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    The Interview

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    Creating centuries-long success over six generations – and counting 

    December 3, 2024 • by Peter Vogel in The Interview

    Cristina Carvajal, President of one of Latin America’s most respected family enterprises, discusses the benefits of having a family member as the CEO of the family business....

    Cristina Carvajal, President of the Carvajal family council, discusses how social dividends create educated family members, the societal impact of a shareholder foundation, and the benefits of having a family member as the CEO of the family business.

    It was on the cusp of a fourth-generation succession that the Carvajal family, one of Latin America’s most respected family enterprises and the winner of the 2022 IMD Global Family Business Award, faced the same fate as 95% of other enterprising families.

    After surviving two world wars, political and social unrest, and extremely turbulent economic times, the transition from the third to the fourth generation posed a significant challenge to the family legacy. It required careful navigation of the succession process which meant trust in the leadership capabilities and vision of the next generation to ensure the continuity of what had been established. This was not an easy task, as the business needed to refocus, which involved selling divisions and determining a new strategy for its desired focus. Ultimately, this led to the appointment of its first external CEO.

    While its first, second, and third generations lived as a close-knit sibling family above the family’s printing business, in the early 2000s, the fourth generation began leaving Columbia – uninterested in steering the family business and placing its leadership in the hands of a non-family chief executive for the first time in over 100 years.

    The family enterprise which started as a printing press had expanded into the three disciplines of packaging, paper making, and technology. Within a short period of time, they had expanded to the Capital of Columbia, Bogota, and then Puerto Rico – the family’s first international expansion. They then started making the Yellow Pages and various types of notebooks, importing a machine that made lined pages. It was a period of tremendous growth, but their challenge became keeping everyone together.

    Despite being successful in his ambition to refocus the increasingly diversified business, the CEO’s lack of alignment with the family values “made for a harsh transition from family CEO to non-family CEO,” recalls Cristina Carvajal. It was only once Pedro Carvajal took over in 2020 that the family came back together again. “It revived the whole culture of the family and our values,” added Carvajal, whose role it is to relay communications between the family and the business as president of the family council.

    “Creativity has been a great part of our innovation and always being ahead of what was going to happen.”
    - Cristina Carvajal

    Creativity as the springboard for innovation

    The Carvajal family council is the foundation of one of the most unique and sophisticated family enterprise ecosystems in the world, now boasting 330 members and spanning six generations. Its foundation 25 years ago is arguably the key to its long-lasting success. That and the family’s ability to look to the future and work backward.

    “Creativity has been a great part of our innovation and always being ahead of what was going to happen,” Carvajal said, referring to her great-grandfather’s decision to buy a printing press in 1904 before the family even had electricity or running water. “I remember being told that during the war, my uncle had to invent a way of repairing the machines as they couldn’t source parts from Europe. After the wars were over, the creators of the machines would come to Colombia and copy the parts that were being made by the family because they were more innovative.” Today, the family continues to innovate. As printing declines in the digital age, it has expanded into packaging, making paper out of sugar cane bagasse, a fiber that is recycled. “We are always looking ahead of innovation and thinking about how to change with the times,” explains Carvajal.

    While many enterprising families may see change as a threat, for Carvajal, embracing it is the very force that keeps the family united.

    One of the most sophisticated family enterprise ecosystems in the world

    While many enterprising families may see change as a threat, for Carvajal, embracing it is the very force that keeps the family united. The family council started with a family protocol 25 years ago, created by the third generation in a bid to keep the next generation together. This evolved into a comprehensive family council that takes care of distributing social dividends, creating rules around family employment, and running programs for family members in areas such as education and communication.

    This, Carvajal believes, is key. “You need to have difficult conversations,” she said. “I always tell the family, I want to hear the good, the bad, and the ugly. It’s how we evolve and improve as a family.”

    Creating educated family members who keep giving back to the family, generation after generation

    The social dividend was created as a way of ensuring that every family member has access to a good education, a good health system, and a once-in-a-lifetime payment for housing. Family members have the right to receive this dividend if they don’t sell more than 20% of their shares, which serves as an incentive for family members to stay connected with the business.

    “We make sure that we have educated shareholders that want to give back to the family because their education and healthcare were paid,” Carvajal added. It works alongside an entrepreneurship project that sees the family council offering business loans, branding, and strategy advice to family members to encourage their own entrepreneurship. Carvajal continued: “The family needs to work on their own businesses because the family grows much faster than the business.”

    Carvajal is constantly looking at new ways to get creative and strengthen the family enterprise ecosystem. One project on the horizon, ‘The In-Laws,’ will see all legal partners of family members attending family assemblies for the first time. Carvajal said: “Children will now grow up listening to their father and mother talk about how important the unity of the family is. Before, it was just one parent talking about the importance of the business to their children. Now the in-laws will be proud of the family and share this pride with their children too.”

    The family council is currently looking towards the year 2080. This involves not just projecting macroeconomic factors but exploring what the next generation and the generation after need to learn to thrive in that environment. This could include shifting the language of the holding company from Spanish to English to accommodate members who are no longer exclusively Spanish-speaking or increasing the social dividend for the 30% of family members who now live outside of Columbia, where the cost of living is considerably higher.

    The foundation remains the company's largest shareholder by far, and the family is extremely proud of being one of the first families in Latin America to establish a philanthropic shareholder foundation of this kind.

    A foundation like no other

    It’s not solely about sustaining their legacy either. In addition to the Carvajal business and investment fund, which both operate with independent governance systems, the family manages a foundation that strives to make a difference in vulnerable parts of Columbia. It was founded in 1960 when Manuel Carvajal said there could not be a healthy business in an ill society. With that vision, he convinced his cousins to donate the first 40% of the company to start the foundation, and with international growth, it became 23.5%. The foundation remains the company’s largest shareholder by far, and the family is extremely proud of being one of the first families in Latin America to establish a philanthropic shareholder foundation of this kind. As well as summer camps and libraries to provide safe spaces for children, the family has ingrained their creative and innovative entrepreneurship into the way these organizations are run, helping young people to work on their finances and supporting them with their careers and growth. A nod to the family’s forward-thinking nature that has allowed them to thrive for more than a century.

    Watch the full interview to hear more about the Carvajal family’s 120-year-old success story – and how communication and their openness to change keeps them evolving together, generation after generation.

    Experts

    Cristina Carvajal

    President of the Carvajal family council

    Cristina Carvajal is President of the Carvajal family council, the governing body of the Carvajal family business, headquartered in Cali, Colombia. She is also Director of the Family Business Network’s Colombian chapter. Previously, she was Executive Director of the Ecuador chapter of FBN. Carvajal, one of Latin America’s leading family businesses, celebrated its 120-year anniversary in 2024 and was the recipient of the IMD Global Family Business Award in 2022. 

    Authors

    Peter Voegel - IMD Professor

    Peter Vogel

    Professor of Family Business and Entrepreneurship at IMD

    Peter Vogel is a Professor of Family Business and Entrepreneurship, Director of the Global Family Business Center (GFBC), and Debiopharm Chair for Family Philanthropy at IMD. He is Program Director of Leading the Family Business, Leading the Family Office, and the Lean Intrapreneurship program. He is globally recognized as one of the leading family business educators, advisors and academics, has received numerous awards and recognitions and is the author of the award-winning books “Family Philanthropy Navigator” and “Family Office Navigator”.

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