Family Businesses are taking on more formal succession plans to avert a crisis that many enterprises encounter upon the death of the owner.
A report by Price Water House Coopers PwC titled East African Family Business Survey 2021 detailed that more businesses were looking into clearly outlining the transition procedures in the wake of the Covid-19 pandemic.
"The survey confirms an uptick in business planning for succession, 30% of family businesses now have a formal succession plan, up from 15% in 2018," the audit company noted.
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Formal succession plans encompass strategic, financial, estate, and human resources planning.
Other legal documents put in the writing including shareholders agreement which is an arrangement among a company's shareholders that describes how the company should be operated and outlines shareholders' rights and obligations as well as a testament/ last will to show how the estates will be divided.
According to the Kenya National Bureau of Statistics, 26.2% of all households in Kenya have experienced conflicts due to succession.
In the past, family wrangles have ended up in court taking up years to resolve. The family of the late billionaire Gerishom Kirima was involved in a court battled over his vast estate. The battle involved his children and their stepmother.
Other estates that have had battles include former Minister John Michuki, former spy chief James Kanyotu and the late former Cabinet Minister Njenga Karume who all had properties worth billions in the country.
To counter such conflict, family business owners consult with a variety of professionals in developing their succession plans including lawyers, accountants, bankers, financial planners, insurance advisors, merger and acquisition consultants, and management consultants to iron out issues.
41% of family businesses with values in a written form have a robust, documented, and communicated succession plan in place.
As is the case with any business, conflict comes into play with 44% of respondents indicating that not all family members share similar views about the company’s direction even though 72% agree that family members communicate regularly about the business.
"Strong family and business values form the foundation of an effective decision-making and prioritisation process.
"Nearly three-quarters of our East Africa respondents indicate that the family owning the business has a clear set of family values, and 70% report that at a company level, there is also a clear sense of values and purpose," the report indicated.
On a global scale, 79% of family businesses had established some form of governance policy or procedure in place which was a drop from 84% in 2018.
Additionally, only one in four respondents (23%) revealed that they have never had a disagreement. At the other extreme, disagreements are a regular occurrence for one in ten (7%).
"Dealing with disagreement is very much a private affair, 80% of respondents who report having disagreements deal with them internally.
"But just 13% have an established conflict resolution system, and only 12% have used an external third party resolution service," PwC reported.
In advancing with technology, several of family business owners’ key priorities over the next two years were associated with the digital age or the fourth industrial revolution.
Over half of the East Africa respondents indicated that that would increase their use of new technologies and improve digital capabilities, and several of their other priorities such as expanding into new markets or client segments or introducing new products and services, or even reimagining how they measure success or invest in innovation, may require next-level technologies and digital capabilities.
