*O’BRIAN M’KALI uses the analogy of dolphins and dinosaurs to illustrate the success or failure of family businesses down subsequent generations
It is natural for most entrepreneurs to aspire for their wealth, businesses and investments to continue to add value. However, when their enterprises are not yet matured family businesses, the founding owner’s aspirations may fail because the same mindset that drove that business to success may also undermine it due to its limitation to change. In other words, the expected continuation of the business success into the hands of the second generation may be hindered due to a dilemma caused by the second generation failing to preserve the accumulated value of the business.
To sustain a successful family business, it is obvious that the founding owner ought to create a legacy and entrepreneurial leadership that hands over to a next generation as a first step in a series of sequenced procedures. However, the reality on the ground often shows us a different side of family business. For example, the local landscape of our country is littered with artefacts of dead or failed family businesses whose dilapidated infrastructure stands as evidence of family conflicts or simply common traps that inhibited their continued success. As one travels along the country’s highways, you cannot avoid seeing a litany of these failed family businesses.
A look at some common traps that inhibit family businesses
First off is when the founding owner of a family business becomes so confident in their own superpowers that they block their ears from listening to others. The traits theory of entrepreneurship advocates for confidence and self-efficacy but not the type of confidence that is riddled with arrogance.
Secondly is when founders strive to identify and bestow a successor just like themselves, meaning someone who operates their business just as they did. The trouble with such henchmen is that they normally are ‘yes men.’ Because of that, they do not challenge or question any wrongdoing or bad practices that may lead to business failure.
Thirdly, is a scenario where founders of a family business feel that they are the only ones who know how to run the business. Consequently, they do not entertain any thoughts of succession planning or stepping down. In the modern era of agile ventures, the family business becomes analogous with a dinosaur rather than being a dolphin. A dolphin in this context is used to symbolise quick adaption to changes in its environment as opposed to a resisting dinosaur which sooner meets its extinction.
Fourthly is when a family business expects growth to continue automatically and does not anticipate any changes from the business environment or internally. Unfortunately, growth as a phenomenon does not just happen by circumstances nor does it come from imitating the success of the first generation founders. Growth requires redefining the family business and creating new opportunities for a new generation of owners.
In other words, family members of the second or third generation era must become entrepreneurs and pioneer their own pathways. Although their entrepreneurial leadership may be less visible than in their predecessors, it is no less important.
Fifthly, when family businesses recruit advisors, executives and even family members who do not possess any knowledge or competence of business. Usually this group is recruited even from the golf courses or social clubs.
Sixthly, is a unique scenario where a family business assumes that the future is approached in the same ways as the past. This poses a major problem for new generations who quite often than not can observe the strong need for changes in the way of doing things. The behaviour of the older generation can lead to frustrations within the new generation by feeling that their own voices are not taken seriously.
What would you do to overcome founder-owner tendencies just mentioned? The success of the future generations of family businesses depends on overcoming these barriers. For example, there may be a need for a culture paradigm shift from success at a single business to multi-faceted collaboration that may include diversification and even redefinition of business. However, this is facilitated by a mentoring and business development programme that shows a clear criterion of good governance roles for the expected successors.
(PhD, MBA, MSc, M.Ed.) is an expert in enterprise development, innovation, SMME development, policy development, capacity building, monitoring & evaluation and turnaround strategy. He lectures at Botho University. Among others, he is a 2022 recipient the Wadhwani Foundation’s Gold Award at the Start Me Up Global Facilitation Ceremony. He can be contacted on 71860308 (WhatsApp).