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Why businesses do not outlive their founders in our economy

Published by in Business ·
Tags: businesstips
All over the world, sustainability has become the mantra amongst key corporates and visionary organizations. Inherent in sustainability is the going-concern status, environmental concerns, long term view and social considerations. Financial Times Lexicon puts it this way; "Business sustainability is often defined as managing the triple bottom line - a process by which companies manage their financial, social and environmental risks, obligations and opportunities. These three impacts are often referred to as profits, people and planet."

A more robust definition is that "business sustainability represents resiliency over time businesses that can survive shocks because they are intimately connected to healthy economic, social and environmental systems. These businesses create economic value and contribute to healthy ecosystems and strong communities."

Do Good, Do well partners defines it thus; "Sustainability is a business strategy that drives long-term corporate growth and profitability by mandating the inclusion of environmental and social issues in the business model. Unlike corporate social responsibility, which retroactively addresses issues, sustainability implies a forward trajectory. In other words, CSR looks to the past actions of a company while sustainability looks forward by changing the nature of the company."
The simple point to draw from these is that organizations with a sustainable perspective focus on systems. Futuristic systems. Systems build institutions. Well-run institutions run on auto-pilot and meet societal expectations. They do not depend on the owner/founder or suffer from one imposing big man syndrome but create a leveling platform that thrives on competence and abilities. The system automatically throws out non conformists and misfits. It rejects the incompetent. It does not personalize decisions. Institutions outlive individuals, strong and weak MDs. They have more resilience to withstand economic shocks and policy vagaries.

Sadly, this is not the case with most companies located in this area. I grew up knowing businesses like Umuchu Youths, Pal Breweries Oko, Rexono Enugu, Olympic Drinks Abagana, Ilodibe Farms, Monarch Breweries Ninth mile corner, Phoenix Hotels, and many other such. It bothers so much to think that these companies are extinct without exception. None of these companies that existed in the 70s and 80s are still in operation. What could have happened? Aren't Toyota, Ford, Coca Cola, Disney, Mercedes Benz, Sony, Adidas, Nokia businesses in same mold-founded by individuals. Clearly, I may naively be expecting lots from our business concerns considering the often touted challenges in our environment, but three or four successes would not be an aberration. Telecoms has proved this. Dangote has defied it. Only Cutix Cables in this area is insisting that it can be done.

So, what are we doing wrong? Why can't our businesses and companies outlive their founders in this area? What have Toyota and Adidas and co done that we can't? Sadly, this a national phenomenon. Dangote Group appears the only previously privately owned company but now with clear tendencies to break the jinx. This is not mentioning some banks that have clearly become conglomerates. As already mentioned, Cutix Cables Nnewi is setting the pace.
A little research has therefore revealed some tendencies.

Lack of vision: From the onset, most of our businesses are set up for the now, never for the future. Long-term view lacks. An ambitious ten-year strategic growth plan is unmentioned. The bible mentions that people without vision perish. It has been severally proven that organizations with compelling vision, bought in and imbibed by staff which therefore drives their business processes and has over 90% chance of survival, driving growth trajectory and remaining profitable over the long haul. Assuming Innoson Motor Manufacturing Company's vision is to benchmark Toyota, it is expected that its entire organizational processes should slant towards that of the best vehicle manufacturing plant in the world. The pursuit of this vision compels every employee to toe the line of professionalism and global standards.

Hierarchy and Succession Plans: This appears to be one of the most critical issues amongst our companies. There is hardly job descriptions and clear delineation of responsibilities not to mention succession plans. Part of business formation should from the onset define who performs what and who assumes what role in case of an emergency. Unfortunately, superstitious belief systems play its role in this clime once the issue of succession crops up.Even when all signs point towards changing technology, new realities and skills, most founders cling unto the old, conservative and dying ways of business process. Elsewhere, founders are willing to sell once it is clear that their competency levels and skill set is lower than new realities. Sometimes, they opt to diversify into other segments. Other times, they invite visionary shareholders and retain a percentage. It's been severally said that a 10% of something is better than 100% of nothing. The bottom line of every business is money and more money. It does not matter who generates. Competence, hard work and integrity are the major considerations.

