Case Study 3: The Ferr Media Group

"This is a very successful family corporation. El Nuevo Da enjoys the highest circulation of any newspaper in Puerto Rico, and the three-year-old Primera Hora is the fastest-growing daily. Combined, they dominate the market for news and advertising on the island. Our family name has the highest recognition factor in all of Puerto Rico, according to a recent survey. But as we move the enterprise to members of the next generation, how do we nurture a culture of cooperation and communication vs. sibling and branch rivalries as the extended family grows? How do we integrate their spouses into what they are doing, to what they are working so hard to build? For that matter, what should we be doing to prepare the generation after that for stewardship and the continuity of this family enterprise?

Antonio Luis Ferr , Chair, Grupo Ferr Rangel

These were the questions that Antonio Luis Ferr, chair of the Grupo Ferr Rangel, was asking himself as he pondered the next phase of the 10-year succession process he had been leading since 1993. At stake were a media and publishing empire and a family that was an icon in Puerto Rico. El Nuevo Da and the Ferr family were among the most trusted institutions in the country. Its investigations made or broke administrations and governors. Five next-generation members were either already successfully running business units or in leadership positions in the editorial departments of the newspapers or in the holding company. The Grupo Ferr Rangel consisted of publishing and other media, printing, recycling, real estate, a family venture capital fund, and, until 2002, a controlling stake in Puerto Rican Cement, a New York Stock Exchange (NYSE)listed company with $250 million in annual revenues.

An Enterprising Family Tradition

Antonio Luis Ferrs grandfather founded Puerto Rican Cement in 1944. Luis A. Ferr, his successor and Antonios father, had earned an engineering degree from MIT before joining the growing company, into which he eventually brought his sons. Antonio joined Puerto Rican Cement after receiving his MBA from the Harvard Business School in 1957. At Puerto Rican Cement, he worked first in production and labor relations, later becoming general manager and eventually president of the company. But by the mid-1960s, amid tension and sibling rivalry, Antonio and his brothers agreed to divide up the companies and their shares rather than risk further family disharmony.

In 1968, Luis A. Ferr was elected governor of Puerto Rico. That same year, Antonio paid his father $400,000 for the struggling small newspaper El Da, located in the southern city of Ponce. Antonio nurtured the dream of turning El Da into the largest and most influential newspaper in Puerto Rico. He preferred the news business to the cement business because of its involvement in politics and the world of words and ideas, as well as its deep roots in the community. He nevertheless continued serving as president of Puerto Rican Cement. He led this firm as it became the first Latin American company to be listed on the NYSE, and eventually he became its chair.

Antonio moved operations of the small El Da to the capital city of San Juan, and on May 18, 1970, he published the first edition of El Nuevo Da (ENDI). As its name implied, the new daily would be different, modern, and dynamic. It would have a fresh new tabloid look and display its agility with independent and informative news coverage.

ENDIs first editorial, titled What We Believe, declared that the publisher did not wish to just create one more newspaper, one more business, but rather, he wished to express the aspirations of a people. The editorial went on to assert that El Nuevo Da was a public trust that would fight crime and corruption and bring to light the social ills that beset the people of Puerto Rico. This first edition consisted of 32 pages, and the printing was outsourced. Competition at the time consisted of two very successful large-circulation Spanish-language newspapersEl Mundo and El Imparcialand an English-language newspaper, the San Juan Star.

Only 2 years after its founding, El Nuevo Da had become an important editorial voice. Its circulation grew from 40,000 to about 120,000 over the next five years. In the mid-1970s, when ENDI covered and investigated corruption in the ranks of the police on the western part of the island, it was denounced as irresponsible and sensationalist. The continuing coverage of corruption and abuses and excesses by the executive and legislative branches of the government would forge a stronger character and a new journalistic image for the paper. Its growth accelerated, and by 1978 the new daily had surpassed the circulation of its largest rival, El Mundo, and had become the largest print advertising medium in Puerto Rico.

In 1995, when El Nuevo Da celebrated its 25th anniversary, its honors included being among the top 10 Spanish-Portuguese language newspapers in Latin America; being ranked among the top 45 dailies, by circulation, in the United States; and being a source of employment for close to 1,000 dedicated people (see Below Figure A).

Figure A

Our Mission

El Nuevo Da is a family enterprise, a leader in the communications industry, committed to excellence on behalf of its customers. As a communications medium, with editorial independence, we keep citizens informed, serve as a free forum of ideas, and disseminate democratic and cultural values with the intent of promoting a fairer society.

Our Creed

Integrity, Respect, and Humility

Customer Service

Excellence

Leadership

Profitability

Spirit of Enterprise

Open Communications

Teamwork

Socially Responsible and Community Responsive

El Nuevo Da had grown to an average of 206 pages an issue, with a circulation of approximately 230,000 issues daily and 245,000 issues on Sunday. New sections and features kept the product young and fresh. It held a 30 percent share of the advertising market and was now being printed in color. Diversification was being pursued, and a series of companiessome related to publishing, others nothad been founded. (Figure B provides a chart showing the companies under family control.)

Figure B is a tree diagram shows the Grupo Ferr Rangel Companies. The companies are categorized under four different departments: 1. Publications a. El Nuevo Da, Inc. b. Primera Hora 2. Services a. Advanced Graphics Printing b. El Da Directo c. Pronatura d. Virtual, Inc. 3. Real Estate Development a. City View Plaza, S.E. b. New projects 4. Venture Capital a. El Norte Acquisitions, Inc. b. El Horizonte Acquisitions, Inc.

