adminneed to strategically address the inherent challenges.
Family business problems rarely go away by themselves. In fact, just the opposite is true. The longer the problems persist, without being addressed and resolved, the more destructive they will become. Family business issues will continue to escalate and can ultimately wreck the business and destroy family relationships.
Experts in family business studies have observed that it requires taking appropriate decisive action to stem the rot. Findings from research have shown that 30 percent of family businesses are successful in the second generation while only 10 percent are successful into the third generation. What this shows is that family businesses have a strong foundation on a social system that focuses on caring for its members and that can be very emotional.
Most family businesses are centred on the founders who usually have a sentimental attachment to the operation.
It is therefore not surprising that some irrational decisions may be made in the name of protecting the name and reputation of the family. This may cause stagnation.
According to Don Schwerzler, an American family business consultant, every family business is unique in its own way.
“If there is only one lesson I have learned in studying and advising family businesses for more than 40 years – every family business is unique and complex in its own way. A family business strategy that makes sense for one can be a real disaster for another family business.”
Closer to home, there are a number of family businesses that come to mind and in their own way exhibit their uniqueness.
The late Roger Boka ran his business empire in such a manner that he believed he could achieve his objectives without any hindrance. Rightly or wrongly, he rode against the tide and against all odds he succeeded in building the largest tobacco auction floor not only in Zimbabwe, but the whole world. His approach may not have been the orthodox style, but his entrepreneurial drive saw him prevail against all odds.
The post-Boka era, however, presented some challenges for his siblings, as they could not duplicate his tenacity and character in the way he did business.
Although there have been some moves of late to revive his fortunes, it remains to be seen whether the aggression and ruthlessness exhibited by the father will be evident as Rudo and Matthew join forces to steer the ship.
The Matambanadzo Transport business was also firmly rooted in the founder, as it became synonymous with rural bus services in the years prior to independence in 1980.
The legacy of Matambanadzo operations appeared to fade with the passing on of the father and the fleet that he had built over years steadily vanished from the highways.
It has often been said that the average life- span of a family business is 24 years and from thereon it begins to fade. This is so because the business becomes less entrepreneurial when the family system dominates the business system.
As the family business grows, there is need to source fresh capital for growth without diluting the family’s equity. This seems to be the hardest part as most families do not want to let go and nowadays it is difficult for anyone to enter as a mere investor without equity. They will definitely need to have a say on how the business is being run.
Another challenge facing family businesses is the reluctance of the older generation to let go of ownership and management power at an appropriate moment. This has increasingly led to a situation whereby some of the competent and motivated family successors begin to lose interest and desert the enterprise.
In some cases unchecked sibling rivalry may arise when no consensus is reached on the chosen successor. Instead of working as a team to build the business some of the members of the family will be busy undermining each other at the expense of the growth and success of the business.
While some family businesses make the effort to attract and retain senior and competent non-family professional managers, their continued existence appears to be always under threat.
One has to also watch out for the unmanaged conflict between the cultures of the family, the board and the business.
There are, however, some positives to be drawn as some of the most successful companies today started off as family businesses. They have been transformed over the years to become corporates that opened up and allowed outsiders to play their part and the results are there for all to see.
The Meikles family, for instance, allowed the business to grow with the help of non-family members into a blue-chip counter that has survived over generations.
It is my intention to explore further aspects of family businesses relating to succession and growth with particular reference to the Zimbabwean experience.
As always, let’s make money.
Online Reporter