family business and succession planning
DESCRIPTION
entreprenuershipTRANSCRIPT
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FAMILY BUSINESS AND SUCCESSION PLANNING
PROFESSOR TERESA MWUESE NMADUPower Point Presentation by
Professor Gbemi Oke
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• OBJECTIVE OF THE MODULE
• To help students understand the concept of family business and the transition from family businesses to the mega firms we see today in the corporate world.
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Learning Outcomes
• Upon completion of this module, students would have been able to:
• Discuss the concept of family business and the factors that make it unique
• Explore the cultural context of the family business
• Appraise the complex roles and relationships involved in a family business
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Learning Outcomes
• Identify entrepreneurial practices that enable a family business to function effectively • Examine the process of managerial
succession in a family firm.• Analyze the major issues involved in the
transfer of ownership to a succeeding generation
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Content
3 Main Topics• The Concept of Family Business• The Cultural Contexts of Family Business–Roles and Relationship in Family Business
• Ownership Transfer and Succession in Family Business.
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Topic 1• Introduction• Definition/ Conceptual Framework• Family in African/Nigerian setting• Assumptions about Family Business• Family Influenced Start-ups• Family Corporate Venturing• Family Corporate Renewal• Provision of Family Private Cash• Family Investment Funds
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Challenges of Family-Owned Businesses
• • Assuming that past success will guarantee their future success;
• • The legacy value attributed to the business does not translate into a market value or advantage;
• Leaders try to balance the risk profile of their shareholders with the risk and investment demands of the marketplace;
• Risk profiles differ between senior and successor generations;
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Challenges• Hard to pass the responsibility of managing the firm into the
hands of younger generations which they deem less capable;• • Families build the first-generation business on the
founder’s intuition, but then business never establishes more intentional entrepreneurial processes or confirmed strategy for the future to keep the entrepreneurial contributions alive;
• • Families rarely make use of the same financial strategies as those used by fellow entrepreneurs to grow the business;
• • Families do not get rid of unproductive assets and underperforming businesses to reallocate resources to more productive places;
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Challenges• • Successor generation family members feel
entitled to get a business rather than seek next-generation entrepreneurial opportunity;
• •Senior leaser communicate to the next generation that business planning and entrepreneurial analysis is a waste of time;
• • The family member is given part of the business to run as part of their legacy, and this is deemed to be entrepreneurship in the family.
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Further Challenges• • Lack of an exit strategy;• • Succession planning;• • High turnover of non-family members;• • Lack of training of new family members
who join the business;• • Lack of outside opinions and diversity on
how to operate the business.
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Topic 2
• Cultural Context• Value of Community Life• Value of Family oneness• Value of the Sacred and Religion• Value of old age and authority• Value of Acceptance and Hospitality
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• Roles and Relationships in Family Businesses• Advantages and Disadvantages
of Family business• The need for good mix in the
family firm
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Topic 3
• STRATEGIES FOR COPING WITH ROLES/RELATIONSHIP ISSUES IN FAMILY OWNED BUSINESSES–Family retreats–Family Council–Family Business Constitution
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Succession Planning• Succession, in organizations, refers to the
process of transferring managerial control from one leader or one generation of leaders to the next.
• It includes the dynamics preceding the actual transition as well as the after- math of the transition (Shepherd and Zacharakis, 2000).
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Succession Planning
• In the context of family business, Sharma et al (2001) define succession as the actions and events that lead to the transition of leadership from one family member to another
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• Entrepreneurial succession is the process by which ownership and control of the production or commercial infrastructure accumulated by one generation of a nuclear or extended family is transferred to the next.• It entails the transfer of a commercial
investment of any type from the owner-founder to his prospective survivors.
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Beneficiaries of Family Businesses
• These could be members of a nuclear family in a monogamous household or members of a compound family in a polygynous household,• Survivors could also be members of
the extended family such as uncles, aunts, nephews, nieces, cousins
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Stages of the Succession Process in a Family Business
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Test Questions• For family members in Nigeria, how easy
would it be for one to assume the role of employee in a family founded business? What are the basic preparations if any that are needed?
• How frequently should family owned businesses hold board meetings? What steps should be taken to make such boards be effective?
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Test Questions• Describe five tell-tale signs that a business has
or does not have a succession plan in place.• In Nigeria, are educational qualifications of
potential successors of any significant effect on succession in business? Why or why not?
• Name five current family owned businesses that you are sure will get to their third/fourth generation. Support your assertions with credible examples.
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•Thank You