Eldorado family: the survival and

succession plan
Sandra Jennina Sanchez Perdomo and Mario Andres Manzi Puertas

Sandra Jennina Sanchez

Perdomo is an Assistant
Professor and Mario Andres
Manzi Puertas is an
Instructor Professor, both
based at Pontificia
Universidad Javeriana,
Bogota, Colombia.

The most important topic for the board of directors meeting held on March 28, 2012 of
Colchones Eldorado Inc. was the succession plan for the position of CEO. The members of
the Board wanted this plan to be made as soon as possible, since its current CEO,
Gumercindo Gomez, 75 years old, had not foreseen any succession plan and he wanted to
make sure that the companys ownership and management continued in the family. After the
Board meeting, Martha Gomez, General Manager, hired an outside consultant to design the
basis of the succession plan for the next meeting, which would be held in two months.

Colchones Eldorado history

Colchones Eldorado (CE for its acronym in Spanish) history dates back to the year 1936,
when its founder Gumercindo Gomez was born in the small town of Cienaga, in the State of
Boyaca, to the Colombian northeast. Gumercindo grew up in a very humble peasant family,
without a father, with his mother and his older sister. Gumercindo carried out his primary
studies in the city of Tunja while working as a baker, but due to his difficult economic
situation, at the age of 19, made the decision to look for a better future in Bogota, the capital
of Colombia.
Once he arrived in the capital, his uncle Miguel Gomez offered him a job as a sweeper, but
Gumercindo refused it because he preferred to be a carpentry apprentice at Mr Luis Zarates
carpentry shop. Mr Luis, as Gumercindo called him, witnessed the new apprentices manual
skills, so that he proposed him to form a partnership to create a little mattress factory. This
partnership was born in May 1957, with a capital of US$27 and it was the first step in his life
as an entrepreneur. At that time, Gumercindo was barely 21 years old and had been married
for a year to Beatriz Nunez.

The authors are deeply grateful

for the time and support from
the top management of
Colchones Eldorado,
particularly Gumercindo
Gomez and Martha Luz Gomez.
They are also grateful to the
Pontificia Universidad
Javeriana and the Business
Administration Program.
Disclaimer. This case is written
solely for educational purposes
and is not intended to represent
successful or unsuccessful
managerial decision-making.
The author/s may have
disguised names; financial and
other recognizable information
to protect confidentiality.

DOI 10.1108/EEMCS-11-2012-0197

The first two years of the business were very difficult, and at the end of this period the
company was dissolved; but Gumercindo continued with the solid vision of driving his
enterprise forward. At that time, the business was only able to manufacture a mattress per
month. The bottleneck was the manufacture of springs, which there production depended
on a single machine located in the city of Manizales, since in Colombia there was no
machinery to produce springs massively and its production was purely manual. Given this
difficulty, Gumercindo thought day and night in a way to solve this problem to produce a
greater number of mattresses. After six months of trial and error, being confident in his
intuition and his ability to design, in 1959 Gumercindo was able to build the first spring
making machine in the country. The creation of this machine represented a paradigm shift in
the manufacture of mattresses in Colombia. After this innovation, the future for the business
was very promising. Then, Gumercindo remembered and said aloud:
My business grew relatively quickly due to the quality and innovation I printed to my products
from the very beginning. A special and unique innovation, the spring making machine was a
novelty and gave me a nice opportunity to increase sales and drive my company forward.

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In the early 1960s, Gumercindo decided that Sueno Dorado (Golden Dream) would be
the name for his business. At that time, the company was already recognized locally,
although it only had 15 workers who manufactured about 300,000 springs per month, and
produced around 30 mattresses daily. Long and exhausting working hours and a strong
development vision, led Gumercindo to build the first production plant. This plant opened in
1964 in Bogota. During this decade his first four children, Brigitte, Martha, William and
George (who was born out of wedlock) were born.
Once the company achieved some level of recognition in the market, it was forced to change
its name due to a trademark dispute with a competitor. Therefore, in December 1975,
Gumercindo officially declared Colchones Eldorado (Eldorado Mattresses) as his
business trademark, giving way to 15 years plenty of business prosperity and family growth,
with the arrival of five more children: Giovanna, Sindy, Adriana, Alba and Enrique (the last
three out of wedlock) (see Exhibit 1).
Due to CE successful trajectory, its privileged market leadership position, and the significant
surpluses in cash flow accumulated by the organization for more than 30 years, Gumercindo
decided to build a new production plant in 1988. His dream was to have a more spacious
factory with a state of the art technology, and offices with luxury finishes and comfort. He was
so involved in the design and construction of the new plant, that he completely missed to
manage the financials, to create forecasts and to monitor the budget. As the construction
progressed, expenses little by little exceeded the revenue, and for the first time, the
company was forced to borrow from banks, which did not hesitate to do so due to CE
historical financial health. Just two years later, in October 1990 and with an investment of
US$1,400,000, CE opened its new headquarters in Bogota with a building of 8,500 square
meters distributed over five floors.

