Vector Consulting shares the key to success in family-owned businesses
An article by Forbes indicates that family-owned businesses control a significant portion of the African economy, but despite the vast number of businesses in this structure, few survive beyond the founder’s generation.
“Family-owned businesses are a large employer in the South African economy, accounting for approximately 6 percent of the gross domestic product,” explained renowned author and founder of Vector Consulting, Ahmed Seedat.
“These companies are economically impactful through direct and indirect taxation, as well as contributing to the social development of the economy through non-profit organizations. The continued success of such enterprises results in the growth of the South African economy and the enhancement of society overall.”
He said the dynamic of family-owned businesses veered from traditional business structures in that they were ‘tightly held’ and required significant cultural intelligence, alongside the ability to understand an unfamiliar context and adjust accordingly.
Outlining some of the challenges of second generations, Seedat said one of the biggest was a lack of understanding of the Companies Act, with other challenges related to entering the business and managing this process.
“The roles and responsibilities of the new entrant in a family-owned business need to be addressed and expectations correctly managed,” continued Seedat. “We’ve also identified a lack of shareholder agreements and exit clause as another fundamental hurdle for successful operations.”
There are many examples of successful family-owned businesses across the country and beyond, including Anton Rupert’s Remgro (originally Rembrandt), Raymond Ackerman’s Pick n Pay, and Said Salim Bakhresa’s Bakhresa Group in Tanzania. Seedat said there are many common elements found in successful family-owned businesses such as these.
“Implementing aspects such as a family charter to provide guidelines for new entrants, as well as standard operating procedures, transformational leadership and a clear induction handbook will assist in transition and positive change,” said Seedat. “There needs to be a shared vision with no room for misunderstanding, ensuring the entire family is on the same page.”
Vector Consulting, in partnership with the Congress of Business and Economics (CBE), will share more insights on family-owned business challenges and successes at its second international conference, ‘The Dynamics of Succession in Family-Owned Businesses’, taking place on 7 March 2020 at The Palm Continental Hotel, Johannesburg.
The conference will be led by Seedat, with the keynote address by Marius Ungerer, a professor and core faculty member at the University of Stellenbosch (USB). Ungerer currently teaches Strategic Management, Leadership and Change Management programmes such as the MBA, MPhil in Management Coaching, and PGD in Leadership at the institute.