Succession is a very topical issue in a lot of enterprises and big businesses, where the framing of the conversation has made succession looks like it is a jostle to see who will get the top post and remove the reigning leader. Because of this framing, there is always a conflicting nature to succession when it comes to family businesses. Founders and incumbent leaders have the responsibility of legacy building, as well as the responsibility to all the stakeholders of the business to ensure that the business carries on. However, there is also the egotistical pride that may hold them back from this transition. This tends to take the form of believing that the next-gen may not be prepared for the role or that the next-gen will not meet the standards or the level of success that the current leader will have met. Some common reasons why succession plans are necessary include:
Succession Planning Lessens Risk of Unanticipated Leadership Changes
Ranging from the smallest to the largest family businesses, every well-oiled machine requires service and replacement of spares. No engine works indefinitely without the replacement of parts. The replacement does not discount the work the previous part has done. It simply means that part has served its time, and a newer part must take over and continue the work. Retirement, termination, and even death are usually the common causes of change in leadership at family firms. Ideally, in all cases, a period of a few months or even years of awareness and preparation are created in which successors can be considered and trained for the job. However, if the position is vacated due to sudden resignation, dismissal, or ill health, the change can be sudden and disruptive. More so for family firms. For family firms, when there is a plan for leadership transition years in advance where there can be a process identifying a pool of internal and external candidates (and keeping it up to date), making the organization prepared for a much easier transition — even if it’s a sudden one.
Continuity Planning Helps Maintain Board and Shareholder Trust
For organizations across the spectrum of publicly traded or privately held, maintaining the trust of the Board and shareholders is critical to the organization’s success. Having a clearly defined and communicated succession plan demonstrates to the invested parties that the organization is proactively managing current staff and planning for the future. More so, if family governance is in place and there is a definitive plan to move the founder from positions of operations and management and place the next-gen into places that show their competence and ability to lead or to work within the organization at some logical position. This is something we have seen happening in the African Family businesses, especially with the conversation around female next-generation leadership.
In 2022, we saw a giant leap in exemplary succession planning and execution. In February 2022, Strive Masiyiwa stepped down from his position as chairman of the Econet Board of Directors. Strive built this company into the global giant it is, and although he is relatively still young and a competent leader who sits on numerous notable boards, he chose to retire from the company that grew his fortune and which his family holds a significant shareholding in. In early April 2022, we saw the board of directors of Econet Wireless Zimbabwe announce the appointment of Elizabeth Tanya Masiyiwa to the board of the telecom company.
Elizabeth, who is a senior executive, social entrepreneur, and philanthropist, is one of the six children of Masiyiwa. This transition is a flagship transition, which may not be the first of such, but it heralds the movement of African family firms into creating conversations around succession planning being an effective tool for continuity and agility, and innovation in the future of family firms on the continent. The most prominent part is the stepping down and the appointment showing the transition and trust that is being upheld in the Masiyiwa family. It will be interesting to see what happens in the ongoing future of this business as it is clearly now seeing a next-gen transition and leadership journey. In this transition, we will see the family continue to guide the business and decisions being made from the boardroom.
Equally so, the transition explores the importance of next-gen education when it comes to family firms. As noted in the announcement and a simple Google search, Elizabeth Masiyiwa is an accomplished young lady who comes with the right credentials and is taking up the seat with this in consideration. It is obviously not a seat granted at the table because of the ownership structure of the company and the well feared “nepotism” clause, but it is because she has worked hard in her own right and earned the ability to sit at the table. She has a B.Sc. (Hons) degree in Banking and International Finance from Bayes Business School, City University London, and a Masters of Social Entrepreneurship from Hult International Business School. And as she takes up the seat, she is said to be studying for an Executive MBA from Cambridge Judge Business School, Cambridge University. She is the executive director of Delta Philanthropies.
She serves on the board of Cassava Smartech, Ashesi Foundation, and Higher Life Foundation, where she leads the Office of Design & Innovation. She also sits on Harvard University’s Leadership Council for the Center of Africa Studies and advises a number of entrepreneurship and philanthropy networks. Elizabeth Masiyiwa co-manages a social impact investment fund that invests in initiatives that promote economic development in Southern Africa. Prior to her role, she was the analyst for UNICEF’s Innovation Venture Fund. By all intents and purposes, she comes ready to bring the next-generation vision into a company her father has successfully led to a global force.
Succession Planning Creates Clear Communication and Alignment
It may be right to assume that the Business system is governed by different rules from the family system. More so, when these two systems overlap, succession planning is crucial for family businesses because it can help avoid the hurt feelings and estrangements that can flare up when emotions are heightened during a transition of leadership. We have seen businesses fall apart when the founder suddenly dies, and there is no clearly outlined succession plan or one that is in transition. For example, if the founder of a company has identified an heir apparent, this should be clearly communicated to all family members.
