Growing successful family businesses

THE PUNCH Newspaper- Dayo Oketola

A family-owned business can generally be defined as any enterprise in which two or more members of the same family have a substantial ownership interest and also participate in the management of the business.

Family enterprises form a significant part of global economy and indeed, some of the world‘s largest corporations are family-owned. Statistics generated by the University of Southern Maine‘s Institute for Family-Owned Business have it that 35 per cent of Fortune 500 companies in the United States are family-controlled.

In Nigeria, names like Dangote, Globacom, Ibru, Anyiam Osigwe, Eleganza and Folawiyo readily come to mind in any discourse on family-owned enterprises.

Many Small and Medium Scale Enterprises in Nigeria are believed to be family-owned. The compositions are made up of numerous combinations, such as husbands and wives, parents and children, and extended family members, who occupy different roles like stockholders, board members, partners, advisors and employees.

According to the Managing Director, Peacegate Oil & Gas, Mr. Ayorinde Adedoyin, an entrepreneur with a family business background in the popular Doyin Group, owned by his father, family-controlled businesses have a number of common challenges that require creative, rather than generic solutions.

He notes that growth limitations, family issues, lack of clear-cut policies and business norms for family members, lack of outside input on how to operate the business, lack of written strategy, poor succession planning, and resistance to change are among the major problems facing family businesses.

Adedoyin bemoans a situation, where many family businesses in Nigeria are waxing stronger and expanding from one sector of the economy to another, while some others have waned in influence.

FOB experts argue that the difficulties faced by family businesses often lead to their downfall. That is why only one-third of such businesses survive in the hands of sons and daughters, while only one-tenth of such continues through a third generation.

The ugly trend in Nigeria, whereby family businesses collapse after the demise of the founder, according to these experts, calls for serious attention. They say family businesses, regardless of their sizes, face significant challenges of continuity, longevity, and ultimately, success.

In view of these hurdles, finding ways to ensure their sustenance has generally been agreed upon by FOB experts as very essential.

According to the Group Executive Officer, Research & Marketing Services Limited, Mr. Adeola Tejumola, there is nothing wrong with a family business, if it can be managed dispassionately. He says it is not compulsory that a family member should manage the business, especially when such a member lacks the right skills.

He notes that lack of capital and resistance to re-investment in the business or pursuit of outside resources have often been known as two major factors that stultify growth in family business.

Proffering practical solutions, he says, ”A family business may grow out of its area of competence but the business can only be sustained by opening up and allowing capital and the right competences to come into the business from available outside sources. By opening up, you allow an array of opportunities to come into the business. Opening up does not mean you lose your stake.”

Citing his firm as an instance, Tejumola says, ”In 30 years, RMS has experienced three transitions; from when the chairman was running the business to his son, and now to a publicly owned company, with the merger with TNS, the world‘s number one marketing research company that is quoted on the London Stock Exchange and Nasdaq. We are going into an era, whereby the company is no more owned by the Tejumola family, although we are still a significant shareholder. The company will now be called TNS RMS in Africa.”

In what seems a piece of advice for SMEs, Tejumola submits that every small business has the potential to become big. Hence, he says, conflict among children of business owners must be nipped in the bud. The best way to achieve this in his view is to ensure that the children of FOBs are raised in a closely knitted manner, affording them the right training and education.

On the right kind of management that ensures success, he says effective communications, strong leadership (from the top), dispassionate and objective decision making are essential recipes for sustaining family businesses.


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