The Ferr Rangel Family

The Ferr Rangel family represents the fourth generation of a long line of business and civic leaders, and entrepreneurs. The first-generation business was a foundry. As the business grew, it added paper and cement to the mix and operated in several countries. In the 1960s, the family company confronted a financial crisis that led to its restructuring. Some of the businesses, now owned by individual third-generation family branches, survived while others did not.

Antonio Luis Ferr married Luisa Rangel in 1964. Antonio considered his marriage to be his most important and best decision. Luisa, he says, influenced him tremendously through her counsel; she placed great emphasis on keeping the family informed and nurturing the participation of the children in the family and the business. Luisa held a variety of positions within El Nuevo Da over the years; more recently, she led the Ferr Rangel family foundation. She was also on the board of directors of El Nuevo Da and the Grupo Ferr Rangel, the holding company. As of 2012, their five childrenMara Luisa, 48; Luis Alberto and his twin brother Antonio Luis (Too), 46; Mara Eugenia (Mau), 45; and Loren, 42were all married and had children of their own (see Figure C).

Figure C is an illustration shows the Ferr Rangel family tree. Antonio Ferr (born 1873) and Mary Aguayo (born 1879) have four sons, Jos Ferr, German Ferr, Carlos Ferr, and Luis Ferr (born1904), and two daughters, Rosario Ferr and Isolina Ferr. Luis Ferre and Loren Ramirez de Arellano (born 1906) have a son, A. L. Ferr (b. 1935), and a daughter, Rosario Ferr (born 1938). A. L. Ferr (born 1935) and Luisa Rangel (born 1942) married in 1964 and have five children: daughter Maria L. (born 1964), married to Cyril (born 1964), has a daughter and two sons; son Too (born 1966), married to Irene (born 1966), has three sons and a daughter; son Luis A. (born 1966), married to Isa (born 1966), has a son and a daughter; daughter Mau (born 1967), married to Miguel (born 1967), has a daughter and a son; and daughter Loren (born 1970), married to Paco (born 1970), has a son and a daughter.

Antonio and Luisa believed that the succession process began before the beginning. In other words, the way they brought up and educated their children had much bearing on the familys ability to both attract to and retain in the enterprise the very capable members of the next generation. They lived by the maxim Plenty of love, equally distributed. They paid attention to the unique needs and potential of each individual child as he or she grew. They were encouraged not to harbor rivalries but rather to enjoy things as a group.

At an early age, the Ferr Rangel children were told that their only inheritance would be their education. The rest was up to them, and therefore seeking excellence and doing things well would be important to their futures. Their involvement in the business began while they were still in college, but their jobs in the company after graduation emphasized a ground-up approach. They all worked in lower-level jobs, whether as writers, researchers, reporters, or administrators, and generally reported to nonfamily managers. They were mentored and received feedback on their performance, both from their direct supervisors and from their parents. The adult siblings considered it critical that they agree on business goals, since they could all conceivably want to be president of the company.

Family Council Meetings

In 1993, the Ferr Rangel family began to meet regularly to discuss family and business issues. Over the next several years, they developed a family constitution, a document that guided their succession-planning discussions. In it, they established guidelines for the involvement of family members and the eventual transition across generations. The family constitution included a statement of family values; criteria for employing family members and restricting the employment of in-laws; behavioral expectations of next-generation members involved in the company; principles regarding the relations between family and nonfamily managers; guidelines for decision making, including Antonios tie-breaking role during the next seven years; and a commitment to the professional management of the family-owned enterprise.

Family council meetings were given top priority in the busy schedules of all the owner-managers. These half-day meetings included discussions about the business, investments, the succession process, conflicts between the siblings or between family and nonfamily managers, and relationships between family members. Any emerging conflicts were addressed. According to one in-law, family dynamics improved as a result of the meetings: I am a lot more confident and optimistic since these family meetings started. It takes time to express and listen to other opinions and understand the different perspectives. Without it, and without accommodating others ideas, all you are doing is competing.

In 1995, the first family weekend retreat was held. It included the spouses of next-generation members. Spouses were briefed on the state of the business (financial results, strategy of the various business units, and new developments) with the intention of leveling the playing field for family members not working in the business. The family mission statement developed and acknowledged the important role of spouses in a supportive role vis--vis the family members who worked in the family enterprise. Several spouses had demanding careers of their own in other fields.

Over the next several years, these annual retreats continued to update spouses on the family enterprise, promote discussion of family-business cases, and nurture candid discussion about the unique skills and career aspirations of next-generation members.

As he prepared himself for a family retreat, Antonio recalled,

I had set 2004 as the target date for the transition because I wanted us to plan and be disciplined about doing what we needed to do to be ready. But I started noticing some impatience with the process, a certain rush to the presidency that I found quite troubling. I wanted to be able to remain as a mentor and advisor to the leaders of the next generation and not feel pushed out.

What is Antonio Luis Ferr struggling with? Since he is personally committed to the transfer of power to the next generation in five years, what should get his priority attention? In sharp contrast to the Bingham family (Case 1), what best practices have the Ferr family already implemented to promote a successful succession?

This case was prepared by Professor Ernesto J. Poza as the basis for a class discussion rather than to illustrate the effective or ineffective handling of a family-business management situation. For permission to publish this case, grateful acknowledgment is made to Antonio Luis Ferr, chair, and Mara Luisa Ferr Rangel, president, Grupo Ferr Rangel.

Discussion Questions

1. What leadership, management, and governance best practices have the firm and the owning family already implemented? How do they seem to be working?

2. What does the CEO need to do next to ensure continuation of the legacy of the enterprise and its history of innovation?

3. How can corporate governance and control contribute to the continuity of this family-owned business?