Perspectives from ISB

Family businesses are a vital part of the Kenyan economy, and their continuity and success often depend on the transition from one generation to the next. In the Kenyan economy, it has been found that less than one-third of family businesses survive the transition from the first to the second generation, and half of these do not make it to the third generation.

The values, the foundation of the venture fade away in the dynamics of business environment. The priorities change with the leadership, which sometimes become the missing link in the texture. Typically, there comes a time when the desires and demands of the family members clash with the company objective and goals which they wish to achieve, and this is where having professional managers becomes necessary.

The professional managers bring a wealth of knowledge and experience to a family business that complements the positive aspects of the culture established by its owners. More specifically, professional managers from outside the family can bring into the business, better systems and processes, greater flexibility, transparency, accountability, faster decision making and more effectively align stakeholders with the business’ objectives.

Heightened competition is also another factor in recruiting professional managers. Not every family can produce a chief executive officer or chief financial officer, capable of running a business in an ultra-competitive marketplace, thus forcing them to look outside its circle for unique talent that will propel the business forward.

These professional managers can better handle the competition, and build on an already successful venture, by looking at other avenues of growth, for instance expansion into new markets/avenues/products that will shore up revenue and profitability.
Fortunately, more and more Kenyan family-owned businesses are waking up to the need of integrating professional management in running their operations. It is, however, imperative to be conscious of empowerment and acceptance of the change management approach and to create a well defined reporting structure to avoid overlapping of roles and creating confusion in the working environment.

With robust succession plans in place, Kenyan family business will be more likely to professionalise their management faster. Only then can we hope to see more family run businesses outgrow the second and third generations and grow into truly large businesses.

Source: Ramamurthy, Thiagarajan, January 1, 2018,

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