by 1980 there were five countries accounting for 9% of sales. The customers were delighted with the products and the sale force grew. This success was reflected in exports as well as domestic sales. By 1990 the company was achieving 25% of total sales in ten countries. By 2003, core business exports grew to 35% in 20 countries. Now the company has four divisions: food supplements, packing, eco-tourism and a chain of department stores. The success was amazing. Even Antonio had never imagined it.

Dolores and Antonio had five children: Ana Maria (36), Gabriela (34), Carolina (32), Antonio (29) and Beatriz (18). All went to the same private school up to junior high school; after that Ana María and Gabriela entered Monterrey Tech for their high school and college. Ana Maria studied business administration; Gabriela studied chemical engineering. While in college they met their husbands, Luis (40) and Carlos (34). Luis is an electrical engineer and worked for a multinational for five years before he resigned to start his own business.

They received financial support from Antonio Sr which was guaranteed with 60% of the stock.

Carlos finished medicine and practiced in a private hospital. Two years ago he started his own practice with the financial support of Antonio.

Carolina loved art and design. She got permission to study at the Art and Design School of Monterrey and then convinced her parents to let her go to Italy where she specialised in interior design. She married Marcelo (33). He is a pianist and teaches piano in a private school but they would love to have their own art and music school.

Antonio Jr studied industrial engineering at university and was the best American football player while playing with the university team. On finishing college he worked for an international consultancy and now he is completing an MBA in Spain, financed by his own savings.

Beatriz is starting high school at Monterrey Tech and, like her siblings did, is working for the company during the summer holidays.

In May 2003, Antonio Sr was giving a conference speech when a journalist asked him: "what will happen to the company when you are no longer around?" Antonio answered, "it is not my problem; it will be the problem of those remaining".

He could not have imagined that only three months later he would be hospitalised in intensive care. He had a heart attack while driving and remained unconscious for five weeks. This was the hardest time in Dolores's life. She was suffering and grieving. Their children, and heirs, were devastated. They were all wondering 'what happens if Dad does not wake up?' Antonio died in the fifth week of his illness.

Dolores (59) is grieving and under pressure since she is now the owner of the company. She has been out of the business for more than 30 years and much has changed. What should she do? What should the family do? How do they make the decisions Antonio did not have the time or willingness to make?

Commentary 1
This case describes a natural catastrophe that has been compounded by lack of planning and the implementation of the basic foundation blocks that are well known within the family business field. The situation suggests numerous challenges for the family, the business, the employees, customers, lenders, suppliers and other stakeholders. The firm should take steps to avoid a distressed sale of the business. The first issue to be resolved is to determine who is legally in charge with the authority to implement change.

Of the many challenges facing the family from a business perspective is that no-one in the family has any knowledge of the business. Businesses, like living organisms, have a life that can quickly be extinguished. One of the most urgent issues is to develop, communicate, and implement a plan that will sustain the current operations of the firm until a revised strategic plan based upon the new circumstances can be brought forward.

A first source of guidance would be the board of directors, particularly if there are significant leaders from outside the firm on the board. From the information provided in the case, it does not appear that such a resource exists. A second resource would be key management within the firm, family or non-family. While the case indicates that family members did not have "any idea about the business" there may be key management member who can be elevated to fill the gap left by Antonio.

Another key resource are counsellors/consultants to the firm. It is likely that Antonio developed at least a small number of trusted professionals that could be relied upon to both provide insights to the business as well as to suggest interim professional management. Alternatively, the family should seek a new adviser and a professional employment firm to take over the immediate operations of the firm and deal with any pressing issues. These issues include investigating wills, buy/sell agreements and estate planning. Visits to key customers, suppliers, lenders and other stakeholders is essential. Receiving their input and alleviating their fears will go a long way towards order and structure for all.

Thomas Schwarz  is director of both Family Owned Business Institute and Center for Entrepreneurship at Grand Valley State University. He also serves on the Body of Knowledge Committee of the Family Firm Institute.

Commentary 2
It is not uncommon for sibling rivalries or past family conflicts to arise during times of crises.

Delay major business decisions until adequate information has been provided and identification of the needs of the business, as well as interests and talents of the family members, have been completely explored. It is not uncommon for some of those involved to feel emotionally frozen, unable to think or organise their thoughts. Others may perceive a sense of urgency to make major decisions (sometimes without adequate information) just to reduce the anxiety they are experiencing.

Ensure that the current upper level management have communication and control systems in place to deal with day-to-day operational issues of the business effectively. Effective use of the board of directors, professional advisers, upper management, as well as a family business consultant can be extremely useful.

Conduct family meetings with a facilitator to provide on-going discussions about family and business issues and ensure more effective communications, problem solving and decision-making. Such meetings also serve an educational purpose for the family members. These meetings can be used to make long term plans for the company (including a possible sale) and to identify those individuals who would be best suited to take the company in the direction the family selects.

With the assistance of professional resources and family members assess the leadership resources within the company and family. The educational and professional experience of some of the family members may allow the family to determine that one or more should serve on the board of directors or even be the CEO. A non-family member or an outside manager may be brought in to run the company until the family has had the necessary time to make an appropriate assessment and develop the skills and provide the knowledge for those individuals selected.

Organise the issues confronting the family and business into priority groupings. This process frequently reduces anxiety because it gives a sense of direction and timing to the efforts required to move forward.

Joyce Brockhaus  is a family business consultant in St Louis and former president of the Family Firm Institute. She is president of Brockhaus Group.

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