How viable are Family Businesses?

Too much negativity exists towards the possibility of the success of family oriented businesses in Uganda and I presume most of Africa. This perception has arisen from observation of those that have made a go at it. One can list stories of family business failures caused by among others; Family member fall outs, Founder’s death, Mishandled succession, Polygamous settings, Lack of professionalism and Egos.

While the expressed fears have weight, I still believe that family businesses are very viable.

We live in a world where we are slowly abandoning what I will coin as the cobweb approach to success. The desire for instant gratification has made us forget that today’s success is a result of numerous actions strategically undertaken months or even years before. You for example can’t expect to have a healthy body if you do not follow a healthy life style. When disease sets in, we want to use medication to return us back to our original state of good health instantly. We forget that we might need to invest an equal amount of time and effort to undo what we did to get to the poor state of health we are currently in.

A spider builds a cobweb in an incremental fashion starting with a small center span which is expanded upon one layer at a time eventually leading to a large cobweb span that can trap insects for it to feed on. If you are serious about running a family business, you need to work towards it and not ambush your children or wife out of the blue into taking charge. It all starts from your family, how you run it, and the kind of practical skills you impart upon them. The key issues to consider here are;

Upbringing of the children: How do you raise up your children? Do they love to work? Do they appreciate work? Do they know what it takes to have money? Many parents especially those that lead a relatively comfortable life have this belief that the children should only study, eat food and get entertained. This has led to the raising of a generation that loves the nice and high life but isn’t ready to work hard enough to attain it. Some successful entrepreneurs must be literally weeping from their graves seeing how their children have failed to run businesses they left in a very comfortable state. Others have tried introducing their children to their businesses only to face dismal failure. Most of this can be traced to upbringing.

Family bonds: As a family, do you all have a sense of camaraderie? Does everyone look out for the other and ensure that all is well? Do you all relate cordially with one another (save for the occasional sibling brawls of course)? Get your family to bond. The children need to learn to love and respect one another at a very early stage of their lives. They should look at you the parents as role models. Don’t do what will make them question your ‘heroic‘ status in their lives. They should have interest in helping out one another. This is a big foundation and failure to achieve it can easily lead to bitter and violent fall outs in future. The Reliance Group suffered as a result of the massive fall out between the Ambani brothers who had inherited their father’s fortune following Dhirubhai Ambani’s death in 2002.

Spouse participation: If you are married or have a steady partner, try as much as possible to involve them in what you do so that you can both be in sync. Sometimes they may have no interest in the line of business you are pursuing but with steady and systematic gentle persuasion, you can get them to participate. This move is likely to have a positive impact on your children’s acceptance since they will see their parents operating in sync.

My then 5 year old son helping with the product display at a tradeshow

My then 5 year old son helping with the product display at a tradeshow

Early Stage involvement: It’s never too early to involve children in your business especially if it isn’t the very high end consulting type of operations. Trade related businesses are so easy to achieve this. A three year old child can count. Why not have them help you count the products as you pack your van for delivery? My next door neighbor at home has trained his two sons aged 6 and 8 years to run the family shop in his absence. Whenever I get a chance to visit an Indian operated shop, I always find the children especially during holidays or after school hours helping out. The operator of one of Kampala’s leading local restaurants operating under the Uhuru brand name did benefit from this kind of early exposure. Whenever he left school, he would spend the rest of the day helping his father in the business and ever since the father passed on, he has grown it exponentially. Borrowing from this, during holidays, when we have a trade show to attend and showcase the products of our family business, my wife and I carry all our children to the trade show and ensure that they do actually participate in the activities.

Financial Literacy: While a good section of parents are scared of exposing their young children to money fearing that it might spoil them, I don’t subscribe to that school of thought. The earlier children learn about money, the earlier they make the mistakes and the less costly the mistakes are. With a focused approach, you can have your children making prudent financial decisions by the time they are five years. Attributes like saving money, understanding what is expensive or cheap, appreciating that money is worked for among others are easily engrained in them during such early years. We have a goal at home to ensure that by five years, a child can tell the various denominations and by Seven years, they should be comfortable with making purchases on their own. Appreciating the value of money early enough will stem the temptation of wastage of money in later years as the children get engrossed in the family business which might then be generating good revenues.

