As Kenyans become more affluent, many families-in-business continue to accumulate wealth and own family enterprises. In some of these families, the business and wealth is already being passed on from the founders to the next generation of vision bearers. The catch however, is that whereas some families are undertaking the transition in a structured, well informed manner, for others, and that too, a vast majority, the approach continues in a bahati-na-sibu (haphazard hit-or-miss) fashion.
A fact validated by events observed in family-owned enterprises, which continue to unfold in the media. Unfortunately, the mishmash tinkering adopted by the vast majority, continues to be a minefield which consistently threatens to cause friction in families and disrupt their businesses. Worse still, if it continues unchecked, it can fast-track the inevitable erosion of hard earned family wealth.
These unmanaged transitions, increasingly validate the Anna Karenina principle,coined after Tolstoy’s observation that: “wealthy happy families might be all alike, but every unhappy wealthy family is unhappy in its own way”,albeit with very slight variation. In essence any complex system, requires multiple factors to go right for success to occur, but it only has to fail in one key factor to be rendered useless.
The friction evident in (unplanned) transitions observed are a clear manifestation of failing in one key factor. The family as, a group, has not articulated a key ingredient of who they are, what they stand for – worse still – where they are going. Interestingly, this is not necessarily a Kenyan phenomenon. Globally, it is acknowledged that a vast majority of incidences involving the transitions of wealth of business families fail for lack of an articulated (and adherence) to shared family goals and values and the lack of a shared vision.
Family Glue – Common Agreement Vital
A progressive family, will endeavor to deliberately highlight what they consider as their distinctive set of goals and values. That which sets them apart from other families, and which, provides them their unique complexion as a family and which informs their decisions. These goals and values, provide the background for preparing a family charter—also known as a constitution or protocol. This, any legacy conscious, business owning family must possess.
A well-drafted charter, sets out principles which are morally binding statements and provides the instruments for achieving and implementing them.It codifies essential rules, responsibilities, and obligations relating to the ownership and management of the business. At its heart, it engraves respect for the family’s tradition and values and is the family “bible.” The family members agree to be guided by the Charter as a reflection of the values of the family. The Charter regulates the relationship of all family members among themselves (and with the business). It covers everything from governance, to the role of family members’ (even spouses) in the business, to family break-ups.
For a founder with a young family, the need for a family charter may not be apparently clear. However, its significance is enhanced when needed arises to relieve the complexities which accompanies the rise of a new generation. Particularly, when that event increases the number of family members in the business, and which often occurs by the third or fourth generation.
In the increasingly complex dynamics of family and business relationships, The Family Charter makes up an integral part of the family business and wealth preservation arsenal and a founder [vision bearer] in family business needs to give his family successors this opportunity to ensure their wishes live for generation.
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Institute For Family Business (IFFB), has extensive experience, supporting family businesses with direct, concise and easy to follow growth and sustainability family business solutions. Through training: Family Business 101, the premier family business course in the region, and private family business coaching and advisory support services. IFFB continues to assist family-owned businesses in the region thrive and transition from generation-to-generation.
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