When we discuss family business legacies, ownership is not enough. There must be a leader within the business and the family. It’s important to know who will carry the flag to the next generation.
A rice threshing machine was created by Mr. Alexandrino Garcia on October 10, 1930 and marked the founding of the Algar Group whose name represents the initials of its founder. Mr. Garcia was a visionary, well ahead of his time, and he had an extraordinary capacity to overcome challenges. He also had a genuine commitment to serving others. His goal was to make life easier for people and to help them prosper.
The founder’s commitment continues today and the company openly communicates its primary purpose as “people serving people” across its telecom, technology solutions, entertainment and agricultural commodities businesses.
Reconciling the family/business connection
The Garcia family no longer thinks of the Algar Group as the family business because they believe that a true family business is one in which the entire family becomes involved in managing the company. And under such circumstances, the financials of the company are blended with those of the family.
Algar Group, on the other hand, sees the family relationship with the business as, “a family that controls a group of companies”, and it is important to differentiate between the company/business and the family/owner of the assets. The Algar Group’s management team is comprised of business managers from outside the family and only three family shareholders currently work in the company.
The family owners’ primary responsibility is to provide guidance to the managers; direct the company strategy; make sure its culture is aligned with that of the family; and develop the next generation to become good owners.
Over the decades, Algar Group has consistently reinforced the interdependence of the company culture and family culture and their shared purpose. The family has an important responsibility in making sure that the principles and values of the family continue to be the driving forces behind the company’s strategic direction. It is also the family leaders’ role to make sure there is a long-term view that generates ownership behavior throughout all generations of the family and among the company’s employees.
Mr. Luiz Alexandre Garcia, Chairman of the group, said that the responsibility for sustaining the business is far greater for future generations than it was for the original founder. Founders usually come from humble beginnings and, if they fail, they go back to the beginning and often start over. When future generations receive a large asset that they are responsible for managing, the scale of the potential damage can be much higher if they fail because the company no longer belongs to only one person.
Learning to become a good guardian
The first lesson that Algar Group teaches the members of each generation is their responsibilities as owners. Even though they may never work in the company, they have to be conscientious guardians of the company’s principles and values and to prepare themselves as much as possible for the role that they will be expected to play based on their interests and abilities.
Mr. Luiz Alexandre Garcia, Chairman of the group, remarked that members of the next generation can prepare themselves to be executives of the company if that’s where their interests lie, or as a board member if they have the right qualifications. Another option is to not be involved in the business at all and participate only as an active member of the family. While no one in the family relinquishes their ownership responsibility, it is up to them to decide independently what role they want for themselves beyond being a good owner and to be prepared to attain the academic credentials and experience that will be required if that is their career choice.
Family members are told that they will be provided with the best training in terms of education and life experience to build their life and to be successful in a business role within the company if that’s what they choose. They have the right to make that decision, but there is no family obligation to do so and family members are encouraged to pursue their own interests and develop their own particular capabilities outside the company.
While this is a highly democratic approach, Mr. Garcia pointed out that it can be potentially challenging to develop the next generation’s sense of ownership when they don’t actually work in the company. Without this connection, there is a possibility of them saying, “I’m going to sell my shares because I don’t have a sentimental relationship with the company.” The Algar Group works very hard to keep an emotional attachment in place and to help the members of each generation understand that ownership is their responsibility but preserving the legacy and taking it forward is a requirement that has even greater consequences.
Learning to live the legacy
Sustaining a legacy can feel like a weighty obligation for younger generations who may not fully understand the importance of the purpose and values of both the family and the company. There are two key factors in Algar Group’s mission to keeping the legacy alive within the family: repetition and transparency.
As Mr. Garcia explained, “You have to keep doing this over and over again because each generation will ask the same questions that the previous generation asked. Sometimes, these are difficult topics, such as why family members’ spouses and in-laws don’t participate and work in the business.” The main rule, he said, is to be transparent and speak from the heart. If one difficult topic is discussed with one segment of the shareholders, everyone else is made aware of that conversation and has the same information.
As in many family businesses, there are regular family rituals, meetings and family events to talk about the family’s history and learn about the business. The family legacy had been embedded in the business using old movies of his grandfather who has achieved icon status within the family. As well, Mr. Garcia’s father is 85 years old and is the ‘culture ambassador’. Everyone likes to talk to him and take pictures with him when he attends events. However, the family legacy is now becoming more institutionalized as it moves from being focused on a specific family member to being the wider family and the business collectively.
On a more formal basis, there is a Shareholder’s Academy with academic lessons and leadership coaches. Equally importantly, the family has created UniAlgar, a formal teaching mechanism for employees to learn about the company’s culture, values and principles and develop their management skills through classroom lessons and videos.
The legacy that the founder has left to the family is enduring and while the business itself will change, the culture should last forever. The testament to this is that Algar Group has operated for more than 90 years in many different fields of business. The principles, purpose, values and success of the company have never wavered and have been widely recognized. As recently as November of 2020, Algar Telecom was recognized as Brazil’s “Company of the Year” by Exame, a magazine specializing in economics, business, politics and technology published by Editora Abril.