Family Succession

Written by: Manuel Romero | Assessment and Operations Director

Family businesses are a fundamental part of the economy in Latin America. However, they often face unique challenges compared to non-family businesses. One of these challenges is their succession planning and the establishment of family protocols.

Characteristics of family businesses in Latin America:

1. They are an important source of employment and economic growth in Latin America.
2. Most family-owned companies in Latin America are SMEs.
3. They face unique challenges, such as succession and lack of capital.
4. They have a significant presence in key sectors such as agriculture, construction and manufacturing.
5. Lack of resources and business training is a common challenge for these companies.
6. They rely on personal relationships and networks to do business.
7. They prioritize growth over the formalization of processes, so they lack optimized procedures and decisions are made based on experience and not on the formal structure of their operations.
8. The founders know the detail of their operations, which makes the companies work, based on a rich technical and tactical knowledge of the founder's company and his successors. This requires a scheduled family succession with sufficient time for execution.

How does a family succession plan work?

Given the above points, it is important for family businesses to plan their Family Protocol and Succession Plan.

Succession Plan

Succession planning determines how the assets and responsibilities of a family business will be transferred from one generation to the next. This can be a complex process, as it involves not only the transfer of assets but also the transfer of values, business culture, family legacy and leadership style.

Family Protocol

Establishing family protocols is important to ensure that communication and decision-making in the family business are clear and effective. This can include establishing clear rules for how family members will participate in the business, how important decisions will be made and how conflicts will be resolved.

The Latin American entrepreneurs we have worked with for more than 30 years, company builders, are visionaries who saw opportunities in countries with challenging social, political, economic and cultural conditions. These entrepreneurs have grown their organizations with ambition and determination and have weathered crises in an increasingly competitive world.

In conclusion, their company is just another "child" that they have seen grow and develop, and for this reason, it is difficult for them to hand over the management of the company to the next generation.

For these reasons, the most important thing about creating a family protocol and succession plan is to preserve the family and the company.

Risks of not having a family succession plan

Failure to conduct a family protocol and succession plan can have serious consequences for family businesses. Here are some of the most important risks:

1. Interruption in the operation of the business

If there is no clear plan for the transfer of assets and responsibilities from one generation to another, there may be a disruption in the operation of the business, which may have a negative impact on the continuity of the company.

2. Family conflicts

If clear rules are not established for the participation of family members in the business and decision-making, there may be conflicts and tensions among family members, which can damage the family dynamics and the operation of the business.

3. Loss of family values and culture

If the transfer of family values and culture is not planned, there may be a loss of identity and cohesion in the company and the family, which may have a negative impact on the continuity and quality of the business.

4. Difficulties in decision-making

Without clear communication and agreement on how decisions should be made, and conflicts resolved, there can be inefficient decision-making and increased uncertainty in the operation of the business.

5. Legal disagreements

If there is no clear plan for the transfer of assets and responsibilities, there may be legal disagreements between family members, which can have a negative impact on the continuity and quality of the business.

In short, failure to execute the succession plan can have serious consequences for continuity, family dynamics and business efficiency. Therefore, it is important for family businesses to address these challenges and take steps to ensure the continuity and long-term success of their business.

How to create a family succession plan?

London Consulting Group has supported hundreds of family businesses in various industries, especially in Latin America, supporting entrepreneurs, not only to optimize their processes, generate more profitability and improve their costs, but also to accompany their strategic processes of Family Protocol and Succession Plan, through a methodology based on the accompaniment of a coach to facilitate the process and perform the key steps for a planned process, and as mentioned above, preserve family unity and business success for many years.

Written by: Manuel Romero | Assessment and Operations Director