There is hardly any Nigerian-founded business that is still functional since Nigeria got its Independence. This is the same thing that has affected churches & political parties in Nigeria. Many of these businesses were the pride of the country, even their local communities providing job opportunities for people, only for them to collapse after the demise of their founders. A good example is the companies owned by former billionaire M.K.O Abiola – Concord However, Abiola Bookshop, Summit Oil, Habib Bank, etc.
In many western nations, there are thousands of companies that have outlived their founders and have grown into conglomerates and groups of companies, beyond what the founders must have envisaged. Companies like Coca-Cola, General Electric, Tata Group, Newspaper, KFC, McDonald’s, Walmart, J.P. Morgan Chase, Goldman Sachs, Siemens, etc.
This issue with Nigerian companies has been like this for years and similar trends are being observed among currently existing companies.
Why is this so and what should be done to prevent them from always re-occurring?
Kind of business
Sole Proprietorship is the most common kind of business run by Nigerian founders. This is because the founders want to have total control of the business with the catchy phrase, ‘after I have suffered to build this business from scratch”. They are the sole custodian of ideas and management of the company. It becomes difficult for the business to expand even while they are alive, let alone when they die.
The major disadvantage with Sole Proprietorship is that the death of the business becomes the end of the business. It is advisable that once a business is scaling fast, the founder should seek advice from investment bankers and finance professionals on how and when to go public. He can have major shares while allowing other shareholders into the company. This will sustain the company for years to come.
It is very rare to see privately-owned Nigerian companies go public except for corporations like Banks, Manufacturing firms like Dangote, Telecoms like Globacom. Other founders can take a cue from this.
No Clear Succession Plan
One important thing about leadership is the ability to groom a worthy successor who will continue the vision of the leader. In most cases with Nigerian founders, they fail to replicate this structure of succession where another person, not necessarily their family would lead the continue after them.
In developed societies, big business owners always have an eye out for people within the establishment, perhaps among his/her managers, that have rare leadership skills and are not necessarily blood relations. They keep these people close, make their stay in the company a comfortable one, and begin a systematic grooming process, where the person easily transits from a manager to becoming the head of the company.
For succession plan that has to do with families, children and relatives in such family are integrated early into the business. Many well-known businesses today are family-owned and are run through this succession plan to keep the dream of the founder alive. Companies like Louis Vuitton, Walmart (Walton family from the USA), Group Auchan (Mullez family from France), LG Corporation (Koo family from South Korea), Dell (Dell family from the USA), are examples.
Many companies still existing today are existing because of a good succession plan either through the family line as in the case of TATA Group in India or employees who have grown through the ranks in such a company.
Nigerian Founders should take a cue from this and find a structure that will make the succession plan work.
Lack of structure and business systems
One key trait of successful businesses, especially those that have existed through several generations, is the existence of a clear structure and business systems that help the business to operate effectively even with the absence of the founder.
Building a Structure is indispensable to the longevity of any business. It provides order, assigns responsibilities for key activities, and improves accountability. As explained earlier, many Nigerian businesses cannot function independently of their founders.
Policies and procedures that govern everything in a business from recruitment, employee conduct, finance, and accounting, etc. are important to the successful running of a company.
It is not surprising then that the most critical information and records concerning most businesses are housed in the heads of their founders. They seem to be the only ones who know where everything should be and how the business should run. Now imagine what happens to a company when such a founder dies. It is very paramount that structures and systems are built for the long-term existence of a business.
Unclear Vision of Company
One key variable to sustainability is the information and vision of the company. This is where many founders fail as they hoard this information from their subordinates. “When the purpose of a thing is not known, abuse is inevitable”, is a common saying regarding purpose and vision. This is the case with running a company without having a piece of clear information about the vision and mission of such a company. The employees run operations based on the instructions of the founder and not because they understand the vision of the company.
When a founder dies and another person takes over with a conflicting vision, it drives the company towards another path and in most cases, leads to the end of such a company. This is very common to companies in Nigeria where the founder hoards key information about the company owing to threats of revealing ‘ the secrets’ of his growth.
Family Influence
In the African setting, Families always tend to fight over properties and various things belonging to their ‘child’. They begin to assume different positions and run operations of the companies especially when they are not competent to lead the company.
Some founders also give family members positions in their companies as a way of helping the family, not necessarily because the family members are qualified to assume such positions. This incompetence often leads to the gradual destruction of the companies especially when these family members hold very key positions within the company.
Incompetent Successors
This is a prevalent issue in Nigeria as many successors don’t merit being saddled with the responsibilities of heading a company. Many are usually there for personal gains, so would only do things that suit their selfishness. One of these is embezzlement which perfectly illustrates the corrupt practices the average Nigerian leader is known for. Many once-booming companies have been forced to close down due to bankruptcy caused by embezzlement by leaders and managers.
One reason this happens is that some founders put successors based on sentiments such as family or someone they are indebted to, not necessarily because such person is competent to lead the company.
To curb this, a company should have a policy that states the required education and other qualifications for the job of the CEO. This should be well spelled out and known to the individuals concerned.
Structures to adapt to change & future trends
Every prosperous company gets to a stage where they have to expand and adapt to emerging trends. For many Founders who have failed to expand and adapt, the success of the business will be largely dependent on their influence. When the founder dies, many times, it becomes difficult for the successor to adapt the business to new trends in the industry. At this point, many of their competitors would have left them behind while they struggle to take off.
Founders of business must employ experts and consultants who will advise them on the best time to expand and adapt to new trends so that when they leave or die, the business will continue to stay afloat and adapt to new trends in the marketplace. Founders must be knowledgeable about new technologies that can drive business better and implement them in the running of their businesses.
One way to achieve this is for the company to go public and sell part of its shares to interested members of the public. When a company goes public, it forces it to maintain a certain level of corporate governance. The founder is required to put verifiable management and control structures before his company is allowed to sell shares to the public. Upon the death of the founder, his generation can only be contesting for their father’s shares while the company is running. This is what Warren Buffet did with his company Berkshire Hathaway, allowing expansion into various other industries.
In conclusion, the enduring legacy in business must be adopted by Nigerian Founders so that their business can live after them and be passed from generation to generation.