Succession planning is often dismissed as a mere formality in the business world. Yet, for family-owned enterprises, the transition of power from one generation to the next is a complex and critical juncture. In Nigeria, where family businesses are deeply ingrained in the cultural fabric, the stakes are even higher. These enterprises, from the sprawling conglomerates to the corner stores, are the backbone of our economy. However, their survival hinges on a delicate balance of tradition and innovation, a challenge that many Nigerian family businesses are struggling to navigate.
These businesses, from large conglomerates like Dantata and Doyin Group to small and medium enterprises, are vital for the economy, driving innovation and creating jobs. However, ensuring their continued success as ownership changes hands is challenging.
Recognising this snag, the Lagos Business School Family Business Initiative hosted its inaugural Family Business Conference themed ‘From Family Enterprise to Family Institution: Climbing the Longevity Ladder’ in April 2024.
According to the Lagos Business School Family Business Survey 2024, one of Nigerian family businesses’ most significant challenges is the disinterested generation.
One may ponder why the next generation is not interested in family businesses and what challenges it poses to Nigerian family businesses.
Ibukun Awosika, founder/CEO of The Chair Centre Group and the Conference keynote speaker, acknowledged that children of family business owners often develop their visions and goals, which may or may not align with the established trajectory of the family business.
This discussion created two schools of thought: family business leaders interested in and intentional about next-generation successors and those who pay little or no attention to it but expect it to happen.
M.D. Abubakar, Igbuan Okaisabor, MD/CEO, Construction Kaiser Ltd, and Samuel Maduka Onyishi, chairman, Peace Mass Transit Ltd, stressed the crucial and strategic roles of the next generation in family business longevity.
However, Mr Mezuo Nwuneli, Co-Founder and Managing Partner of Sahel Capital, and Nnamdi Ezeigbo, CEO of Slot Nig. Ltd., had a different perspective on building family business longevity.
They built their businesses focussing on societal impact, relying on non-family professionals rather than solely on intra-family generational succession. That is business management that is driven by merit rather than familial connections.
An important question in this discussion is how many Nigerian family business leaders can entrust leadership to non-family members. The LBS Family Business Survey 2024 found that only 1.64 percent of Nigerian family business leaders are willing to take a chance on a competent non-family professional as the successor.
Okey Nwuke, director of the LBS Family Business Initiative, posits that a shift in mindset towards succession planning, including openness to competent non-family professionals leading the business, is crucial for long-term sustainability and growth. Stated differently, family business leaders must prioritise strategic vision beyond immediate family interests.
The disinterested next generation can be a significant challenge to Nigerian family businesses, depending on the school of thought to which you belong. So, what is the fuss about Nigerian family businesses’ next-generation successors?
A cursory look at failed defunct Nigerian family businesses shows that successors contributed to the failure of those companies. The Nigerian economy could have certainly fared better without the demise of legacy companies such as Adeola Odutola Industries, Concord Group, Ekene Dili Chukwu Nigeria Ltd., Chanchangi Airline, and Okin Industries, among others.
Failed conglomerates lead to significant job losses, a rise in unemployment, a decline in government revenue, a drop in gross domestic product, and market instability and uncertainty, leading to volatility in financial markets.
The fuss about next-generation successors stems from the tension between maintaining tradition and embracing change. While there’s a desire to honour past achievements and values, there’s also a need to adapt to modern market trends and technology. Striking the right balance requires respect for the past and a vision for the future.
The transition to the next generation often uncovers deep-seated family tensions, complicating decision-making and causing discord within the business.
Sibling rivalries, parental favouritism, and intergenerational conflicts pose significant challenges to succession, risking the business’s reputation. Effective communication, conflict resolution, and leadership development are crucial for navigating these challenges.
Additionally, talent and meritocracy issues arise in family business succession, with many assuming family members will succeed regardless of qualifications, leading to resentment among non-family employees. Embracing meritocracy is vital for Nigerian family businesses to thrive.
Moreover, professionalisation and governance are critical. Without clear structures, businesses face inefficiency and internal strife. Adopting professional practices can unlock opportunities and ensure long-term success.
We cannot afford the high mortality rate of Nigerian family businesses, particularly when our seemingly low productivity in the manufacturing sector and low foreign exchange inflow are taking a heavy toll on the Naira.
Recognising the Nigerian federal government’s effort to achieve sustainable economic growth, accelerate structural transformation, and improve productivity, the Lagos Business School, through the LBS Family Business Initiative, is set to change the narratives through knowledge dissemination and advisory services.
It is a fact that most family businesses face challenges transitioning from generation to generation.
The future of Nigerian family businesses hangs in the balance. The failure of these enterprises is not merely an economic loss; it is a cultural tragedy. We cannot afford to let these pillars of our society crumble. It is imperative that family business owners embrace a new mindset – one that prioritises meritocracy, professionalisation, and long-term sustainability over short-term familial interests. The government, too, has a role to play by creating an enabling environment for businesses to thrive. By fostering a culture of entrepreneurship and supporting family businesses, we can ensure that these institutions continue to be the engines of our economic growth and social development.
The time for complacency is over. The future of Nigeria depends on the success of its family businesses.
Nwuke is a director of LBS Family Business Initiative; and Agu is a research assistant at the LBS Family Business Initiative.
