The collapse of business after the demise of the founder is a global occurrence not limited to Nigeria. But the rate at which the businesses of very rich Igbo men and women fail immediately the founder dies is becoming alarm and requires and intervention. It is heart rending to see a renowned business empire collapse so soon.
I took interest in ascertaining the principal cause of this unfortunate occurrence during my postgraduate studies and in the course of my corporate and investment banking career, on the main causes of this phenomenon.
My findings may be well known to the readers. I shall also be recommending measures to stem this preventable occurrence.
My privileged position as a finance person has afforded me numerous opportunities to meet a lot of Nigerian business persons some of who were from my home town, Nnewi with highest density of millionaires per extended family in Nigeria. This also happens in many other diverse societies.
There were many businesses that were the pride of a town, state and a people that have now become history because the men that started the businesses either died unexpectedly or naturally at the ripe age.
There are many successful businessmen especially of Igbo extraction, who are still living but have continued to make the mistakes made by the bourgeoisie before them and whose big empires would most likely end up the same way.
This has to stop!
CAUSES OF THE COLLAPSE
The following could be said to be some of the reasons why the businesses of rich Nigerian men don't outlive their founders:
1. Personalization of the business by the founder: Most successful businessmen started small and worked so hard to grow their businesses. Some of the notable businessmen are even addressed as or answer their companies’ names in place of their personal names. They are usually the sole signatories to all the companies’ bank accounts. They alone confirm all payments. There is no problem with this if it ends here.
However, in most cases, the founder begins to assume that he is the same as his company. He would refuse to put structures in place to drive the business. He does not separate his personal expenses from that of the business. The owner believes that nobody including his children no matter how educated can run the business better than him. He will keep deceiving himself with immortality until he is struck by stroke or die as willed by God and the business dies with him.
2. Lack of Organisational Structure: Flowing from the personalisation of the business operations, the founder would disregard all wise counsel to put a proper management structure in place. Proper structure in business means creating functions and hiring competent staff with clear job descriptions to man those functions. A smart business values the contributions or suggestions of his management employees. He knows that many paid people can voice out inspirational ideas that can change for good the fortunes of his company.
Examples of structure include setting up separate units in charge of Accounts, Internal Control, Audit, Marketing, Admin, HR, etc. It also entails creating levels of management e.g Board of Directors, Executive Management and Heads of Departments. A good structure also entails having clear policies on how the business of the company is conducted.
The founder of a typical big Nigerian business would surround himself with incompetent personnel, mostly relations who specialise in eye service and gossiping with great propensity to feed fat on the company. This group of people quickly milks the company dry whenever the founder is terminally sick or dead. They tactfully ensure that the founder does not define roles or hire experienced administrators who could help organise the company therefore rendering them redundant.
Most unqualified employees who are related to the business owner would instigate the sack of any manager in the company that dares moot the a transformational idea to the founder to put a proper structure in place.
3. No Clear Succession Plan & Founder's Feeling of Immortality: Many of our successful businessmen deceive themselves and have refused to learn from history. They think that they would never die. Some of them spurn the idea of writing a Will or training a successor. They don't see any competent person in their children or staff and carries on in self-delusion until death calls and the cookies would crumble.
4. Resistance to Diversified Ownership: Many of our rich business men are egocentric. They have bad temperament or no sense of charity and are too greedy to share profit with management staff who are key to the success of the business. They also want to own a 100% of nothing than 51% of something. The list of directors filed at Corporate Affairs Commission is merely for registration purpose as the registered directors are usually members of their families or non-existent persons. There are no real board members order than the founder who is the same as the board and management of the company.
The absence of a good and independent board members with equity is a serious threat to the sustainability of an emerging big business. Two good heads, they say, are better than one.
5. Refusal to Modernise or Embrace Technology : Some big companies that refuse to read the trend and modernise their operations shall surely die. Remember how LG and Samsung killed the almighty Sony TV. Also, the case of typewriters and desktop computers is still fresh in our minds.
Due to lack of competent management team and advisory board, a one-man managed big business cannot correctly read the trend all the time and can be run out of business and it could happen so soon. Some businesses have even died before the founders because the owners refused to heed the advice to innovate or change their methods or processes. There are founders believe that an old woman does not feel wearied or aged in dancing a familiar tune.
6. Unsuitable Education of the Children: It is customary in Igbo land and most Nigerian cultures that the sons or particularly the first sons should take over the management of their father's business once the founder dies. But a business can only continue operating at good levels if the founder had prepared the child for the role.
But engrossed in the business, our people forget to engage the possible successor-son effectively to ensure that he understands the secrets of the business.
Some send their heir apparent son(s) abroad to study without close interaction and before they know it, the guy has developed interest in other areas of life and would not be interested in returning to manage his father's business.
My research also revealed that a child who is always at loggerheads or does not agree with the dad may see the opportunity to study abroad as a ticket to freedom. He would marry a woman in his host country and stays put.
The worrisome aspect is the case whereby a son is given to enjoyment abroad and returns home with a profligate tendency and runs down the inherited company within few years.
7. Mother's Negative Influence: Some mothers, swimming in opulence, decide to spoil the children who mature into adulthood with entitlement mentality and without any modicum of desire for hard work. The big rich father would suddenly find out that his male children are not capable of managing his business and may attempt to give the mantle of leadership to his brothers and this would spark off a war that might even quicken his earthly exit.
8. Non-Writing of Will or Acrimonious Contest of the Will : Unless the founder was lucky to have integrated his first son into his business very early and the son develops good rapport with his siblings, the founder's death without a Will would be quite problematic.
A legal contest of the Will by the family members of the dead founder could grind a business to a halt. Some famous businesses that were the pride of Nigerians are currently mired in this kind of quagmire.
9. Crass Incompetence of Successor or A Curse: The business may fail due to the greed or crass incompetence of the successor who could be the founder's son or a hired hand. The collapse of the big empire of a man could also be in fulfilment of Proverbs 13:22 that says that "a good man leaves an inheritance to his children’s children, but the wealth of the sinner is stored up for the righteous."
Nigerian big businesses could outlive and even grow bigger after the death of the founder by adopting what many people had done in other climes.The following have been tested and have worked:
a) Go Public: The founder of a big business should go public and sell part of his shares to interested members of public. A becoming a PLC forces unto a company a certain level of corporate governance. The founder is required to put a verifiable management and control structures before his company is allowed to sell shares to the public. Investment bankers and stock brokers can advise on what options to take. Upon death of the founder, his children can only be contesting for their father's shares while the company is running.
We forget easily that John Holt, A.G Leventis, Julius Berger, were men who set up businesses decades ago. Because they did the right thing, their businesses are still alive many years after they have died.
b) Clear Succession Planning: The founder should put in place a smooth succession plan known to the board of directors. If he desires that his son or relation would succeed him, he should ensure that the person must rise through the ranks or serves under the founder's immediate successor which could be a hired hand to cut his teeth.
c) Succession Through Competence: The policy of the company should state the required education and other qualifications for the job of the CEO. This should be made known to all members of the founder's family. This would make anyone interested to get prepared.
We should find a way of impressing on our leading industrialists to change their ways and to take steps in seamlessly bequeathing their companies to the next generation who can even take those companies to the next level. They must do this because, like all created things, a founder of a business must die. But, he can become immortal by putting in structures in his business that would keep his company alive many years after he is no more.
That's what is called an Enduring Legacy