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IS A MEXICAN FAMILY COMPANY ABLE TO CONFRONT THE POWER TRANSMISSION

FROM THE FIRST TO THE SECOND GENERATION?


Ximena Ocejo Fernndez, Mara Eugenia Abiti Maldonado, Carolina Fernndez Pedroarena, and
Rafael Idoyagabeitia Garca
Universidad de las Amricas, Puebla
Departamento de Administracin de Empresas y Mercadotecnia
Escuela de Negocios y Economa

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. Its going to be
explored the power transition of this company from the first to the second generation.
In the same way, its 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 managements 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 companys
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 familys 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: pioneers 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 its 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., Prez, 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. Its 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 60s, this is a
company that makes and distributes seams threads. This company started as a drycleaner and
with the pass of the years it has become the second greater factory of seams 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 shares 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 seams 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 successors 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. Its 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 wont 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 companys 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 its 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 wont 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.
Its recommended to do another family protocol in order to give continuity to the succession
process. Its 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 successors 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.

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WEB SITES
www.ipade.mx
Lozano, M. El protocolo en las empresas de propiedad familiar. 2000. www.icesi.edu.co