The twilight
The investments in the new building and the big amounts of monthly payments to the
banks, US$120,000, undermined the liquidity of the business. In 1994, this situation led
Gumercindo to appoint his son William, as General Manager, who managed the company for
five years until 1999. Gumercindo wanted to give a new direction to the business, then he
decided to hire an outside General Manager for the first time. Then Gumercindo hired Jaime
Marino, who was known by him for his professionalism and diplomacy in dealing with difficult
issues. His recruitment, by Gumercindos decision, was intended to regain order and bring
prosperity back to the business.
In November 2001, the uncertain future of CE due to the complex family structure, the
incessant family conflicts regarding the business management, the lack of liquidity and
non-fulfillment to suppliers intensified the crisis. Consequently, CE was forced to file at
the Superintendency of Corporations, a restructuring agreement petition under Act 550[1].
This situation in the words of Gumercindo had the following meaning:
We were plenty of glory and achievements, but like every living thing, that grows and succeeds,
and is subject to the vagaries of time and circumstances; we made some childish mistakes and
other more serious ones, such as the lack of a simple planning, not very technical but useful; until
we got to Act 550[1], an alleged failure that became a huge opportunity.

In 2003, two important events took place in the history of CE, first, Jaime Marino left the
general management office and several successors were appointed, however they were
forced to resign because they did not show the expected results. Second, CE was able to
start paying its obligations under the agreement of Act 550, which represented an
opportunity to emerge from the crisis, and as said by Gumercindo:
There are three essential factors to rescue a business and a human being: Love, Work and
Patience. If a person does things with love, patience and work, he/she will overcome any situation.
Those were the tools to overcome this deep crisis.

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The renaissance
In 2004, the CE board of directors appointed Martha Gomez, as the new General Manager.
She was Gumercindos daughter, held a business degree and had 20 years of working
experience in the company. Since Martha joined CE, she developed a special ability to work
in the marketing area, which besides being her passion, allowed her to have a deep
knowledge about the operation of the sales force and the distribution channels. With the
acquired expertise she identified several weaknesses inside CE. For instance, the corporate
image was old fashion, the layout of the production plan was inefficient, and an increase in
the sales force was needed in order to boost the revenues. From her perspective, those
aspects represented a business opportunity that make the company grow, for that reason
they were incorporated into the goals strategic plan that was annually reviewed. This
appointment had this meaning to Martha:
The renaissance of a new member of the family who was isolated and who showed that with her
leadership and teamwork skills the business would resurge.

Once Martha assumed the role of General Manager, she aimed to overcome the CE financial
crisis; she undertook a series of restructuring strategies such as the modernization and
systematization of all showrooms, the opening of new outlets, the design of a corporate
makeover and the training of the sales force (see Exhibits 2 and 3). Those strategies counted
with the support of the board of directors enabled her to organize the business and prepare it for
the future.
In Colombia, the 2008 was a difficult year for the economy due to the international financial
crisis, which stroked the manufacturing industry and specially the mattresses sector.
However, for CE management there was an opportunity behind the crisis, and this period
was crucial for the business recovery, based on the strategic plan for that year.
In early 2012, CE was complying with the tax payments and labor obligations and its cash
flow control was efficiently planned and executed. The company had a sustained growth in
sales of around 25 percent, its relationship with suppliers was remarkably satisfactory and
the showrooms had a modern and attractive image.

