Thriving Family Businesses and their secrets of success.

Did you know that every seven out of ten of the businesses you know are family owned?

According to the audit firm PricewaterhouseCoopers (PwC), a family-owned business is one where the majority of votes are held by the person who established the firm, or their direct descendants, with at least one family member involved in the company’s management. If the company is listed, the persons who set up or bought the firm, or their family, hold at least 25 per cent of the right to vote through their share capital, with at least one family member on the board.

Family businesses account for approximately 80% of the Kenyan economy and work force. Despite this, they are vulnerable and face similar challenges regardless of the industry or location: governance, succession, wealth management, family conflict etc. Less than 15% of family businesses exist after the first generation.

ICEA Lion, Commercial Bank of Africa, Brookside, Kenpoly, Kenafric Industries and cooking oils manufacturer Bido are some of the family-owned businesses that have thrived well in Kenya.

Kenpoly for example a firm, best known for producing plastic products, was incorporated in August 1977 as Kenpoly Manufacturers Ltd. Plastic products from the firm are sold not only in Kenya but also in at least 10 other countries in the region.

It also runs Blowplast Limited that produces packaging items for consumer goods like oils and pharmaceuticals. Under Kenpoly is also Thermopak Kenya Limited that specialises in producing packaging for use in the horticulture, hospitality and dairy industries. Kenpoly is also founder of Fina Bank.

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.

According to Prof. John Davis a Senior Lecturer of Business Administration Havard Business School, family business culture matters but not a big factor at all there is a 15% influence in family owned enterprises from country to country.

When it comes to implementing an action to address a particular issue one must pay attention to culture. Your approach to challenge authority and ability to work with the next generation one must pay attention to culture.

Family business sector in all economies is the dominant sector all over the world it accounts for two thirds in any country.Family owned companies perform better than none family owned based on studies, financial indicators, growth and return on profitability. Large to giant listed companies in any country are family owned.

So how do family businesses change from generation to generation?

As business is growing families grow too, in order to keep up with the growth. As you grow the company, one has  to become more and more sophisticated at a bigger scale in terms of running the business. One individual cannot run everything you’ve got to delegate, you need effective systems.

The family has to be   aware of the supportive role and the increasing level of professionalism over time.There is this common saying that, “the first generation creates a business, second generation builds it, the third generation squanders it”

A good example Bidco which is best known for manufacturing cooking oils, and its ownership as of March 2015 was all about Bhimji Shah and his sons Vimal and Tarun Shah. Each of the three had a 33.3 per cent stake, according to disclosures made by the International Finance Corporation. Vimal Shah who is a second generation is the managing director and the public face of the company. Bidco evolved from a garment factory that Bhimji Shah founded in Nyeri in 1970 then grew to a massive cooking oil firm.

There are three paths to growth of any business, first is the normal growth curve where the business goes from initiation, growth, maturity and then declines over time in three generations. Second is the business grows and crushes faster in one or two generations, third is the crush path where family members who consume assets more than they produce through lifestyles expenses, make bad decisions and lose money in the process.

Business also consume assets, you need to rejuvenate and diversify in a certain way, make deliberate effort to prepare the next generation to run the business.

You need family wealth creators like Bhimji Shah who handed over the business to the second generation who are now replicating the founders experience by working harder to growing the Bidco business empire.

What are the key ingredients to a successful family owned businesses?

Strong leadership, in case of family disputes there is always someone to turn to who creates an atmosphere of working together to resolve issues amicably. The leadership of these family businesses play two key roles as Head of Business and as the Head of the Family. Family CEO’s are somewhat different from the non-family CEO’s who can be removed by a board within 2 to three years.

Family CEO’s are sensitive, loyalty based, and take a lot of concern about family, the community and more importantly the family unity. You are confronted with situations where you are actually talking to the owner of the business as opposed to the traditional CEO’s of non-family owned businesses.

Before bringing in any family member in the running of the business it always advisable to allow these youngsters, work elsewhere for at least three to five years in order to get an outside experience. Get a graduate education an MBA perhaps this will put them in a competitive position in terms of skills and experience.

Let them be known by what they can do to the business as opposed to what the family can do for them in the work environment.

The first generation knew a lot about running a business, the second generation knew less  but after many years of hands on experience they learned from the senior generation. Now the third generation have  global working experience with more technical skills better sense of the market. They went to good schools abroad accessed the best universities and have experienced diversity of cultures. What they do not have is wisdom that comes with age.

The Author is an  Entrepreneurship and Innovation Management Consultant and Chair TPA

https://ekaaleekuam.blogspot.co.ke/

Creating a culture of collaborative Innovation

What is the key ingredient of true collaborative culture and where does this originate?