Refusal to go to the stock market or allow external equity: A business may be considered ripe to solicit for funds from the capital market once competent accountants and business management experts analyze the level of their funding, capital outlay and formation, cashflows and their growth plans. Becoming a public liability company compels accountability, professionalism and transparency on a business. It dilutes ownership but makes up in potential longevity and profitability. Nothing forbids the founder from having a controlling or substantial share in the company. The Nigerian Stock Exchange has much work to do by marketing and selling the benefits of enlistment to medium scale enterprises. Stock market is a very safe way to fund a business once the parameters and indicators are right.
Reluctance to accept change: Founder(s) of business should be wise to know their limiting skills and to take the best decision to mitigate this without totally losing out. For example, we presently train some Micro Finance Banks and our findings reveal that for some, there is an urgent need for a board and senior management overhaul. Some of the banks migrated from Community Banks to Micro Finance Banks and the CBN has long introduced complex regulatory frameworks and technology-driven reporting formats since the migration; yet some Directors and MDs of these banks are not computer savvy and in fact detest them. This leads to frustration and limits the effective work-time as solutions to systems integration and reporting problems are sought elsewhere with heavy financial implications. Our selfish inclinations would rather prefer a shut-down than a business surgical operation.

Lack of trust: Most founders of our businesses have monumental tendency towards lack of trust. While realities and past experiences would give supporting inclinations to that stance but a measure of trust must be released in every business venture else, the system collapses. The basis of engagement that is, employment or invitation for a business relationship must be informed by a quantum measure of trust. Trust based on ability or expectation to contribute to organizational growth. A measure of this must be released for business continuity. Yet controls is paramount.

Focus on share of wealth than continued creation: A business is an entity. It should be seen as a living organism that should be nurtured to growth. It is common to observe manufacturing companies that operated for less than two years, yet the founder glories in that fact that the property would appreciate in the long run for a "kill". This is naive thinking. Inflation would have eclipsed the assumed profit by the time the business is ready for sale. Meanwhile within the intervening period of dormancy, the society, state, the founder and the family lose. Anyone who invests in setting up a business has a moral responsibility to create wealth for the society. It is also a corporate social responsibility. So many small and medium scale businesses have cited energy challenges as a key reason for closure, yet so many such businesses still thrive in our environ. Where is the truth?

Forcing family members to take over: So many founders insist that family members assume key roles in their businesses willy-nilly. This is wrong. People can be inspired but never motivated. Every individual can only motivate himself. People are not forced into businesses they are not passionate about. Yet this is common in our environ. Some other times, family members who lack cognate skills and competencies force themselves on businesses. Till family members pursue their own dreams; businesses or vocations forced on them will collapse sooner. Passion is beyond the external effects, but at the core of love and determination to succeed of every venture undertaken. If it cannot be found, non family members who posses such should be invited for business sustainability.

Not seeking state protection: Most of our businesses transit from trading to manufacturing. Meanwhile the psychological requirement for a successful trader varies from that of an entrepreneurial manufacturer or a conglomerate controller. We transport our individualistic sole proprietorship drive into production or a more complex venture. Manufacturing is far more complex. It requires inputs from many people with diverse skills. More importantly, it needs government collaboration and protection to succeed. Sometimes, government facilitates low interest loans, trips to international trade fairs, skills transfer, tax exemptions, patronage, workshops and seminars, collaborations, etc. Some of our businesses shy away from visibility, citing tax burdens etc as reasons. Yet the benefits of visibility outweigh being hidden as a mushroom venture.

Not going global: Internet has transmuted the world to a global community compulsorily. There is hardly any business that is not technology related. Governments are championing this for transparency, yet most of our businesses have refused to computerize their operations. New markets exist elsewhere for every business if not within your locality. This can only be found through the Internet and aggressive enquiries. Again, the benefits of visibility outweigh being hidden as a mushroom venture.

Family bickering: Most big businesses even witness family bickering and law suits on asset sharing while the founder is still alive. We usually advise diversification of share holding in such cases. A business that functions more in the courts than the markets is bound to fail.

Finally is the lack of skills or in-depth knowledge in the business venture undertaken. We advice that people practically understudy a business they desire to venture into for an appreciable length of time before set up. This is critical and beyond paper feasibility studies and fathom projections.

These are some of the reasons why our businesses don't outlive their founders in our environ. Resolving or avoiding these issues would truly convey a going-concern status for businesses and assure longevity.


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