Business structure
During the 55 years Colchones Eldorados history, Gumercindo Gomez had been the visible
head of the organization. He was appointed as CEO in 2001. Before that date, the company
did not have a well defined organizational structure, but from entering Act 550, CE was
forced to design its structure, which was finally represented in a hierarchical scheme (see
Exhibit 4), providing a clear definition and description of job positions.
While Martha was in charge of running the daily operation of the business, Gumercindo had
not retired yet and he still visited his company as part of his daily routine. Although strategic
decision-making was in the hands of the senior management and the board of directors,
different committees were created in order to decentralize the decision-making process.
These committees were: management, purchasing, product innovation, customer
satisfaction, commercial, administrative and financial. All of them had clearly defined
objectives, functions and performance indicators.
Not all the family members had worked for CE. In 2012, out of the 129 employees, only two of
his sons worked for the company: Martha, appointed as General Manager since 2004, who
also assumed the functions of Marketing Manager since 2006; and William, who after
holding the position of General Manager during the period 1994-1999, rejoined the company
as Director of Information Technology since 2006.
CE ownership, from its inception in 1975 until 1989, had belonged 100 percent to Gumercindo,
who advised by a consultant decided to distribute 68 percent of his shares, among his wife
Beatriz and five of his children, keeping only 32 percent for himself. In 2001, Gumercindo
recovered 70 percent of the shares after a negotiation, in which three of his children, William,
Brigitte and Sindy, decided to sell him their shares. After the negotiation, the new shareholding

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structure was: Gumercindo, 70 percent; his wife Beatriz 17 percent; his daughters Martha and
Giovanna each with 6 percent and finally, his daughter Alba with 1 percent.
Every year in March, the shareholders meeting took place in order to know about the
companys performance and achievements, and to set out the annual goals for the coming
year. In the meeting, Gumercindo represented his daughter Alba; and Martha represented
his mother Beatriz and her sister Giovanna.
The board of directors was composed of ten members, five of which were major and the
remaining five were alternates. Gumercindo was the first member of the main board of
directors, while his daughter Martha was the first member of the alternate board of directors.
The other members were people from outside the company, with wide professional
experience and an appropriate educational level.

Management and corporate governance

Gumercindo used to say the business is built with the best human talent and therefore, a
family must be built inside. Following this philosophy, the organization promoted the values
of respect and solidarity; relationship between managers and employees were framed in an
accentuated paternalism transmitted by Gumercindo to all its employees.
Another achievement in the business operations management has been encouraging and
strengthening product quality and innovation processes, thus consolidating CE as one of the
most recognized and beloved brands for the Colombian society.
For the business, and in the words of its founder crisis is always an opportunity. This
assumption was evidently tested in 2001, when CE filed the petition for reorganization under
Act 550. Although this situation represented the deepest crisis of the company, senior
management focused on the company survival, risk minimization and reduction of its high
indebtedness level, which allowed CE to reach a value of US$10,000,000 for the year 2012.
During this crisis, the board of directors played a decisive role in the definition of the
organizations strategic plan, the administration of resources and the approval of profitable
projects. According to Act 550, access to outside capital was restricted and all investment
projects had to be financed by the company, therefore CE had to carefully plan its capital
investments within its cash flow. From 2001, the financial information was shared, analyzed, and
evaluated in each board of directors meeting, allowing a proper planning, implementation and
monitoring of the distribution of resources and capabilities in the business.
During Marthas tenure, the biggest challenge was to organize the production plant making
an efficient use of resources and reducing operation costs. She managed to renew and
reinforce CE corporate image by creating a new design and utilizing national advertising
campaigns, and opening new and modern stores to promote a pleasant shopping
experience (CE owned 17 outlets and had over 100 dealers in the country). She
systematized all areas of the business and obtained payments to be deferred according to
Act 550 until 2015. During this management period, aiming to promote the growth process in
2011, CE signed a strategic alliance with Sealy, the major mattresses maker in the USA, to
manufacture its mattresses in Colombia.

Family and business

Colchones Eldorado did not have a family protocol, a family council, or a purchase and sale
of shares agreement. Several family members have worked for CE: George, salesman from
2000 to 2004; Sindy, Marketing Manager, from 2002 to 2006; his son-in-law Arturo,
Wholesale Distributors Manager; and Enrique, various occupations, from 2005 to 2008,
while he was studying at the university.
When a new member of the family wanted to join CE, for example, Marthas daughter, Camila,
she could do so under a process of informal recruitment, only if there were a vacancy in which
she were interested, and with the compliance of the minimum requirements for the position
(studies and previous experience). Under Marthas tenure one of the changes was the

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implementation of family members performance evaluation. In her own words: A family

member is evaluated as any other employee; promotion and compensation will depend on
results.
Outside the business, the Gomez family met every Saturday for lunch. This activity allowed the
family members to strengthen their family ties. The business affairs were only dealt with during
working hours and among members who worked for the company. The family conflicts
and differences were resolved through dialogue. Martha was aware of the importance of
preserving the family harmony, and concerning this topic, she stated the following:
In our family we profess three different religions. This situation generates substantial differences,
but we have enough capacity for dialogue, reconciliation and forgiveness to build a future
together for the sake of both the Business and our families.

