Director at the Lagos Business School Family Business, Okey Nwuke says family businesses need to be more strategic with their succession plans and preparing the next generation for leadership by balancing the need for innovation with traditions and legacies of the family unit. In a chat with CNBC Africa at this year’s International Family Business Conference in Lagos, he reiterates mindset shifts are critical to change the failure rate of family businesses as capital accumulation remains a challenge.
A director at the Lagos Business School Family Business, Okey Nwuke says family businesses need to be more strategic with their succession plans and preparing the next generation for leadership by balancing the need for innovation with traditions and legacies of the family unit. In a chat with CNBC Africa at this year’s International Family Business Conference in Lagos, he reiterates mindset shifts are critical to change the failure rate of family businesses as capital accumulation remains a challenge. Take a look. Even if you are running a business today, your competition can come from, you know, in the next, in Europe, from US, even though you are inside Nigeria. So you have to know what is happening in the world. But how do you create and balance that need for, you know, innovation with the tradition of the family? What also keeps the family business strong is that history, the family, the legacy. So you have a challenge of how do you navigate those paths, balance that with your family dynamic? How do you prepare that next generation? I want to talk about next generation for leadership. We're not necessarily talking about the members of the family. That I talk about stewardship. Members of the family don't necessarily have to be the ones running the business unless they are competent and interested. Two things. They must be interested in the business. They must be competent because the job is to do what the business needs, not because I'm a family member. So if they are not interested, they don't have to be running the business. They can sit on the government boards if they so qualify, but make sure the business is safe. The concept of stewardship is what is required for the business to be here today and be there tomorrow. If it means a third party running the business, that is what the business needs in the interest of the family. So the essence of the conference is to prepare, wake up owners of family businesses, their mindset, their thoughts, their logic, that there are some things that are important that are not being discussed. Sometimes we spend all our time running around looking for new businesses, new contracts. What I call it is like if you have a basket and you get all that wealth, you wasted your time. But fortify that base, then whatever you bring will sit properly for today and for tomorrow. Let's also talk about this one very important thing is rethinking the family business space right now. And more importantly is how best, you know, a lot of, let's look at how this practice has worked over the years right now. Like you rightly mentioned, stewardship is one important thing that can transform or move from leapfrog a lot of family businesses. We've seen a lot of family business grow while some also, you know, die without seeing this. But looking at your expertise now in terms of guiding family businesses now, and the case study looking at Nigeria right now, how would you say businesses are navigating these challenges in terms of not just getting a succession, but in terms of sustaining the business beyond? Nigeria has not done very well over time, which is actually the reason why our objective is to change the narrative. I mean, I used to tell a lot of my family business, you know, friends, the failure rate of family business today is very high. It's unsustainable. Like I said, less than 30% of family businesses stayed after the end of the first generation. So that means 70% is wasted. By the time we get into the third generation, under 10% will be alive. And that is historical facts. But what I tell them is, it's not like whatever you do, you get that outcome. If you do something differently, you're going to get a different outcome. That's actually why we started this conference. Then people bring those, what are the reasons why these businesses don't survive long time? One, selection of successors. We're so narrow minded about succession, about it must be from our family. And if you come into Nigeria, culture now comes in, maybe first son, you know, in some parts of Nigeria, maybe in the southeast or some parts, or so even when the daughter is the best ready for the business, no, my first son, or it has to be somebody in my family. Maybe I have the very worthy employee who have been loyal, you just don't even put up in the equation for succession. The business will not succeed. So the point we're seeing is succession must be to come and offer what the business needs, who had the capacity, who had the competence, who had what it takes to take the business, provide the needs of the business. If you put our minds outside this, we'll continue to have that challenge. So my son may not be interested in the business. Then, or even if he's interested, maybe I send my son to Harvard Business School, Lego Business School, he come back as a PhD. I come back and make him executive director. He does not understand the business. The Indians, the Asians who have done this well, that son or daughter of mine had to go through the ladder to learn. That's the only way he can run the business. Once you begin to change your minds and focus on the fact, what does the business need to survive? We continue to have that challenge. But I believe with the success we've had in the conferences prior year and now, and the interest people are sharing, that message is just more like an advocacy process that we started. People didn't pay to come for this. It's all free, cost a lot of money, but you believe eventually that is what the business and the country needs for businesses to thrive, so that we don't start. Capital accumulation is difficult. You now start the business, accumulate capital, then it goes down, the next people start again. So like, start and stop. It does not all go well for the development of the country. So we believe when we do things differently, understand the most critical thing that business needs. Manage the family dynamics, manage the issue of culture and all of that in the new mindset of what does the business need to survive. By then we start sending a new story for family business. Director at the Lagos Business School, family business, Oke Unwoke speaking on the importance of succession planning for family businesses.
Theme: Strategic Succession Planning for Family Businesses in Nigeria
Director at the Lagos Business School Family Business, Okey Nwuke, emphasized the critical need for family businesses to adopt strategic succession plans and prepare the next generation for leadership roles. In a recent interview with CNBC Africa at the International Family Business Conference in Lagos, Nwuke highlighted the importance of striking a balance between innovation and tradition within family businesses. Nwuke stressed the significance of mindset shifts to address the high failure rate of family businesses in Nigeria. He pointed out that less than 30% of family businesses survive beyond the first generation, with only a meager 10% enduring into the third generation. These statistics underscore the urgent need for a new approach to ensure the longevity and success of family enterprises. One of the key challenges facing family businesses is the selection of successors. Nwuke noted that many businesses limit their pool of potential leaders to family members, often overlooking competent and interested individuals within the organization. This narrow focus on familial ties can impede the growth and sustainability of the business, as the most qualified candidates may be disregarded in favor of lineage. The concept of stewardship emerged as a central theme in Nwuke's discussion, emphasizing the responsibility of business owners to prioritize the needs of the enterprise over familial considerations. He highlighted the importance of grooming capable leaders who are not only passionate about the business but also possess the requisite skills to drive growth and innovation. According to Nwuke, succession planning should be guided by what the business demands to thrive and evolve, rather than traditional customs or cultural expectations. By broadening the criteria for selecting successors and focusing on competence and commitment, family businesses can position themselves for sustainable growth and resilience in a competitive market landscape. The conference served as a platform to challenge conventional practices and inspire a shift in mindset among family business owners. Nwuke underscored the need for ongoing dialogue and education to drive change and improve the success rate of family businesses in Nigeria. By reimagining the role of family members in business leadership and embracing a more holistic approach to succession planning, enterprises can overcome obstacles and build a legacy that endures for generations. In conclusion, Nwuke's insights shed light on the transformative power of strategic succession planning and the imperative of adapting to shifting dynamics in the business environment. Family businesses in Nigeria stand to benefit greatly from embracing innovation, fostering talent from within, and aligning their strategies with the evolving needs of the market. By embracing change and prioritizing the long-term sustainability of their enterprises, family business owners can chart a new course towards lasting success and prosperity.
"Succession must be to offer what the business needs, who has the capacity, who has the competence, who has what it takes to meet the business needs."
Nigeria, Family Business, Succession Planning, Innovation, Tradition, Leadership, Stewardship, Business Development