Did you know the current school going students are known as generation-Z?   I even saw a t-shirt on social media bearing   slogan ‘’when am bored I google myself’’. We currently have six generations the builders 70+ years, baby boomers 51-69 years, generation-X 36-50 years, generation-Y 21-35 years and generation-Z 6-20 years.

 Generation-Z are born between 1995 and 2009 and when they talk about library they actually mean of their play list in itunes. They speak, and write short message service (sms)  in a new language and if they can shorten it further they will. Their idea of an encyclopaedia is one that they can change and  contribute to while they constantly rate it.

This generation-Z in my view spent a huge amount of their time online chatting with friends and relatives each day, so what will be the future work force be like from this group of individuals?. We are in the brink of a significant intergenerational transition at the workplaces, the baby boomers who are in leadership roles  are approaching their retirement years and transitioning  out of the work force.

At the other end of the spectrum are the generation-Z, as they  enter into the work force  things are going to change, they are the most materially endowed, technologically literate, formally educated and globally connected generation to ever grace  planet earth. The way they approach work, problem solving, collaboration, communication and innovation will be completely different.

Every generation will have their own challenges and fears to overcome in fact generation-Z are global and visual generation, you can communicate their three top fears simply through visual icons.

The first fear is the poor wifi signal, it’s quite a crisis with generation-Z  if  they are not  connected to the internet, The second fear which i think is even a greater problem for them is the buffering signal. I mean this is a generation that did not have to wait for anything not even   dialogue, and the biggest challenge is when their phone battery is out of charge, phone without charge life ceases to exist with this group of individuals.

 I personally experience this every time my home internet goes off during the school holidays; I will receive a series of sms from my kids indicating that our internet is offline.

Generation-Z are growing at a time of extraordinary and unprecedented change and that  is how they will approach their careers. How will this phenomenon shape the way generate-Z approach work in the future?

The world population is growing and becoming more culturally rich and diverse in every Country of the world through net overseas migration and this will be reflected in our work place community.

 The generation to follow  Z were born since 2010, the year marked by the launch of the electric car station, the launch of the ipad, the launch of Instagram and the beginning of generation alpha. I heard a story of a mum talking to her generation apha son about grandma who was not feeling well. She explained that ‘you know grandma is sick she  caught a virus and  needs to see a doctor’. The boy replies and says ‘don’t be silly mum only computers get viruses’. This confirms that we are growing up in different times. Perhaps wifi will be at bottom of Maslow’s hierarchy of needs based on the fundamental demand and consistent use of internet by these two generations.

Productivity in the work place will increase significantly through technology, innovation and collaboration and we are seeing sectors being transformed. Let’s take hospitality sector for example Hilton Hotel  was established in 1919 with presence in 91 Countries with approximately 600,000 beds however compare that with Airbnb  an American company which operates an online marketplace and hospitality service for people to lease or rent short-term lodging including holiday cottages, apartments, homestays, hostel beds or hotel rooms. Established in 2008 and is in 190 countries with over 1.5 million listings.

Now what Airbnb has done is an innovative approach to accommodation that has released the collaborative power of community for all of us to become accommodation providers if you want to, and it has leveraged this over a technology platform. We can also see this with  Uber taxi service they don’t own even a single taxi vehicle but have presence in the many cities in the world, we can all be drivers using the uber application.

The traditional leadership styles of command and control that is based on position and hierarchy is shifting to a more collaborative and contribution approach for the younger generation where they can participation and have a voice.

Effective leadership of the future are not just those with highly developed skills set and expertise in an area but rather those who are able to create a culture of collaborative innovation. These leaders will understand that as people we are designed to connect and constantly connecting over the online platforms to the extent that we are now able to telecommute full time at the comfort of our homes.

We are also designed to contribute and it’s interesting that the platforms that we spend  most of our time online not just as consumers but contributors as well these social media platforms like whatsapp, facebook and blogs just to mention a few. This online culture will also enable us to create content like in youtube, did you know that there are over 100 hours of youtube content being uploaded every single minute?

How will the future workplace culture of collaborative and innovation look like?

Well, it will be inclusive of multi-generational, multi-cultural and multi skilled community that draws its strength on the diversity built on the foundation of  shared values such as humility, respect and authenticity. Productivity, outcome and output will be increasingly important in every workplace. As we shift our focus from  process to developing people, from not just outcomes but creating space for opportunity and innovation, from transactional to transformational leadership and create vibrant, dynamic and healthy workplace community then outcome and productivity will be higher than ever in a thriving culture of collaborative innovation.

Let us all collaborate.

The Author,

Chair, Turkana Professionals Association (TPA)

https://ekaaleekuam.blogspot.co.ke/