Corporate Governance: Family Business edition- From Transition to Success

This week Akira Consult was fortunate to brainstorm on what it would take an investment firm to successfully transition a #familybusiness they were eyeing. It had become important to align the business as regards its Corporate Governance framework, going forward.

Fun fact about Family businesses; at least 70% of the worlds businesses are built off the back of them. Also, they are more likely to succeed than other businesses because of their reliability, commitment to strategy and pride in their work. It is however a concern that less than 15% of family businesses do not survive transition to the 3rd generation- meaning the founders and their children do not successfully pass on the business to the grandchildren, inevitably killing a good story.

Did you know some of the largest brands globally are family businesses- e.g Ford, Estee Lauder, Samsung. In Africa, examples such as Pick n Pay Supermarkets and in Kenya, Bidco, Ramco and Keroche.

Sabis International Schools, whose origins are in Lebanon and who have a footprint in #Kenya is a family business that has successfully transitioned from being founder-led to being a corporate organisation. To do that transition, several #governance structures within the family were in place. These structures addressed key threats to a family business including; informality and lack of structure, succession planning of the founders, roles and the place of the family and its members, strategic focus and capital allocation, benefits and distribution of returns and conflict resolution between family members.

The structures and tools a family business can use include the following:
1. A family constitution- like a Board Charter, this document articulates the strategic direction of the business, the roles and responsibilities of key positions and how the roles of family members in these positions, employment rights and obligations of family members, shareholding, distribution of returns, conflict resolution and transition mechanisms.
2. Family meetings to Family Forums- This is important for all family members to be kept abreast of the progress, for idea generation and for any grievances to be aired.
3. Family Council- should the business be at a mature level, those actively running the Company could constitute a council, much like a #Board, who would make the ultimate decisions for the company. If the business is considering a transition to external investors, the Council can invite external members to advise appropriately.
4. Family Office- In the event the business reaches higher levels of success, it can consider establishing this office to professionally advise on wealth management, philanthropic activities and other investor related discussions.

We look forward to executing the potential family business transition to an even more successful corporate and shall be sure to document our learnings even as we advise.