According to Fernanda Hurtado, the call came completely out of the blue.
A recruiter was looking for someone to boost growth, increase membership and rethink the model of the Chilean AEF, which translates to the Association of Family Business. Hurtado was pleasantly surprised, remembering that call as a stroke of luck.
It was no coincidence, however. Fernanda Hurtado is a much-lauded member of the Chilean business community and a part of the Institute for Women’s Leadership in Latin America’s Women in Public Service Project. At the time she received the call, she was serving as the head of the Chilean Chapter of the International Chamber of Commerce (ICC).
Since taking over as CEO of the AEF in 2014, Hurtado has focussed on establishing a foundation to ensure the continuing success of family businesses. More than 55% of all private businesses in Chile are family-owned and yet many are relatively new. As such, succession and governance pose serious challenges for many families as they hand the reins over to the next generation.
Tharawat Magazine had the opportunity to sit down with Hurtado to discuss the role of AEF in Chile and some common challenges faced by family-owned businesses.
What were your first strategic actions after joining AEF?
The AEF was modelled after a similar institution that had already been established in Spain. One of the first things I did after I joined was suggest to the board that the Spanish model was inappropriate for Chile. That model saw efforts centred on urban areas, but here, there is a great distance between the Northern and Southern regions. A lot of family businesses in Chile are very far away from the capital, so it doesn’t make sense to concentrate only on Santiago as the centre of the whole initiative. We need to have a more integrated approach to what we’re doing across the country.
Also, we soon coined on to the fact that we needed to engage with companies that were eager to participate, specifically family businesses that realised succession was key to their existence. We started working in conjunction with other institutions that have a very strong family business representation in their membership. That is how we have come to collaborate with the National Chamber of Commerce, the Construction Chamber, the Santiago Chamber of Commerce and the Federation of Chilean Industry as well as bilateral chambers of commerce such as the German-Chilean Chamber of Commerce.
We’re thinking of expanding our activities and outreach to additional regions in collaboration with the Construction Chamber and the National Chamber of Commerce, where those institutions have a strong presence. A lot is going on, and it helps that the current socio-economic and political conditions are more positive than they have been in the past. Of course, this leads to better prospects for development and growth, which makes it easier to talk about the importance of coordinating the back-office of the family business.
You touched on the current economic environment Chilean family businesses are facing. What are some challenges and opportunities?
In general, I think that it’s mostly the same challenges that family businesses face all over the world. That said, I think there are a couple of characteristics that differentiate us from other places. Most family businesses in Chile are not that old; in fact, the majority are in the process of transitioning from the first to the second generation. The biggest challenge is getting the founder to understand that they need to let go a little bit and integrate the younger generation. They also need to think about how they are going to organise their business to keep the family together. I would say that the average life cycle of family businesses in Chile is 35 to 40 years, no more than that. Of course, we do have some very old family businesses, mostly in the agro-industry, and wineries are another example. Generally, though, you don’t see many 4th generation family-owned businesses here.
Why do you think that is?
It has to do with the fact that we are not an old country. We are just celebrating 200 years of history, and it makes sense that the older families have agricultural origins. You can argue that serious economic development in Chile only started in the 1970s and 80s. Many of the big family-owned companies that are still going strong to this date.
Do you get the sense there is a strong motivation to see these family businesses survive?
Absolutely! Family culture is very strong in Chile. The predominant religions within the country are very supportive of the family unit – Chileans spend lots of time with their relatives. When you have that type of a culture, you will do whatever it takes to remain whole as a family. We’re lucky that Chilean culture reinforces all the factors that go into maintaining a healthy family business over the long haul.
Of course, the big challenge today is adequately preparing your family business before something bad happens. This is something that worries me because often you’ll see a founder who has worked all their life in the trenches, day in day out, to ensure the survival of the company. It comes to a point where they say, ‘Oh, I’m done’, and they have not given any thought to the process of succession.
We know that you have initiatives like AEF Futuro, AEF Women, AEF Philanthropy and AEF Family Office. Can you tell us a more about why you decided to have these distinctive streams?
It has to do with understanding the dynamics of every family business. Usually, those families that are in the process of transitioning from the first to the second generation are not very concerned about family offices, foundations or philanthropy. The primary focus is to educate them about corporate governance, reputation and internal and external communications. We want to give them all the necessary tools they’ll need to survive.
It’s important to get them to understand that within the AEF, they will be able to network and share their experiences in a space of trust. We approach situations in a non-academic way so as not to alienate people. It’s crucial for them to feel that they’re not alone on their journey, that they can share with other families that have gone through the same process and see what the outcomes have been.