Family, business and inheritance #AskKirubi

October 16, 2014
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, Ck-Inheritance

Many family business owners begin the business with the hope of supporting their families and creating a lasting legacy. In as much it begins with a noble cause, more often than not it turns out to be a regretted choice. About 70% of family-owned businesses fail or are sold before the second generation gets a chance to take over. Actually very few survive beyond the third generation due to so many factors including globalization.

There are many reasons why family businesses do not work. Some families are just naturally dysfunctional while others refuse to keep up with the changing times. Lack of mentorship and apprenticeship is also another factor. You will note that the Asian community is very good with the latter, allowing their family members to begin getting accustomed to the business environment from their early years. Failure to share insight or vision with the rest of the family, lack of a clear succession plan, business strategy and the lack of focus, commitment and passion are more factors as to why such businesses end up failing.

It is time we adopt change and begin changing the face of African family owned businesses. We are creating a generation of entrepreneurs and this generation needs to mentor the next and the cycle continues. At some point in your life, someone reached out to you and gave you the help you needed to move forward. It is only fair that you do the same. Let me speak to families and their ‘dictators’ who sit on the business thrones…

Firstly, as the business leader you need to demystify the notion that family members always have a place in the business. No one, not even your children should feel obligated to work in the business otherwise they will take it as their fall back plan; when all else fails. The last thing you need is your children ascending to leadership positions within the business yet they lack experience because your business will automatically fail. You need to insist on proper training and screening for any family member who is interested in joining the business. Let them go to school, acquire a degree(s), get the relevant experience, work hard for their job title and be accountable for it. This will enhance discipline and increase your chances of success within the business.

There is this expectation that the business must support the family (extended family included) and thus must grow fast enough to do so. Just because your family members have chosen to procreate and fill the earth doesn’t warrant each of them to work in the business. You cannot employ every family member. If you manage to deal with demystifying the above notion then you will reduce the possibility of having to deal with this. You will actually scare away those who are looking to waste time in your business. Developing strategies to grow the business and expansion in various counties could be a solution to tackle this problem. You can task those qualified to head the different outlets.

If at all you feel the need to include all family members then you have to make sure you deal with the active and non-active ones. Those who are active and have worked hard could be incorporated into the business. Those who are inactive could be given shares in the business so as to avoid conflict.

However, if you want the business to continue after you’re gone, and if you want your kids to succeed in their chosen professions (whether it’s the family business or not), it is only imperative that you take the time now to distribute the inheritance in a logical manner. Create a clear succession plan and furthermore, you could hire an advisor to assist you in case you feel you may be biased towards certain family members. Let this plan outline the issues of governance, distribution of wealth and sustainability.

When your family members join the business, cease from making them specialize in the same department as you. Let it be their decision because in the long run it may be difficult to get candid feedback or get them to be proactive. They may be intimidated and that is not wise for the business. You want to work with people who have the passion for the job/business, committed and share your vision. Let them gain cross-functional expertise and contribute in the area they are strongest in. If at all you find yourself in the same area or department, get a non-family member to mentor and supervise them. That way you are sure that they will provide objective assessments and give critical advice concerning the family members.

Finally, go public. Place your business in the stock exchange if at all it’s doing very well. For sustainability purposes, you could bring in outside investors and expand your business. Grow the business by selling part of it to acquire skills and qualified personnel. Move with the times and change your mode of operations. Run your business like a multinational and you will get rid of many of the problems I have outlined above.

Running a business is not rocket science but running a family business could be. You need to tighten the mechanisms used to govern the business, adopt formal policies about who to employ, promote, dismiss and how to balance family and business interests. Make sure that everything you do or need to do is written down and is in conformance with the business rules/regulations. I believe if you can take some of these steps and incorporate them into the business, then you are destined for success for generations to come.

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