Reference no: EM1338727
Explain Management and governance and family practices
Discuss management, governance, and family practices in the service of business continuity and intergenerational entrepreneurial activity. The Ferré Media Group is trying to build shareholder loyalty and keep the family business relationships healthy.
Executive Brief
This is a very successful and enterprising fourth generation family business. El Nuevo Día and Primera Hora newspapers enjoy a commanding share of the news market and receive approximately 70% of all advertising dollars spent in the local market.
Five next-generation members of the Ferré Rangel family are successfully leading the corporation, running business units, or in leadership positions on the editorial side of the business. The company consists of newspaper and web publishing, digital printing, commercial real estate development, a recycling company, and an investment/venture capital company. (Until 2002, the Ferré family also controlled Puerto Rican Cement.)
The origin of the family business is traced back three generations, but a separation of companies and assets among siblings of the second generation and third generation, to which Antonio Luis Ferré, Chairman, belongs, gives the Ferré Media Group Case a continuous entrepreneurship flavor. A. L. Ferré bought a small regional newspaper from his father for $400,000 in 1968, while presiding over the family-controlled cement company, and turned it into one of the top 45 dailies, by circulation, in the United States. His spouse, Luisa Rangel, held a variety of positions in the newspaper over the years, and was more recently actively involved in the family foundation and the companyâ??s board of directors. She played a very active role in family communications, successor development, and the transfer of power across generations. Family members and key nonfamily employees considered her the â??chief trust officerâ? of the family.
In 1993, the Ferré Rangel family began to meet regularly as a family to discuss family and business issues. In these meetings, they developed a family mission statement and a family constitution, a document that would guide succession-planning discussions for several years. These meetings were the forum for discussions of the state of the business, business strategy, investments, the succession process, conflicts between the siblings or between family and nonfamily managers, family relationships, estate planning, and stress management. Education, communication, policy-making, and problem-solving were the primary activities regardless of the issue or topic at hand. A. L. Ferré had set a target date for succession to take place by 2004. These meetings began to build readiness within the owner-manager family for the transition. (See Exhibit 1 below for a summary of phases and key activities during that ten-year period.)
In 1995, the first family business retreat was held. This forum, for the first time, included the in-laws.
Exhibit 1.
Ten-Year Succession and Continuity Process at the Ferré Media Group
Between 1997 and 2002, every member of the next generation grew into a position of significant responsibility. The company was restructured. The new organization gave more responsibility and autonomy to business unit presidents, created separate boards for several of these businesses, and included a holding company, whose president was the eldest Ferré Rangel daughter, María Luisa. This reorganization provided career opportunities for family and nonfamily key managers alike. A corporate strategic planning effort was spearheaded by the holding company; it promoted the development of new strategies at a business unit level. Next-generation members were simultaneously running operations, developing their leadership capabilities, and nurturing the development of their own generationâ??s vision for the company.
A retaliatory move by the government, frustrated by repeated coverage in the newspapers of corruption, waste, and poor management in local government, led to reductions in ad revenues and the blocking of environmental permits required in the cement operations of the company. The Ferré Media Group filed a first amendment rights case in federal court in Washington, D.C., and for more than two years focused much energy in proclaiming its journalistic independence and winning the case. The company emerged triumphant when the case was settled in late 2000. The next generation had witnessed the financial and personal sacrifice brought about by the suit. Adversity tested the familyâ??s resolve regarding business continuity, but family members renewed their commitment to the enterprise and its mission.
Finally in late 2002, and as a result of this renewed commitment to running the enterprise by next-generation family members, corporate statutes, buyâ?"sell agreements, and estate plans were developed and funded. Separate classes of stock were created to differentiate between generations and between owner-managers and other heirs (with no involvement in the management of the enterprise). These legal documents and ownership structures all promoted corporate control by owner-managers and aimed at providing speed and agility. Partnership agreements between the siblings and participation policies for their heirs were also developed with an eye to avoiding encumbered decision-making or paralysis in the next generation.
Questions to answer:
1. What leadership, management, and governance best practices have the firm and the owning family already implemented? How do they seem to be working?
2. What does the CEO need to do next to ensure continuation of the legacy of the enterprise and its history of innovation?