Wednesday February 14 2018

How businesses can outlive founder’s demise

The late John Ssebaana Kizito (inset) founded

The late John Ssebaana Kizito (inset) founded Statewide Insurance Company. PHOTO BY STEPHEN OTAGE 


Will that family business die with the founder or outlive the owner? That is the question.
The answer, drawn from varied interviews and experiences, is in plain black and white.
For starters, managing a family business that has been passed over to you is never easy especially if you have not been involved over the years.

From horse’s mouth
“Succession alone is not enough. It doesn’t matter how good the succession is without the customers and the employees,” the late James Mulwana’s daughter, Ms Barbara Mulwana, shares her experience.
She continued: “It is about cultivating the support of our customers. They were loyal to him and now we must ensure that we maintain that. It is all about the customers support and that is what matters. ”
At the sideline of the late James Mulwana symposium in honour of his contribution in business and the economy, Ms Barbara Mulwana further emphasised that keeping customers and employees happy is a crucial step in maintaining a business together even in the absence of the founder.
Ms Mulwana, who has been the serving as the executive director of Nice House of Plastics, one of the companies his father founded, since 1991, first worked as the head of sales and marketing department in the company before taking up her current position.

Armed with a Bachelor of Science Degree in Electrical Engineering and Computer Science from North Western University (Evanston, Illinois) and an Executive Development Programme (EDP) from the Kellog Graduate School of Management, Ms Mulwana, like her late father, is a hands-on person.
While at the EDP, she underwent an intensive programme focusing on the environment in which business operates, the key functional areas of management, the development and implementation of corporate and business unit strategy.
With this wealth of education exposure, you would think she is managing her father’s enterprise with ease.

“It was not all rosy for the late James Mulwana,” Ms Mulwana who is also the a director, Jesa Farm Dairy and Uganda Batteries Ltd, all under Mulwana Group of Companies which were founded by her late father, said.
She continued: “My father was a patient man. Where he failed, he never remained down. He stood up.”
The lesson here which Ms Mulwana, also the board chair of Uganda Manufacturers Association, wants emulated is that you don’t have to be from a privileged background to accomplish what her father achieved.
“Mr Mulwana believed he could learn. You don’t have to have academic papers to learn. My father never finished secondary school. So young people can learn from him.”

When interviewed for this article, the director of Crown Bottlers (Pepsi) Ltd, Dr Maggie Kigozi said for the business to survive after the founder, it is prudent that the owner of the business leaves a will before demise.
A will or testament is a legal document by which a person, the testator, expresses their wishes as to how their property is to be distributed at death, and names one or more persons, the executor, to manage the estate until its final distribution.
The will could restore some sanity and order where there is a bitter disagreement among the family.
A building of the Madhvani Group of Companies

A building of the Madhvani Group of Companies at Uganda Manufacturers Association Show grounds in Lugogo. The Madhvani family has built a successful family business empire in Uganda. Mr Roni Madhvani (inset) is a third generation member of the Madhvani family who is also involved in the operations of the business in Uganda. PHOTO BY STEPHEN OTAGE

But importantly the former executive director of Uganda Investment Authority (UIA) said for those who have no idea about the business should not immediately plunge into it but learn as much as they can including going back to school to learn a few things about the business.
“For my case, I had to learn fast. From a medical field to business arena meant that I needed to learn a few things in business and I did,” Dr Kigozi now a veteran entrepreneur who is successfully running a family business started by her late husband explained.
Numbers don’t lie
According to Uganda Bureau of Statistics (UBOS) studies, a research done to determine the age of the businesses, indicated that just about 17 per cent of indigenous businesses in the country have been operating for at least two decades or slightly more.
The UBOS report on the Census of Business Establishments, shows that 94 per cent of the businesses are sole proprietorships—sole ownership of business.

And businesses that operated as Partnership or Private Limited Companies, according to the report, each accounted for only 2 percent.
The distributions of businesses by Industry showed that majority (61 per cent) of the businesses were in the trade sector followed by accommodation and food services at 14 per cent.
About three years later, findings from the National Population and Housing Census 2014, undertaken by UBOS, show that economic activities operated by the majority of the household members were predominantly in agriculture (43 per cent) followed by manufacturing at 16 per cent.
The heartbeat of the business or even the economic activity that provides for the family depends on the goodwill and industriousness of the owner/founder.

Experts weigh in
The executive director, Enterprise Uganda, Charles Ocici, told a group of Small and Medium enterprises, that decision making in a family business in Uganda is a challenge because the vision of the business is usually left to the founder. This makes it difficult to advance the mission once the owner is no more.
Prof Samuel Sejjaaka, the country team leader at Abacus Business School, said to follow in the footsteps of the fallen industrialist—starting strings of businesses and setting a foundation is what has allowed the business to thrive while he is no more.

He said: “This is what the late James Mulwana understood.”
Mr David Kalyango, the Chief Internal Auditor, Bank of Uganda, in an interview last week, said: “The mortality rate for family owned business is high because most of them do not differentiate between the business and family affairs.”
He continued: “When the founder of the business is still in charge, he will discharge all the roles—family affairs and family business. But those who take over may not have those natural skills because they are not the founders. So they will have problems distinguishing between family and business decisions.”
As a result, they will begin encroaching on the capital of the business to solve family or personal issues/problems.

Managing family business

Professionals should be employed to manage family business. If you must work with any relative, then they should be qualified and paid salary just as Ms Barbara Mulwana and Dr Kigozi.
The CEO of Big Finance, Mr Daniel Joloba, said family businesses in Uganda collapse because the family members, especially the children who take over look at the company as a cash cow rather than an entity that creates wealth.
“Ugandans should learn from Indian business people who introduce their children into the business at a very tender age. The children grow up understanding the business inside out. This is why their businesses last from one generation to another,” Mr Joloba said.

He continued: “But most people introduce their children into the family business at a much later in life as the managing director. That doesn’t always bear the kind of results that the founder thought. No wonder the company disintegrate shortly after the demise of the owner.”
The solution is to involve your family in the business right from the initial stages and at a much earlier stage in their lives.
Begin by giving them simple tasks, such as cleaning the premises and seeing how you transact affairs.
That might interest them in what you do.
That is how they solidify your legacy and build the business empire for generations to come.

According to KPMG, the growth and sustainability of a family
business lies in the fine balance between the needs of the business and the expectations of
family members. In strong family businesses, values may be so deeply embedded that they permeate every aspect of the business’s strategy and operations.
Family members who have grown up steeped in the company’s values may take them for granted and assume that every company operates in the same way.

Role of board

Independent directors can assist with some of the challenging issues family businesses face since they can speak without fear of repercussion. This allows them to feel freer to raise sensitive issues which may help cut through the ‘emotional noise’ that is prevalent in many family businesses.
Therefore, it is important for whomever is running a family company to consider getting input from a board with outside directors that can help preserve the discipline, principle values, and ethics that play an essential role in the success of your family business.

Family businesses in Africa
Incorporated in August 1977, Kenpoly Manufacturers Ltd produces plastic products sold not only in Kenya but also in at least 10 other countries in the region. Kenpoly also owns successful farming businesses in Naivasha and Nakuru that employ 1,800 people.
Among the people on the Kenpoly empire driving seat is Hanish Chandaria, one of the three children of the founder — all of whom have taken up roles in the business.
Aliko Dangote, a very successful man just like his uncle Alhassan dantata, has continued to prove his worth.
He is presently the richest black man in the world with a net worth of $24.6 billion. He is the owner of the Dangote Group of companies that manufactures cement, noodles, salt, and sugar amongst other products.