Managing family-owned businesses in challenging times : Extracts from Ricardo Bäcker’s Interview
The Argentine economy is a mess.
So says Ricardo Bäcker, whose firm in Argentina recently did a strategic exercise in which they acknowledged that the deterioration of the local economy had led to declining interest from multinational companies. “We decided to focus on local companies, and local family-owned businesses. They feel more comfortable in the uncertainty of the local economy: they are the future of the country.”
Argentina’s economy is young - so there are not a lot of companies that have been around for a long time. Still, at least three of the companies that Bäcker has worked with are third-generation family-owned businesses.
Local focus and experience, combined with his membership of an international peer group for CEOs, mean that he understands the challenges facing family-owned business and the way those challenges can affect the outcomes of succession planning.
“I had a conversation with an owner with whom I have placed a general manager, and he was not satisfied with the performance of the manager. And one of the things I told him was: you took a general manager for navigating, let’s say, from Buenos Aires to Cape Town, and to organize the ship and the supplies and have the passengers happy. But now you’re suddenly in the middle of the storm. And there on the ship are people who know the weak points of the ship, or there are those who were already on the ship before this new captain went on board. You’ve hired somebody to organise and to prepare for the future. But suddenly, he is absorbed by very operational events, and that doesn’t give him time to organise processes. And that makes it very difficult to judge if he’s good or not good for what you hired him. I’ve seen this many times.”
A tendency to second-guess a successor is common in family-owned businesses. That means that expectation management must be part of the succession process. “The founder is entrepreneurial but that trait isn’t necessarily inherited by their children - the kids don’t have that spirit, they were raised in comfort. If the founder fails to find the right successor, then they hire someone. Sometimes they just want a person who takes care of all the processes and details. They sometimes call it a general manager, but really, it’s not a general manager, it’s more like a COO role. I often have to explain that to a candidate. Both sides need to be very sure of what’s expected.”
Expectation management is important for other members of the company too. In family-owned businesses, the owners often don’t manage via KPIs or OKRs - they use their knowledge of the company. But an outside hire might expect those kinds of management processes. Conversely, a founder might not understand that somebody can be good at managing a company without having the detailed knowledge. And the existing team might have been raised in the owner’s management style. They might not adapt - so then the new general manager might change that next level of people within a couple of years.
“It’s not as simple as just bringing in a person who runs the company like the owner was running it. It’s a whole transformation. And you have to make people aware of that,” Backer says.
Ricardo Bäcker is the Founding Partner and Chairman of Bäcker & Partners / AltoPartners Argentina