Black people have a serious problem, according to this wise fellow I recently shared a Kombie with, apparently most of their family businesses cannot survive the second generation. When the passionate owners of the startup dies their businesses tend to wither as soon as the young, entitled, slothful, spoiled and inexperienced brats of these owners find themselves at the helm. Most of these, it seems, choose to be profligate socialites; more interested in spending the inherited fortune rather than taking up the baton. When one of the passengers, a young fellow, called this assertion poppycock, the older gentlemen countered by angrily spewing a list of local businesses that had been failed by their young leaders after the original owner died in a rather convincing rant that led me to conclude that perhaps the man knew what he was talking about.
The Stanford Economist, F. Perez-Gonzalez, recently published a paper titled Inherited Control and Firm performance which seems to give credence to the gentleman in the Kombie’s theory. He examined 335 management transitions 112 of which the position was given to the blood relative of the retiring person. He found that those firms that operate on a nepotism basis tend to underperform when compared to those firms that were operated on a merit basis. This he called the nepotism hypothesis. “Under nepotism, family successors are more likely to be promoted to the CEO-post irrespective of merit.” This is not because the CEOs are family but because most lack experience and post-graduate training prior to ascending to the throne.
The problem does not seem to be anything new either, the great King of yore, Solomon bemoaned the fact that he would toil only to leave his wealth to another and fretted over the thought that he could not foretell his successor’s behaviour. Sadly, young Rehoboam destroyed old Solomon’s kingdom during the first three days of his reign!
Most startup owners, including tech startups, are so busy with the day to day running of the business they forget to think about the time after they are gone. As a result things like insurance, life assurance and grooming a successor are hardily ever talked about let alone acted upon. This much is reflected in things like insurance policies available in our market. Whilst most western insurance companies are quite innovative when creating packages; coming up with things like Key person insurance, packages that allow people to insure their voices (singers) and limbs (surgeons); insurance companies here are still dishing out the same old vanilla packages with half-hearted modifications here and there. The clientele seems not to be bothered by this either since some are unaware of the innovations that have been made elsewhere in the field.
You need to start thinking about your own dynasty. What is going to happen to your beloved company or startup when Junior takes the reins? It might be sooner than you would be inclined to think. You could fall to death on your exercise bike or get electrocuted by your hair dryer whilst in your tub – improbable as it is, such things have actually happened, and your business would be dead just like you before your wake is over.
One great way to train your heir is to reintroduce the traditional Assistant’s position within the company’s hierarchy. Long before assistants were coffee guys who keep track of your calender and schedule, assistants were trainees who would naturally take over the role once the person in the pole position retired or somehow left the job. Since the position is an intimate one, it allows you to imbue your scion with your philosophy, MO, values, culture and vision. This way when you are gone for whatever reason you can rest assured that your heir apparent will take the reins with minimum disruption to your business.
Due to the high employment that is currently prevailing in the country it has become increasingly harder to find work as a summer/holiday intern since most companies would rather have experienced hands on deck. Companies large or small would benefit immensely by allowing high school and college students to intern in their companies. Experience shows that most interns tend to come back and work for the companies they interned for. Think of allowing interns into your company as being the same as trading in Futures. You can also utilize these position to interest and train Junior within your organisation and prepare him/her to be the next godfather.
The Japanese have taken the whole concept of grooming the heir to some lofty levels with their mukoyōshi custom. When they fail to find a suitable candidate to take care of the business after they are gone, they have been known to look for a suitable candidate outside the business. The suitable candidate is adopted into the family first and then groomed to run the business. Such a person is known as a mukoyōshi (adopted mukuwasha.) This according to the Economist and Freakconomics is one of the reasons the Japanese have enjoyed unparalleled success in their family owned businesses. 98% of those adopted in Japan are between the age of 25-30. Whilst you are unlikely to do this here in Zimbabwe you might consider leaving the business in the hands of another more capable relative; a son-in-law perhaps.
As you run your startup, take time to groom the next generation. It is never too early or too late to start. Begin by making sure the “young boss” does not get preferential treatment at work, that they get to work as an underling in each department/aspect of your start up before they get to the top so that they have a holistic view of the entity or all your hard work will be for nothing.