It is no longer a secret that family businesses world over can struggle with governance, leadership transitions, and even survival, longevity or business continuity.
From context observation, the majority of Small Medium Enterprises (SMEs) in Nigeria are family-owned businesses. Family businesses are common in Nigeria, especially, in Lagos State, which is the economic nerve centre of the country. The importance of this form of business cannot be overemphasised as they are expected to contribute to the economy in these three key areas: creating jobs, improving Gross Domestic Products (GDP), and improving the standard of living or reducing the poverty level.
However, the failure rate of family businesses especially in Nigeria is high.
History abounds with the stories of many great businesses that shut down after the death of their founders. This should be a huge concern to the government, policymakers, family business owners and future entrepreneurs.
For instance, Olympic Drinks, the factory producing Gina drinks in Anambra State, as well as a machine construction company and a maize milling company all folded up after the death of the founder, Sir Joe Nwankwu in 2004.
Also, the G.M.O. Group of Companies noted for the production of household utensils and industrial spareparts collapsed soon after the death of its chairman, late Chief Godwin Chikeluba.
In the northern region, Hajj Air owned by Alhaji Haruna Kassim, and many tannery factories for processing hide and skin, owned by deceased indigenous entrepreneurs collapsed after their death.
Chief Moshood Abiola and Chief Henry Fajemirokun’s stories are well known. Abiola’s business empire gradually phased out after his death in 1998. The same could be said of Chief Fajemirokun’s business empire, as well as De-facto Bakery Works Limited which was a confectionary company that had four branches and produced 115 products during the lifetime of its owner but seized to exist after the founder’s death.
But however, a few businesses, where the share capital controlled by the family members is in at least its second generation and the family controls at least 30 per cent of the company’s equity and voting rights. In Nigeria, The Dantata Organization, Ibru Organization and FCMB Group are good example of firms that have outlived their founders.
Speaking on this issue, Dr. Timi Olubiyi, an entrepreneurship and business management expert says: “apart from the known challenges such as decrepit infrastructure, inconsistent government policies, double taxation among many others, which are contributory to business failures in Nigeria, the lack of succession plan is a serious issue militating against the survival and continuity of these family businesses.”
He states that “succession planning is the process of identifying and preparing suitable family members or employees through mentoring, training and job rotation, to replace key players within the family business as those key players leave their positions for whatever reasons such as retirement, advancement and attrition are usually missing.”
According to Olubiyi, with succession planning as a very important aspect of a business, overwhelming evidence from a survey and finding from a study indicate that 94.2 per cent of entrepreneurs and business owners in Nigeria lack succession plan or a poor succession plan exist in their business organisation.
He points out that, “in the developed countries, there are companies that have outlived their founders due to good corporate culture of succession planning. Some of these companies are Walmart owned by the Walton family (USA), Ford Motor Company founded by Henry Ford in 1903 and now owned by the Ford family (USA), Tata and Son Ltd owned by the Tata family (India), LG Electronics owned by Koo family (South Korea).”
He says, Nigerian family businesses can also build appropriate structures and culture to guarantee this form of business continuity and multigenerational growth, adding that, succession planning can help achieve this, by considering a deliberate effort of developing competencies into the leadership positions of your business.
We’ve got the edge. Get real-time reports, breaking scoops, and exclusive angles delivered straight to your phone. Don’t settle for stale news. Join LEADERSHIP NEWS on WhatsApp for 24/7 updates →
Join Our WhatsApp Channel