What is next for Colchones Eldorado?

A week after the board of directors meeting, the consultant had to structure the model for the
succession plan for the position of CEO, who, according to the board of directors, it was
supposed to meet the following requirements:
Keywords:
Succession planning,
Family business,
Entrepreneurship,
Small to medium-sized
enterprises,
Family ownership,
Colombia,
Manufacturing industries,
Management succession,
Family firms

ensuring the conservation of share ownership within the family;

keeping the position of CEO within the family; and

ensuring the family harmony.

Note
1. Act 550 of 1999: which establishes a regime that promotes and facilitates business recovery and
restructuring of the Colombian business entities to ensure the corporate social function and to
achieve the harmonious development of the regions (Republic of Colombia (1999), Ley 550 de
1999, diciembre 30. In Diario Oficial No. 43.940 de 19 de marzo de 2000).

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Exhibit 1
Figure E1 Gomez family genealogical tree

Source: Colchones Eldorado

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Exhibit 2
Figure E2 Corporate makeover

(a)

(b)
Notes: (1) Prior corporate image; (2) new corporate image
Source: Colchones Eldorado

Exhibit 3
Plate E1 New point of sales design

Source: Colchones Eldorado

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Exhibit 4
Figure E3 Colchones Eldorado organizational chart
MARKETING
MANAGER

MARKETING
PROMOTER

COMMERCIAL
ADVISOR

SHOWROOM
MANAGER

COMMERCIAL
MANAGER

SHOWROOM
SUPERVISOR

MARKETED
PRODUCT
MANAGER
DISTRIBUTION
MANAGER

INSTITUTIONAL
MANAGER

SALES
EXECUTIVE

SALES
EXECUTIVE

INFORMATION
TECHNOLOGY
DIRECTOR

LOGISTICS AND
PURCHASES
DIRECTOR

PURCHASING
MANAGER

CUSTOMER
SERVICE
MANAGER

WAREHOUSE
OPERATOR

TECHNICAL
SERVICE
ASSISTANT
MAINTENANCE
MANAGER

PROCESS
CONTROL
CHIEF
DRIVER
SHAREHOLDERS
ASSEMBLY

BOARD OF
DIRECTORS

GENERAL
MANAGER

CEO
INTERNAL
AUDITOR

TAX AUDITING
OFFICE
ASSISTANT
CHAIR

OPERATIONS
MANAGER

TRANSPORT
AUXILIARY

OUTLETS
SHIPPING
MANAGER
OUTLET
SHIPPING
ASSISTANT

QUALITY
COORDINATOR

ASSISTANT
MANAGER

PRODUCTION
OPERATORS

WHOLESALE
SHIPPING
MANAGER

QUALITY
ASSISTANT

CENTRAL
WAREHOUSE

WHOLESALE
SHIPPING
ASSISTANT
CENTRAL
ASSISTANT

WAREHOUSE
AUXILIARY

BILLING
ASSISTANT

PORTFOLIO
MANAGER

SV CONTROL
ASSISTANT

MESSENGER

HEAD OF
TREASURT
ADMINISTRATIVE
AND FINANCIAL
MANAGER

CHIEF
ACCOUNTANT

ACCOUNTANT
ASSISTANT

COST
ASSISTANT

RECEPTIONS

ADMINISTRATIVE
AUXILIARY
ADMINISTRATION
AND TALENT
ASSISTANT

GENERAL
SERVICES

CAFETERIA
AUXILIARY

GENERAL
MAINTENANCE

Source: Colchones Eldorado

About the authors

Sandra Jennina Sanchez Perdomo is a Professor of Strategy at Pontificia Universidad
Javeriana in Colombia. She earned her BS in Business from Universidad Externado and
Financial and International Business post-degree from Universidad de la Sabana in
Colombia. She received her MBA from University of Dallas, USA. She won the third place in
the First Teaching Case International Contest 2012 organized by UNAM in Mexico. Sandra
Jennina Sanchez Perdomo is the corresponding author and can be contacted at:
ssanchezp@javeriana.edu.co
Mario Andres Manzi Puertas is a Professor of Marketing at Pontificia Universidad Javeriana
in Bogota Colombia. He won the third place in the First Teaching Case International Contest
2012 organized by UNAM in Mexico.

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