By the time a transition is necessary, everyone in the family should be on the same page about what will happen. An owner or leader who hides his or her intentions sets everyone up for mistrust, disagreement, and failure. Businessman and founder CEO of Equity Bank Kenya John Kagema died in December 2018. He was the owner of the luxurious Enashipai Resort and Spa in Naivasha. His widows and children were left fighting over 21 companies, an insurance policy, at least 118 plots of land countrywide, a mining company, and a fleet of motor vehicles.
In 2019, Serah Wanjiru filed an application at the Family Court Division, claiming to have been left out of the proceedings on the succession of Kagema’s estate, yet she and the reclusive billionaire had been married under Kikuyu customary law and that they even had a set of twin children. In the same year, Esther Njeri and her 29-year-old son Abraham James Gitangu Mwangi went to the Family Court Division seeking to be included in the case seeking the transfer of the administrative rights of the Kagema estate. It is unfortunate when such things happen because it is not only the family that suffers but the vast business empire can be left in shambles. However, if family governance had been instituted and continuous work towards functional family governance in relation to the business system, this would have seen a clear collaborative succession plan being put in place and the protection of business assets then taking paramount importance.
A huge unacknowledged element in family governance is that it is key to ensure the family is educated in understanding that the business should be protected as it is the financial foundation of the family wealth. Any action that brings about instability in the business or any of its systems will impact the family. Whereas family will remain family, the business, once decimated, can leave the family with no financial security and all members losing in the long term. Identifying key skills within the family and appointing key leadership, and testing out the collaborative function of this leadership is important because key leadership must be in accord about the way forward to ensure they are operating as a unit and not undermining each other’s efforts.
For the business system, a succession plan should fit into a larger defined strategic vision developed by organizational leadership. By definition, creating a succession plan forces company leadership to look ahead and estimate where their organization is going.
By considering factors like your industry and your competition, your organization can determine what its leadership will need to look like 5, 10, and 15 years from now. Equally so, if this is executed with care within a family system, the family can make the right shifts as and when it is necessary for the events of life.
Succession Enables Successors’ Time to Prepare
Identifying potential successors gives families and the organizations they build time to provide the resources that will prepare next-generation leaders for their role. During this period of educational and skills development, Next-generation family members can be assessed for strengths and gaps and receive proper development opportunities.
It is much better for candidates to determine that they aren’t interested in a role before committing to it. A bad hire can take an emotional as well as a financial toll on an organization, so it’s in everyone’s best interest to take the time necessary to choose wisely. A good example of such is the Dangote family. Like the Masiyiwa family, a number of next-generation leaders hold top positions in the family business and have gotten there by growth and merit. One such example is Ms. Halima Dangote.
Halima Aliko Dangote is the group executive director, commercial operations of Dangote Industries Limited (DIL), one of the largest and most diversified business conglomerates in Africa. She is responsible for the implementation of the group’s shared services strategy with specific oversight for the commercial, strategic procurement, administration and branding and communications functions. Ms. Dangote joined DIL in 2008 and has held a number of executive management roles, including her most recent role as executive director of Dangote Flour Mills, where she led the turnaround and recent sale of the business to Olam. Previously, she served as executive director of NASCON, a manufacturer of salt, seasonings, and related consumer products. She started her career as a business analyst with KPMG Professional Services, serving private and public sector clients on topics related to business performance improvement, strategy and policy formulation.
She is also a trustee of the Aliko Dangote Foundation, a board member of Endeavor Nigeria, and a member of the Women Corporate Directors (WCD). Halima holds a bachelor’ Degree in Marketing from American Intercontinental University, London, United Kingdom, and a Master’s in Business Administration from Webster Business School, United Kingdom. She has attended a number of high-profile leadership development programs, including; the Program for Leadership Development (PLD) at Harvard Business School; the Executive Development Program at Kellogg School of Management; Finance and Accounting for Non-Financial Executives at Columbia Business School.
Her extensive experience and the positions she holds show her personal as well as professional growth and the family’s commitment to developing competent and capable Next Gens who earn their place within the ranks of the organization.
A Succession Planning Survey from Heidrick & Struggles and Stanford University found that more than half of companies today cannot immediately name a successor to their businesses should the need arise. It is an even more critical situation in family-owned and -led organizations, where a lot of the family capital is dependent on the succession and the planning of the future. In a research done by PWC on African family businesses, it was found that family business owners want, above all, to create an enduring asset for future generations. Legacy is top of mind for 81 percent of African respondents. However, sadly 76 percent of African family businesses don’t have a succession plan in place to make sure that the business is passed down to the next generation in a planned and formalized manner. Moreover, only 19 percent of families have a family constitution/charter, which links strongly to not having a succession plan in place. Despite these challenges, the major highlight when there is a challenge is that there is opportunity. As we are made aware of the failings we have, we have the opportunity to emulate the successful organizations and families and, in turn, create our own template of success.
Tsitsi Mutendi is a co-founder of African Family Firms, an organization that aims to facilitate the continuity of African family businesses across generations. She is also the lead consultant at Nhaka Legacy Planning and the host of the Enterprising Families Podcast.
