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How to cushion family businesses against dying

Founders of family businesses always have one common ambition; building such businesses that can survive through various generations; however, to the detriment, many of those dreams don’t come to reality as most of the ventures continue failing to live beyond those that start them.

The global economy predominantly survives on family businesses; they account for a whopping 80 per cent of companies worldwide. In fact, Sunny Bindra, a Kenya-based senior management consultant, refers to family businesses as the ‘beating heart’ of the world economy.

Charles Ocici, a senior business development mentor and executive director Enterprise Uganda, observes that building sustainable family businesses is a great idea any development-minded investor needs to think about, plan and implement.

“Family businesses are a foundation of financial security; what is worrying though, is that their survival rates take a downward trend against the moves geared towards taking them through successive generations,” Ocici says.

The survival trends

A recent survey by Egon Zehnder, a global Swiss executive management advisory and research firm indicates that world over, a paltry 30 per cent of the family businesses survive to the second generation, just 12 per cent transit into the third generation, while the fourth generation is reached by only three per cent.

Guarding against collapse

Ocici outlines critical areas where founders and successors of family business need to keep a keen eye as they try to guard against the common causes of failure.

Involve prospective successors early enough

Transition in management, according to Ocici, should not be handled as something accidental; children prepared to take over from their parents must be brought on board as early as possible so that they are part of the process to enable them acquire the necessary skills to fully manage the enterprise .

“Don’t keep children away for long, expecting to introduce them to the enterprise when it is at its peak; at this point, it gets even harder for the successors to deliver to the expectations of the clients; they must continuously sweat so that they don’t feel like the business is a donation to them; they need to share into the pain of sustaining it,” he adds.

Identify and nurture talents

During the process of managing enterprises together with prospective successors, the regular task of business founders is to identify and nurture different talents of their children so that a family member’s eligibility to manage in a given capacity is rather backed by competence than the biological relationship with the founders. So, corporate governance systems must apply.

Family business is business, family is family

Much as family businesses are established in the interest of the whole family, sustaining them requires that managers try as much as they can to avoid overlapping family (domestic) issues with those of the family, according to Ocici.

“Home issues shouldn’t affect the way you operate a family business. If your husband is the top boss and you are his junior manager, you don’t need to act insubordinately at work because he offended you from home; at home, he is a husband and a boss at work….so, you need to draw that line,” Ocici advises.

Succession planning 

Joseph Nkandu, a prominent coffee farmer and the executive director of the National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE), says the organisation has started on the journey of embracing succession planning among members involved at different nodes of the coffee value chain.

“As coffee farmers, we have realised that it is necessary to get onto the growing bandwagon of succession planning in the coffee agribusiness especially at the farming level. We are actively attracting the youth into joining coffee farming and where possible to take over core responsibilities from their aged parents in addition to establishing new farms,” Nkandu says.

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