Conflict within Colombian Family Owned SMEs: An Explosive Blend between Feelings and Business

Conflict within Colombian Family Owned SMEs: An Explosive Blend between Feelings and Business

Rafael Perez-Uribe (Universidad EAN, Colombia) and David Ocampo-Guzman (Universidad EAN, Colombia)
DOI: 10.4018/978-1-5225-0097-1.ch017
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Abstract

Micro and SMEs represent 96% of the companies legally constituted and registered at the Chambers of Commerce in Colombia, and between 70% and 90% are mainly family owned businesses. Many of Colombia's largest companies and most successful business groups were born as family companies. However several researches and investigations developed by EAN University have revealed that these Family Businesses are a constant focus of conflicts. Why? What makes them so prone to conflict? The purpose of this work is to show the possible causes of this grim reality, and to offer some alternatives for proprietors to take these arousing conflicts to transform them into opportunities for improvement, giving their organizations an opportunity to be sustainable over time.
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Introduction

Family affairs and issues generate both the greatest of satisfactions, and the deepest concerns. The strongest commitments, and the most fragile feelings. The greatest of generosities, as well as the most unfortunate sentiments of selfishness. A huge sense of belonging, and the deepest of estrangements. Tender acts of forgiveness, and the worst acts of vengeance. The greatest examples of self-accomplishments, and the most hideous acts of appropriation of others’ merits. The most stimulating and vibrating dreams, and the rudest awakenings (Koenig, 2000. Cited by Velez, Holguín, et al., 2008).

Colombian Family Businesses (FB) have been catalogued by Romero (2005) as the “backbone” of the economic development of any country, for in a free-market economy the entrepreneur becomes the key element in job creation and wealth generation. Furthermore, FB are the predominant type of company in the entire world, and many of Colombia’s mightiest and most recognized enterprises are family-owned companies, or were at their beginning. And, just as Koenig’s quote (2000b) states, family issues can cause the most remarkable satisfactions or the bitterest disappointments, and if you add business issues into the mix an explosive cocktail comes out of the blender.

Family Businesses are not only the most common type of businesses, they represent the oldest manner to start a company in the history of mankind, and its importance is evident when one looks at some numbers.

International statistics regarding the existence of FB show significant numbers on that regard: 100 million people are employed by these worldwide, they represent 60% of the Earth’s total companies and 25% of the 100 top companies in the world are family owned enterprises” (Betancourt, Arcos, Torres & Olivares, 2012).

By the late 20th Century and early 21st, nearly 40% of the 500 companies registered in Fortune’s magazine Global 500, also known as Global 500, were either 100% family-owned companies or family-controlled companies. (Lea. 1991. Cited by Avendaño-Alcaraz, et al., 2009).

According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC, 2008, cited by Zuluaga-Arango, 2010), in Argentina and Brazil, 9 out of every 10 companies that operate within their economies is a FB; in Costa Rica 8 out of 10; in Peru 6 out of 10 and in Mexico the ratio is 4/10. This study also reveals that small Family-Partnerships are most commonly utilized in Austria, Norway, Sweden, Finland and Liechtenstein. By the same token, China, France, Italy, South Korea, Japan and Germany are recognized as strong family-societies.

Table 1 illustrates some characteristics of family enterprises both in Colombia as well as in other nations.

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