The lack of communication, expectations and long-term vision are the main factors that cause more than 50% of family businesses to fail to reach the next generation.
The fact not only affects companies, it also affects the Mexican economy, which is mostly made up of family businesses, the main source of income, jobs, innovation and wealth in the country, representing approximately 90% of the Gross Domestic Product (GDP) and of the productive units in Mexico, according to data from the National Institute of Statistics and Geography (Inegi).
In Mexico, less than 60% of companies have a succession plan for their continuity, despite the fact that there are data that prove that around 90% of those that do have one, carry out a successful process that makes them transcend and positively impact its continuity and the economy, said Fernando Sandoval, Academic Director of the Institute of Entrepreneurial Families of the Tecnológico de Monterrey, at the presentation of the book “Family Business Succession: Success Stories”.
Difficulty reaching agreements is a high-risk factor for succession and survival of family businesses, followed by difficulty finding the director’s future tasks and problems organizing the transition of command. This is a sign that family businesses do not intend to transcend, for which they are not preparing themselves and do not dedicate time and will to the succession process, said María Fonseca Paredes, director of the Institute of Entrepreneurial Families for Mexico and Latin America of the Institute Tecnológico de Monterrey.
In a first or second generation family company, what can destabilize continuity, most often, are the fears of the patriarch who does not decide to relinquish control in time or due to conflicts between the main heirs, according to Carlos Núñez Urquiza , executive director of the Citibanamex Center for the Development of Family Businesses.
In the case of very long-lived companies, from the third or fourth generation onwards, what can derail the process is the lack of good attention to shareholders who do not participate in the administration, because when they feel that they are not taken into account, they could split the company or cause the majority to vote for its sale, Núñez added.
Potential to take charge
In terms of business succession in family firms, Mexico is behind countries such as the United States, Canada and Spain. However, the pandemic increased interest and opened the opportunity to strengthen the corporate governance of companies, according to Fernando Pino Marín, director of the Citibanamex Family Business.
The companies that weathered the pandemic best are characterized by having a formal corporate governance in which: all issues are openly addressed, digitization was already integrated or quickly adopted, good communication enabled problem solving, and there was low reliance on suppliers and supply chain, said Núñez.
This added to the fact that in Mexico, unlike many other parts of the world, the millennial generation is already taking command of companies and has a propensity to generate these governing bodies, given the education they have received. Trends to which Mexico will quickly adapt.
For María Fonseca, the family succession of companies is the acid test of the possible continuity of a legacy that can transcend multiple generations, hence it is considered a strategic and comprehensive process, not isolated and that deserves high attention for its conduct. .
