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Two key aspects why your family business is not thriving

  Jun 9, 2017
 

“A ship sails not in the direction of the wind, but on the setting of the sail,” Jim Rohn.

From the largest to the oldest form of business existence; family businesses are recognized as one of the most important and dynamic contributors to the economy.

However, these businesses are often put to numerous tests as they transition from the ownership of various family generations. The two greatest challenges in running sustainable and successful family businesses are; conflict and succession management.

Kenya National Chambers of Commerce and Industries, Chair, Kiprono Kittony, graced this month’s entrepreneurship knowledge session, speaking on Families in Businesses, Structured for Sustainability. His address cut across the various dynamics of running a successful family business, traversing from the management structure to addressing major pitfalls that impede their success.

 “Most conflicts in family ran businesses arise when family members’ feel that their individual needs are not met and when communication is unclear. Conflict management is the most crucial element in managing both family and non-family businesses,” said Kittony.

The two major hurdles; conflict and succession management can be resolved through proper structuring of the business. In doing so, family members must think of the likely situations that could lead to conflicts and work around devising structures to cushion such risks. Kittony highlighted the following indicators as key causes of conflict that families in businesses need to watch out for.

1.) Divergent opinions 

2.)  Remuneration.

3.) Inclusivity – How are decisions made and how is communication passed down.

4.) Exit strategy for family members who may no longer want to work for the family business. In such cases, what is one entitled to?

5.) Choosing the next leader – Succession. This transcends from how leadership positions are given, to how titles are given.

He also urged the participants to take cognizant of the following basic principles that are significant in the success of the family business.

  1. Inculcate the business culture to your children at an early age.
  2. Learn the business from the bottom up and so should anyone else who joins the team. There is a tendency of granting offsprings high levels of management roles, whereas they have not earned it on performance merit.
  3. Sharing the same goals
  4. Learning from the previous generations’ experience.
  5. Setting a good example to both family and non-family employees on good work ethics.
  6. Learning how to draw the boundaries between business and family life. Valuing family rituals whilst being professional in the work environment.
  7. Preservation of the family reputation – aligning the families’ values with those of the business.

Concluding the session, Kittony urged the participants to create structures that mitigate the risks of conflict, as well as develop concrete succession plans. For instance; drafting a will. In a situation where assets are owned collectively, one needs to consider the collective engagement of all the family members.

As you strive to keep your family business legacy alive, is your next generation ready to lead? Click here to find out how you can ensure that your family legacy lives on across generations to come.

About Strathmore Business School’s Family Business Program

Almost all companies start out as family businesses, but only those that master the challenges intrinsic to this form of ownership endure growth, maintain collegiality and harmony as a family and achieve success in the business. In the process they transition successfully across generations and proceed to prosper and diversify into multi- location and multi-industry businesses. Family-owned firms have the capacity to be top performing companies in their respective industries while nurturing the common identity and care within a family. But at the same time they are at the risk of family hazards that can overspill and engulf them. Family relationships are a double-edged sword for the family business. The strong networks of family relationships, the clear and shared objectives among family members are key benefits, as they enable the family business to forge a strong identity and common purpose. Yet the closeness of family relationships can also lead to disaster, due to conflicts between family members, and the difficulty in managing the relationship between the family, the business and the ownership.

 

  • What is a family business strategy? How can it be linked with corporate business policies?
  • What are the dynamics and links that affect the family, the business and ownership?
  • Has your family set up the policies and structures that guide the family and the business?
  • Has conflict been anticipated? Is there a conflict management policy?
  • How will the family entrepreneurial spirit be maintained as the family grows?
  • What risks does the family business face with family values in a rapidly changing society?
  • What is the family business succession plan? Is it documented?
  • As a leader how do I make siblings work together, hold the dream and maintain the legacy?


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