FAMILY BUSINESS AND SUCCESSION PLANNING

PROFESSOR TERESA MWUESE NMADU Power Point Presentation by Professor Gbemi Oke

 OBJECTIVE OF THE MODULE

To help students understand the concept of family business and the transition from family businesses to the mega firms we see today in the corporate world.

Learning Outcomes
Upon completion of this module, students would have been able to:

Discuss the concept of family business and the factors that make it unique Explore the cultural context of the family business Appraise the complex roles and relationships involved in a family business

Learning Outcomes
Identify entrepreneurial practices that enable a family business to function effectively Examine the process of managerial succession in a family firm. Analyze the major issues involved in the transfer of ownership to a succeeding generation

Content

3 Main Topics
The Concept of Family Business The Cultural Contexts of Family Business
Roles and Relationship in Family Business

Ownership Transfer and Succession in Family Business.

Topic 1
Introduction Definition/ Conceptual Framework Family in African/Nigerian setting Assumptions about Family Business Family Influenced Start-ups Family Corporate Venturing Family Corporate Renewal Provision of Family Private Cash Family Investment Funds

Challenges of Family-Owned Businesses

Assuming that past success will guarantee their future success; The legacy value attributed to the business does not translate into a market value or advantage; Leaders try to balance the risk profile of their shareholders with the risk and investment demands of the marketplace; Risk profiles differ between senior and successor generations;

Challenges
Hard to pass the responsibility of managing the firm into the hands of younger generations which they deem less capable; Families build the first-generation business on the founders intuition, but then business never establishes more intentional entrepreneurial processes or confirmed strategy for the future to keep the entrepreneurial contributions alive; Families rarely make use of the same financial strategies as those used by fellow entrepreneurs to grow the business; Families do not get rid of unproductive assets and underperforming businesses to reallocate resources to more productive places;

Challenges
Successor generation family members feel entitled to get a business rather than seek nextgeneration entrepreneurial opportunity; Senior leaser communicate to the next generation that business planning and entrepreneurial analysis is a waste of time; The family member is given part of the business to run as part of their legacy, and this is deemed to be entrepreneurship in the family.

Further Challenges
Lack of an exit strategy; Succession planning; High turnover of non-family members; Lack of training of new family members who join the business; Lack of outside opinions and diversity on how to operate the business.

Topic 2

Cultural Context
Value of Community Life Value of Family oneness Value of the Sacred and Religion Value of old age and authority Value of Acceptance and Hospitality

 Roles and Relationships in Family Businesses Advantages and Disadvantages of Family business The need for good mix in the family firm

Topic 3
STRATEGIES FOR COPING WITH ROLES/RELATIONSHIP ISSUES IN FAMILY OWNED BUSINESSES
Family retreats Family Council Family Business Constitution

Succession Planning
Succession, in organizations, refers to the process of transferring managerial control from one leader or one generation of leaders to the next. It includes the dynamics preceding the actual transition as well as the aftermath of the transition (Shepherd and Zacharakis, 2000).

Succession Planning

In the context of family business, Sharma et al (2001) define succession as the actions and events that lead to the transition of leadership from one family member to another

 Entrepreneurial succession is the process by which ownership and control of the production or commercial infrastructure accumulated by one generation of a nuclear or extended family is transferred to the next. It entails the transfer of a commercial investment of any type from the ownerfounder to his prospective survivors.

Beneficiaries of Family Businesses

These could be members of a nuclear family in a monogamous household or members of a compound family in a polygynous household, Survivors could also be members of the extended family such as uncles, aunts, nephews, nieces, cousins

Stages of the Succession Process in a Family Business

Test Questions
For family members in Nigeria, how easy would it be for one to assume the role of employee in a family founded business? What are the basic preparations if any that are needed? How frequently should family owned businesses hold board meetings? What steps should be taken to make such boards be effective?

 Describe five tell-tale signs that a business has or does not have a succession plan in place. In Nigeria, are educational qualifications of potential successors of any significant effect on succession in business? Why or why not?

Test Questions

Name five current family owned businesses that you are sure will get to their third/fourth generation. Support your assertions with credible examples.

 Thank You