Professionalising family businesses

Friday November 20 2020
pros1pic

Mukwano factory in Industrial Area. This is one of the family businesses that has remained operational despite the demise of the founder. PHOTO/file

Four years ago, I wrote a column on the intergenerational challenges facing family businesses, admiring the way those who overcame such challenges did so while noting how too often the founder was reluctant to empower subsequent generations.

I want to return to that topic today, thanks to the opportunity I have benefited from over the last few months to meet with a good number of owners of medium-sized family businesses. In some cases, the founding father was still very much in control, as his sons (occasionally these days his daughters, too) have been getting to grips with leadership. In others, the elder had withdrawn somewhat, just coming to the office for short periods of time; and in older-established businesses third and fourth generation family members have now risen to prominent positions.

What patterns have I observed? First, irrespective of the age of the company or its leadership, the top person is inevitably ultra-operational, what one might call “transactional”.To the extent that in some of my meetings, the phone kept ringing so the boss could progress some immediate transaction, make some micro-decision.

Here, they had just found it too hard to develop a trusted and empowered senior management team to whom to delegate, and the inevitable consequence was that little mindspace was available to allow them to indulge in higher level strategic thinking.

All these micromanaging owner-director-managers were leading successful entities, ones that had survived many ups and downs, including splits from other family members. Their businesses were utterly dependent on their personal talent and experience, their energy and charisma, their motivation to show up to keep the revenues flowing in and to manage costs.

Some are fortunate in having members of subsequent generations who are both fit to contribute to sustaining the business into the future and willing to. But for others, succession planning remains an unresolved question.

Advertisement

So busy are they with day-to day issues that it is just too hard, indeed too inconvenient, to think about the consequences of something adverse happening to them: ill-health, for instance. Some had a notional board, often only including an elder or a spouse – most of whom would not be engaged in the business, while for others it was “me and my brother” or me and my son(s)”.

“Board meetings” might take place around the dining room table at home, or driving together to and from the office, and while a few were considering appointing independent directors none of those I met had done so.

The 2015 Companies Act specifies that four board meetings a year must be held by all registered companies, but most of our SME leaders just are not in the habit of complying with this requirement. Their focus, their discipline, is so much more on the day-to-day, and one of the consequences is that formal longer-term strategic plans or mechanisms for managing their implementation rarely exist.

Having said that though, these entrepreneurs are all bold innovators, courageous and optimistic risk-takers, forever on the lookout for new opportunities. They are to be admired, as they operate in this difficult environment.

Others

Some are hiring higher level professional managers, and bringing in consultants and advisers to help them rise. But my perception is that those who would most benefit from fresh and external inputs are the ones least likely to seek such interventions.

It is those who are most exposed to contemporary trends and hence are already ahead of the game who are open to listening to other voices. It is such people too who consider options such as public listing, joint ventures and external investors.

They are the ones with appropriate systems and controls, and robust risk and compliance management procedures.

We are so fortunate to have such widespread entrepreneurial energy and talent. What we look forward to seeing is more of our SMEs professionalising in ways that can see them grow to larger scale, employ more people, focus on markets beyond the domestic, and be sustainable for future generations to inherit.

Make your family business more professional

Adam Sengooba

Most family businesses “become more professional” by the third generation, but skilled, solid employees may decide that they’d rather work somewhere that’s more structured, fair, and professional in the meantime. So, how can the business keep the benefits of a family operation while accelerating the professionalization that will be attractive to both family and non-family members? These approaches can help:

Put time and effort into thoughtful coordination of workflow priorities.

At another multi-generational business, the current primary owners texted employees at all hours, telling them what needed to be done and sometimes positioning extra duties as “favours.” Even dedicated employees grew resentful and complained about burnout, because they couldn’t manage their own time and had no sense of autonomy.

Draft policies and guidelines

Often, family businesses don’t formalize work processes or rules, because family members like to keep personal control and flexibility. A once had a client CEO who would get embroiled in making decisions that should have been made at a lower level. His fear was that if policies and procedures were codified, employees would behave automatically and inflexibly. But the lack of formal guidance meant that too many decisions have to be escalated to him.

Establish acceptable ranges of workplace behaviours

Along with devising policies and procedures for work content, holding discussions about “what we do and don’t do here” can help reduce the extremes of privilege that family members sometimes demonstrate.

The author is Associate Director, PwC Uganda.

Advertisement