Family businesses are a pillar of the world’s economy and account for more than two-thirds of all companies globally, providing between 50 percent and 80 percent of all employment. In Kenya, family businesses in Kenya contribute up to 75 % of the country’s Gross Domestic Product (GDP).
Over the years, only a small minority of family businesses have managed to excel and thrive through several generations. These businesses have been seen to have a solid grip on governance, strategy, management along with social and environmental responsibility.
In the recent past, we have seen a number of family businesses on their knees with others even closing down after years of successful operations. Most of these ailing businesses have been marred by conflict and mismanagement claims. There is a need for solid governance structures and processes to help improve the performance and profitability of the business along with a plan for succession.
In today’s fast-evolving business environment, family business owners are introspecting on their values and the purpose of their businesses. With the fluid business environment due to technological advancements, there are very many disruptors and sustainability is becoming key to the conduct of business. This is where governance structures come into play, to try and ensure business sustainability and continuity. The Family Business Constitution is one of these structures.
Family businesses usually start out as simple organisations. But as they develop and grow they face greater complexities and challenges, often leading to tensions among the owning family over how they run the firm together. A common solution is a constitution outlining the values, principles, and procedures that the family agrees to follow. They are important as they help in managing expectations, avoiding misunderstandings, specifying roles and responsibilities, fostering greater harmony, and ultimately making better decisions. If done well and followed, they offer a strong foundation for a sustainable future.
A family business constitution is a document that stipulates the core values, vision and mission of a family business. It defines the governance structure of the family business with its roles, composition, and powers. The family business constitution is a living document and as such, it must evolve as the business and the business operating environment evolves.
Strathmore University Business School in Partnership with Prime Bank Africa, Mastercard Foundation, and Invest in Africa hosted a webinar session dubbed: ‘Family Business Constitution: A Pillar for Performance and Succession’. This webinar session attracted more than 250 participants from across the world and aimed to highlight the importance of having family business constitutions. Moreover, the participants got an opportunity to get insights on the real-life applications of a family business constitution from successful entrepreneurs running family businesses across generations.
During the webinar session, Mr. Bharat Jani, Managing Director at Prime Bank Africa shared his family business experience and gave insights on the important role that governance structures such as the family business constitution play in improving business performance and enhancing sustainability. He also gave participants a glimpse into Prime Bank Africa’s expansion plans.
Wangechi Muriuki, Country Director, Invest in Africa speaking during the webinar highlighted the findings of a survey the company conducted in 2019 on family business succession. She noted that 66 percent of the respondents cited that their biggest worry at the time was their business’s survival. On having succession plans in place, 55 percent did not have any succession plans in place.
Kenya remains to be one of the most attractive markets for private equity and investors in general. However, when investors scout for good business opportunities in the country they tend to find disorganised businesses without proper governance structures. This is why we need to shift our mindsets as family business owners and begin to think about sustainability and business continuity.
The Family Business Executive Programme
Family-owned firms can 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 network 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.
The Family Business Executive Programme aims to impart on participants practical skills and best practice insights needed to sustain family businesses through generations.
Learn more about our Family Business Executive Programme
Article by Juliet Hinga
Would you like to share an article? Write to us at sbscommunication@strathmore.edu
Share This Story, Choose Your Platform!
Your journey to business excellence starts here. Subscribe today and be at the forefront of innovation and leadership.
