Families in Business chaired a roundtable discussion at the Family Business Conference in Miami to find how businesses in Latin America are tackling globalisation (click here to read more). Families also spoke of the strategic plans that their businesses have developed in order to keep up with the global market, as well as their hopes and plans for the future.
Carlos Eduardo Hellmund is the chairman and former president and CEO of C. Hellmund & Co. The Venezuelan company was established in 1862 and exclusively distributes Fuji Photo film and other top brands. Carlos' son Carlos Jr was elected president/CEO last September.
Ricardo Hellmund is the managing director for TIS Ventures, the Hellmund family's investment and business development vehicle. In five years, the family would like to see 40-50% of company revenues generated outside of Venezuela. TIS Ventures is based in the US.
Dr Santiago Ibarreche is the director of the Center for Hispanic Entrepreneurship at the University of Texas, El Paso. He is also an independent consultant of strategic management, quality management, financial management, and international aspects of management worldwide.
Alejandra Torres Dromgold is chairman of family-owned real estate developer and interior architecture firm Contempo Group. Ninety percent of Contempo Group's business is presently in Colombia and 10% is abroad in financial portfolios.
Andres von Fedak has been the CEO of Danta Corp-SvF Group since 2003. The firm has diversified interests throughout Latin America in the agricultural, real estate, aviation and waste management fields. Around 40% of its businesses are international. He has been responsible for the development of its management structure.
How are you dealing with the rise in family shareholders and what role does globalisation play in your plans?
Torres Dromgold: We have something that has worked really well for us. We started the strategic planning process for the first time about five years ago when this whole succession thing happened. We first said, "do we really want to continue with this business?" We looked at the numbers and decided to make some changes. Then we did a second process when we brought in the external CEO and board members.
Sometimes the process is more important than the results. We meet every three months, we have a strategic committee to continually review and brainstorm, and try to think outside the box. We have an ongoing process that I think has helped a lot.
Could you talk about some of the things that have come up in the last five years because of the strategic planning process?
Torres Dromgold: Well, we have made two important changes to the business. At first the business was just focused on architecture and building and then leasing. We started to see these as different business units and started to look at them and how they could complement each other. We created two new units, interior architecture and hotel management, which were very complementary to the whole package. We also started selling buildings more as financial packages, such as building securitisation.
In terms of diversification, 90% of our assets are tied up in buildings in Colombia. I think the political situation there still has some risks. Even though we've had very strong political leadership for years, the situation can turn around quickly. We have 10% of our investments abroad; more in financial portfolios to give us more liquidity. We still haven't been able to branch off into an entirely new business, which is still something we'd like to do, but we've diversified into different parts of the value chain related to real estate.
Ricardo and Carlos, can you explain how you utilise your family office?
R Hellmund: Our family office is really an office of Venezuelan investments, rather than international investments. So what we are trying to do is see what businesses we can go into and invest in with controlling stakes.
C Hellmund: Outside investments are passive. The family office is not in charge of managing any outside investments. There are banks for that.
R Hellmund: Also you don't want both the business and family office to be based in Venezuela.
Ibarreche: That's also very true in Mexico, Venezuela and Colombia. [Statistics] say that there are $200 billion of Venezuelans' abroad.
The successful banks and the successful investment houses in the US are not successful because they are very profitable, but because they are very secure. People who invest there are the people who are fleeing their countries and they want to keep their money.
Capital preservation is key. For example, in El Paso, Mexico, a local bank was bought by a major global bank. They have lost about half their customers because they came with the New York market mentality of wanting yield and high-risk. And every single Mexican that was there said: "Forget it". It is one of the things very few people understand in the banking industry, that because of the specific environment of a country, people are taking out their money to preserve it, not to augment it. They do not want to take any risk at all because they have enough risk at home.
And that is one of the problems I see with globalisation of Latin American business: we still are very sceptical because of the government. I have been in the US for 23 years and one of the very good things for me is that I live on the border. So every time I start feeling nostalgic, I just cross the border and try to cash a cheque and then I remember why I left.
But in many ways one of the problems we have is that governments have been changing so much and institutions are so weak. You trust the person you are doing business with, but you do not trust the institution. What we tend to do is look at who we are doing business with because you know that person is going to be the one who backs you up, even if the institution he or she represents fails. That person is the one who is going to make your case.
von Fedak: My father never believed in banks. He never had money in a portfolio or anything like that. Any money he had went into starting a new business. When we talk to these financial guys, they tell you "yes I can make you about 8– 9%". For me, it is better business to buy engines and put them in a deposit and next year they would be 15% more expensive.
Ibarreche: That attitude is very common with immigrants. I have seen that a lot with Mexican immigrants. You have assets and assets can always be liquidated if necessary. This will not be necessary if you have money in the bank.
What are your parting thoughts on where you would like to see your business five years from now?
von Fedak: Well I would like to see five years of a good working family office and our third generation working in the different businesses to get familiar with them, if that is what they want. For the business itself, I would like to exceed the goals we have set for ourselves in the strategic plan.
Torres Dromgold: I would love to see the architecture and design unit as a global unit and to be able to offer services in other countries in the region and maybe in the US. I think we have a competitive advantage against US firms in terms of cost and the value that we can offer.
I think Colombian architecture is of very good quality. There is a very vibrant market there. We are on the board of the Green Building Council in Colombia. It's just starting to be formed and we want to be pioneers in environmentally sustainable construction. That's something that's very clear in our mission and our approach.
In terms of the family, I would love to see the family office consolidated so that it can offer services to others, as a profitable business in itself. I think there are a couple of family offices in Colombia right now and they are still single offices that are very inward focused.
As the oldest of four, I would like to see the rest of the siblings step forward and assume positions of leadership. At some point I should be able to step back and allow someone else to take the reins.
R Hellmund: In five years I would like to say we have been successful if we can have maybe 40-50% of the company's revenues outside of Venezuela. I think for me that would be a good omen; that somehow we have created the hope that the siblings and our children can live from the family business.
C Hellmund: I very much feel the same way. Hopefully in five years the family business will be able to sustain the family – those that want to stay in Venezuela and those that don't. It is a matter of diversifying the type of business we are in, both regionally and internationally.
Santiago, what is the best piece of advice you can give these families to help obtain their goals?
Ibarreche: Try to do a good job in terms of passing on the values, not just the work ethic. Also, when you have successful family businesses it's very easy to get used to them and not renew. I think that the strategic planning process is critical – but think in terms of strategic management rather than a strategic plan, because the plan can be something that is very easily kept in the drawer instead of being put in action.
Click here to read more of this roundtable discussion.