Mock Entrepreneurship: As the children gain ideas on what to do, don’t tell them to postpone the ideas until they are done with ‘studies‘. Help them realise some of those ideas there and then. When our eldest son was Six years, he approached us with a proposal of setting up a shop in the house to sell to us basics like toothpaste, vaseline, soap among others since he had always noticed that we usually forgot to replenish them. We encouraged him to save money for the ‘business‘, topped up with some of ours and he stocked his ‘shop’ which was located in a corner of our sitting room. When his school class teacher eventually introduced concepts of commerce in class i.e. cost price, sale price, profit and loss, he was very comfortable with the subject matter. The skills attained doing this could later be tapped into by the family business.

The same can apply to your spouse, he/she may harbour an idea, instead of watering it down, support them to try it out. Let failure not be a reason for you to ridicule them but instead encourage them to try another idea next time after all, it’s success will be the family’s pride.

Day to Day Operations: Should you be operating the business with family members, find a way to pass on the message that working hours are times to operate professionally. Stamp this attitude among the family members especially the children from an early stage so that they know when it’s time to or not to play. The challenge arises when the children grow up without being ring fenced with some of these expectations and we try to exert them at a time when it is a lot harder to change their attitudes.

Family Fallout: This tends to occur. It could be between the spouses, parents and children or among the children themselves. As the head of the family, you need to exercise a lot of wisdom when handling such situations. Alot is dependent on how you have structured your family setup in the past. If it is siblings rivaling, taking sides is an absolute NO. If it is your spouse, chances are it stems from your personal relationship with them and this is the time to make tough decisions. However, in all this, make decisions with the greater good of the business in mind.

Parent to Mentor: There will always be a struggle of identities. When are you a parent to that child and when are you a business mentor to them? It becomes hard to separate the two and yet they all have their advantages and disadvantages in this process. Parenting tends to be a “Do This, Do That” affair borne out of the natural protective instinct we have for our children. We wish them the best and so we don’t want to see them make mistakes. However, you also try to play the mentorship role so they can learn the tools of the trade from you. Mentoring means that you occasionally need to leave someone slug it out on their own just to see what challenges they are likely to come across and how they handle them. This contradicts the parental instinct of protectionism.

Leadership: Start on this early enough. Train the children in leadership by entrusting them with various tasks that require them to lead teams, make decisions and justify their decisions. Encourage them to take on leadership roles at school. These could be Class Prefect, Team Captain or any other. Transform them from the “Dad what can I do now …” to the “Dad have I done this well …” kind of children. Empathy is key here too. Good leaders tend to be empathetic and so, have them develop that side of their lives. Remember they might progress through the business ranks as managers but their eventual destination is leadership at the highest possible level.

That Relative: Due to our closely knit society in most African and Asian countries you are likely to be swamped by requests from relatives who want you to help employ their children. To some this is a NO GO as a result of bad experiences they have hdd but if you must help, then consider taking them through the paces that your children have been through. One thing you have to make clear to them from the word go is that you make decisions in the best interest of the company even if that decision means having to relieve them of their duties. Erase any feelings of self entitlement they might have come with and treat them like any other staff member. However, as you take this move, be ready for anything including making enemies out of relatives.

Succession Planning: This is a very dynamic and complex area that many grapple with. Cross generational succession requires careful study since the mindsets tend to vary. As you age, your children may think you are no longer in touch with the times and would want to run the business in a different way. However, as the founder you probably know the foundation stones of the success of the business and are worried that the younger generation may not appreciate them thus turning your lifetime achievements into dust.

I believe succession planning needs to start even before you start ailing as the business owner. With good family bonds, you get a chance to understand your children, their passion and abilities. That’s why I begun with the core family attributes before addressing the other issues that are key to family business. Our nine year old daughter has repeatedly talked about wanting to help us run the business when she grows up. These are early warning signs to me and should not be ignored.

While I can’t authoritatively state that each family business MUST succeed, I believe they have as good a chance to succeed as any other non family business for as long as we nurture the foundation on which they are premised very well.

What’s your view?

Advertisements

3 responses to “How viable are Family Businesses?

  1. Thanks James. Family business is a very exciting topic. Many people will readily quote the various examples of family business failure in the media but will not offer any positive comments. In my view, it is important to run a business as a business and not as a family activity. The business should be allowed to take on its independence and all relationships should be legal in the sense of shareholding and formality in all dealings. If you want your children to be part of the business, employ them formally or give them shares. Above all, be realistic and apply sound judgment. If your child does not have the skills to run the business, do not force things to happen.
    Two words: FORMALIZE and PROFESSIONALIZE.

  2. Gordon sengendo

    Thanks James

  3. James, thank you very much for this article. I agree family run business are the future since family bonds are the strongest bonds available in the new age of instant gratification.

    What has really struck me are the fundamentals and foundation elements that need to be setup for the business as a recipe for success.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s