When I give a talk to family business owners in Mexico, I almost never find a company in the fourth generation. The tales of famous split-ups in family companies make constant cocktail party conversation, especially in the great commercial centers such as Monterrey.
There is much that American families can learn from the strengths of families running Mexican businesses. The Mexican family culture has less divisive individualism and more teamwork. Familymembers look after one another's interests, nurture the young, and respect the old. In one seminar, a young woman stood up and movingly acknowledged the contribution of the older generation in her company. In 15 years of giving seminars in the United States, I have never heard such a genuine tribute.
But Mexican family business has entered a new era. The move toward free trade with the United States has made it imperative that all Mexican companies become more professional and make huge investments in new technology. There is an urgent search for better ways to meet the competition.
Because rapid changes are called for, the patriarch's knowledge and experience is in danger of becoming irrelevant. Increasingly, Mexican families are looking for checks and balances. They are turning to outside boards of directors for professional guidance. Some companies are hiring from a new cadre of professional managers that has begun to emerge. At the same time, the companies have begun to realize that the business cannot continue to be the ultimate welfare state for the family.
To make the transition from a family-first to a business-first philosophy, however, requires a delicate balancing act.
Succession in a Mexican family business has always been gradual and evolutionary. The old leader doesn't leave and hand over the business all at once. There is no equivalent of retiring to Florida. His presence is always a factor to be reckoned with. Decisions have to be checked with him; his reactions to issues must be anticipated. As he grows older and less competent, the next generation starts to tell him half truths and even hide their decisions from him.
A successful transition to the next generation is dependent on the ability of the patriarch to turn over power wisely and carefully to give his successor enough power, but not too much. If he moves too slowly, the younger generation may get frustrated and do something foolish. If he moves too quickly, he may appear to be surrendering his authority, leaving those children who are not working in the business without the protection they feel they need.
Traditionally, the patriarch designates his successor and insures an appropriate balance of power among the next generation. The oldest son has priority in the succession and is given increasing responsibility. But the old man follows his progress carefully and sees to it that the younger children are taken care of and not cheated by the older ones. The next generation, for its part, is expected to work together, to support one another and get behind the leadership of the oldest son.
In the United States, the next generation typically expects to take over leadership of the family business by age 40; by this time, the sons and daughters are usually clamoring for more power and independence as well as a larger financial stake. In Mexico, where there is no such watermark age, these expressions of impatience would be shameful; they would reflect badly on the patriarch's leadership and suggest selfishness in his children.
However, Mexican sons and daughters have now begun to make some of the same demands. Interestingly, the most radical challenge is coming from the young women who want to run the business, or at least have some say in it, and who face considerable resistance from both the patriarch and their very-much-threatened brothers. Reflecting wistfully on the influence of "modern ideas" on his company, one patriarch recently told me: "This new wave of individualism will kill our family businesses."
In the system of patriarchal management, the role of the oldest son is complex and politically difficult. He must gain power without advertising it. He must learn to get what he wants and still have the old man approve. He must adopt new ideas without going too far. He must modernize but hide the risk. He must discipline the younger children without dominating them. If he abuses his power, he may create resentments that will lead to trouble once the patriarch is gone.
In this family-first culture, it is sometimes hard to get an objective opinion on how key decisions are made. There are a few trusted advisors in a Mexican family business, the gente de confianza, who have proven their loyalty over the years and, in effect, joined the family system. To the children, they are known as tio uncle. They are the glue that binds the family and represent a support system for the patriarch. They carry out the family's dirty work. They make things work, but at the same time, they are formidable barriers to change.
When the children are capable and the system is working well, family members make decisions for the business quickly and efficiently, and get the old man's fast approval. The aging patriarch may save the business from many mistakes, but as one commentator put it to me, "The problem with Mexican patriarchs is that they try to run their businesses with their hearts and not their heads."
To professionalize a business within this tightly knit culture is exceedingly difficult. It requires a true sharing of power with talented managers who may be driven by their own need for achievement and financial reward. Cost controls, previously overseen by the gente de confianza, who were mainly concerned with the family's interests, must be replaced by formal and more open methods of data collection and financial review. Inevitably, the company has to become less secretive, less private; information has to be shared throughout the company.
Many patriarchs will complain, with some justification, that they can't find qualified professional managers to whom they can turn over the business. The fact is that the tenacious hold of the patriarchal system up to now has hindered the development of such a corps of managers. But that is changing as the larger and more sophisticated companies develop management talent. In addition, the country is now in the second decade of a surge in management education, led by some of the great Mexican universities such as the Monterrey Institute of Technology.
What can we in the United States learn from the Mexican experience? By comparing our own experience with theirs, we can appreciate the amount of intergenerational conflict in our culture. The Mexican family works, and overall, it enriches family business. The next generation of family members, for the most part, function better as a team and are generally more successful in maintaining family loyalty than our young people. Since they have a responsibility to the family as a whole, they must make the business grow. So by and large, they have a good track record as entrepreneurs.
There is a more pointed lesson in the Mexican experience, though: Without a balanced approach designed to protect the business from the ravages of family incompetence, conflict, and greed, family businesses no matter where they are won't make it.