KAMPALA — Certainly, we would all desire to start a family business that will last for several generations! We sadly note that over 75% of our Ugandan family businesses never see the 3rd generation, compared to our Asian counterparts. Moreover, most of the long-lasting firms in the world are owned and managed by a family. 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.
There are, however, no easily imitable competences. Success is more about character and resilience. Aristotle defined three dimensions of human intelligence: episteme (intellect), techne (craft) and phronesis (practical wisdom and ethical values). It is clear that, for decades, business schools have taught the first two to the exclusion of the third. It is equally clear, from the evidence based on the most highly effective family firms, that phronesis is very pertinent.
John Mackey, author of Conscious Capitalism, clarifies “the paradox of profit,” is that a business should not tend to maximize profits by aiming to do so. Rather, financial rewards come from focusing on the solutions and customers. Smart business-owning families have understood this for centuries and made it one of their unchanging principles.
Companies with strong Entrepreneurial Drive are likely to display Adaptability. In order to be entrepreneurial and adaptive, they need to harness the engagement of Employees, and their ethical conduct bolsters reputation, trust and, ultimately, the brand. Without trust, held together by a strong Vision and sense of purpose, a business struggles.
Financial Management – Apart from fostering apt book keeping, successful businesses maintain audited books of accounts. All financiers are pretty interested in the Corporate and financial governance of the borrowers. Well, what happens when your board of directors is comprised of your brothers and cousins? Or when your CEO is your sister?
Debt management- Successful family businesses tend to be conservative on debt levels. Rtd Col. Robert Ssekidde of Seroma Ltd once advised entrepreneurs to always take out loans when there is an ardent need, and not a luxury to fix. It should always be commonplace that these funds have to be repaid dependent on the amortizations, lest trouble is to ensue.
Ownership– One reason that some family firms hit a crisis is a failure to properly and professionally deal 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. They also care about employees, society and the environment.
Conflicts management – A highly functional, successful family like the Agha Khan exudes a quiet self-confidence. Family members may give the impression that their lives are conflict-free; but this is never true of any family – or firm. People in all family firms will, from time to time, have clashing viewpoints on future directions, the role of individuals and so on. But high-performing families have the courage to acknowledge the differences and facilitate honest conversations about them, thus fostering innovation and creative ideas.
TAKANASHI – The family’s values were set down in the 17th century and are still respected today. 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 derive the “purpose” that is moral, not commercial.
We should agree that Mukwano Group exhibits most of the principles in the family business secrets of Success model. One can clearly observe visionary leadership, entrepreneurial flair, and continual strategic thinking and renewal. What really matters is being coherent in the ways we differ. Everything must fit together like the notes in a beautiful piece of music.
Truly, the secret sauce for surviving from generation to generation is corporate governance. Is it better to lead a family business with one ultimate leader. Having described the framework of business, we need to appreciate the corporate governance of the family business itself. The intricacies of creating a board for the family-run business, which truly conducts the oversight role on Management. As such, we need to train and mentor the Ugandan family businesses to last for generations.
Michael Jjingo is a fellow of Uganda institute of bankers and General Manager Commercial Banking at Centenary Bank.