Secrets of Successful Family Businesses

Project Description

From small tea stalls nestled in Muthurwa to large corporations headquartered in Upper Hill, family businesses have always been a part of Kenya’s fabric. In fact, contribution by family businesses to Kenya’s gross domestic product (GDP) amounts to 75 percent. A pillar of the world’s economy, family businesses account for more than two-thirds of all companies globally, and provide between 50 percent and 80 percent of all employment

Only a small minority of highly successful business-owning families have excelled and thrived through several generations. These families have much to teach other businesses, not only on governance, strategy and management but also on social and environmental responsibility and economic development.

Below are secrets necessary for long-term family business success.

1. Most do not put profit-maximisation first.

Family businesses anticipate that they will stick around longer than the average start up, so they have a tendency to have a defensive business strategy. There are investments that may lose money in the short term but that prove to be a solid business model in the long run.

Family businesses tend to spot these deals and build on them. Instead of earning profit for the sake of it, most family businesses do it the other way around: focusing on their product, their customers, and their employees, which consequentially leads to a higher profit in the long term.

2.Set values to be respected today and in future

They include: Kindness to each other within the family and to those of lower social status; Do not be lazy; Do not tell lies or gamble. There is also the guidance that one should devote oneself to family rather than to self, and never abandon or look down on people. It is striking that all the principles are moral, not commercial.

3. Deal professionally with ownership

Clarity on ownership, decision-making and stewardship are all fundamentally important in governing family-owned enterprises. Long-lasting family firms take time to discuss and clarify their values, which inform their strategic choices around sectors, technology and risk appetite.

4. Practice minimalism

In a world that values innovation, it’s tempting to ride along every trend that takes the industry by storm. But successful family businesses have a common habit of practicing minimalism in running their business, being more mindful of what they invest in and whether or not it adds value to the company in the long run.

5. Unity among members

The business is strengthened immensely through this unbreakable bond. When individuals grow up alongside the business, a strong and solid link is formed. The enterprise becomes a part of one’s soul and core being. The trust that is present among family members does not exist elsewhere. We can say anything to family and most likely they won’t get too upset. But if they do get angry, it won’t last.

There are a lot of hard truths that must be dealt with when operating a large business so being able to speak openly and honestly makes a big difference and offers advantages. No matter what happens among family members, there is a level of trust and understanding that never diminishes.

6. Succession planning

Having a structured plan in place before any tensions arises, openly communicate succession plans early on to minimise disruption. Also, family members should not be elevated to higher positions immediately because this can lead to conflict and resentment. And it can become difficult to retain talented outsiders if they are not given due credit, well-deserved positions and responsibilities.

7. Draw clear lines to avoid conflict

Unlike non-family businesses, one weakness of family-owned businesses is that there is an increased risk of conflicts when the professional and personal worlds collide. But a common secret in overcoming conflict among successful family businesses is the clear definition of roles of every member of the family. Don’t allow conversations about work during family gatherings, leave business at the office.