The storyline is a familiar one. The parent founds the business, slogs to make it successful -- a huge mansion in the outskirts, children studying abroad all while accumulating a prodigious amount of frequent flyer miles every year.
Then the entrepreneur breaths his last and all hell breaks loose.
If the business is not torn asunder by family wrangles, the heir to throne doesn’t seem to be able to keep up the momentum of the business, either through poor management or as is more likely, the business’ success to begin with was an illusion.
The heirs, torn between rescuing the business while continuing to live the lifestyle they are accustomed to find themselves swamped, overwhelmed and way out of their depth.
It’s not all the kids’ fault
1. Short term vision
Most of our businesses are started to sustain the founder and his family.
They are started for subsistence. Which is understandable going by the crazy period in the 1970s and 1980s we lived through when long term planning was a luxury no one could afford. What these businesses were, and many today still are, are a job opportunity for the founder and his or her spouse. There really is no vision beyond that.
A business can only grow to as big as the founders’ vision allows it.
In countries which have had the benefit of long term stability founding entrepreneurs can plot for national, regional and even world domination. They recognise that business growth is a survival mechanism more than an ego trip, and to grow they need to be increasingly systematic in their processes.
It starts with the vision, even if it is not on paper.
Bill Gates famously stated as his goal, to put a computer on every table in America. Never mind that he could not fathom what the average man would need with 300 kilobytes of memory!
2. Regularise the business
In the beginning just like God, the founder can do everything – bookkeeping, marketing, hiring and firing but as the business grows the need for delegation of the functions will become more urgent. This will necessitate a coding of all the functions so that everyone knows his functions and targets.
Related to the last point for lack of vision the founder keeps doing everything or at least has the final say on everything from building new premises to procuring staples. The business will only grow to the extent of his energy, perspective or competence.
So not much effort, if any, is put into all the things that would make it a sustainable business – documentation, creating systems, promoting a meritocracy and more importantly making the distinction between the owners of the business and management, which does not necessarily mean that one is distinct from the other.
"We start our businesses to make money. But is we can shift our emphasis towards serving more and more people in a sustainable way the money will follow suit. That is a major shift in thinking for a businessman who is hoping his business will throw up his next meal...
The subsistence mentality is encapsulated in the thought that, after all how many beds can you sleep in, cars can you drive at one time or mouths does one have as a justification not to do the necessary work to grow the business sustainably.
3. Must the kids inherit the running of the company?
The above leads to the mentality that the kids must, not only inherit the business, but run it as well. Unfortunately for many of these trail blazing pioneers they often become victims of their own success. Their improving fortunes often mean that their children get quality educations and they develop other interests away from the family business.
To spare every one the aggro many founders would do well to liquidate the company and
pass on the cash to the heirs.
But that would be to ignore the responsibility of the entrepreneur to the public and fail to recognise that when a business provides a good or service, employs people and pays taxes it becomes a public good, never mind that it is privately owned. To break it up for cash would be dereliction of duty by the owners.
So our businessmen need to expand their vision so we can at least have national companies and secondly get away from the hangover that they have to pass the going concern’s management down the blood line.
4. Business are intended to serve, with profit as the byproduct
We start our businesses to make money. But if we can shift our emphasis towards serving more and more people in a sustainable way the money will follow suit. That is a major shift in thinking for a businessman who is hoping his business will throw up his next meal.
If you think about it the businesses that make the most money are those that serve an increasing number of people year after year after year.
In December 2012 the executive Chairmanship of the Tata Group was handed to Cyrus Mistry, only the second person in the company’s 150 year history who was not of the Tata family. Mistry took over partly because Ratan Tata his predecessor had no kids, but he has brought fresh energy and the legacy is safe in his hands as his family are major shareholders in Tata anyway.
To tick off the figures ; Tata does more than $100b in sales or five times Uganda’s total economic output, its more than a hundred companies operate in 80 countries in industries as diverse as steel, automobiles, telecommunications and ICT.
You don’t get to be that big with a vision that does not extend beyond your tummy, however big your tummy is.