By Ian Ortega
One of the commonest pieces of advice in Uganda rotates around not doing business with relatives. The country locker-room is awash with stories where it ended badly. Of men or women who were doing well in their businesses until they brought in the spouse or the children or the parents.
As I have always done in the past, I go to what passes us common wisdom and wonder – “does it hold true?” It turns out, we’ve all been wrong about family business. But first, we need to be clear what a family business is. A family business is an organization in which the three circles of family, business and ownership intersect with each other. An example of this is where a mother is a shareholder, but is also a chief operations officer (COO). In this case, they’re playing the role of mother (family), role of shareholder (ownership) and role of business (COO).
Over time, we came to know family businesses in Uganda by their downsides. We often talk about the greys, where does family end, and where does business start. What if a management decision is taken but it can be vetoed over a family dinner? What about transition, how do they manage this transition from one generation to the next? And how do they manage conflict of ideology? The first generation is usually the one that built the businesses from the trenches, they’re battle-hardened, they have skills and lessons that can’t be taught in any school, and they have such a refined intuition that defies the most sophisticated data-analytics system. How does the first generation pass on something that cannot be taught, to the second generation, then the third?
In Uganda, we’ve often cited the transition of the Indian family businesses. But even in these, we tend to see that by the third generation, cracks often start to appear. And it’s usually about conflict of direction, what direction should the group take? Should it venture into new areas? Or should it concentrate on its past strengths and not take on new risks? But what if the cheese has shifted from these past strengths? These and more will be conversations for a future post. The plane I am landing today is one that calls Ugandans to reimagine a future that’s anchored on family business.
Why Family Business?
According to Mckinsey, family-owned businesses account for 70% of global GDP, and make up 80-90% of all businesses in the industrialized economies. Thus, family businesses are not a bug, they are the feature of successful economies.
Although data doesn’t exist for Uganda, some of the most impressive businesses that have emerged in Uganda are all family-businesses. Whether in the plastics industry or the cosmetics industry, or hospitality, the trail-blazers are family businesses. Why then are most indigenous Ugandans still sceptical of family business?
Perhaps the inability to run family businesses for most Ugandans also points to one critical aspect of Ugandan society – the inability to organize at family level. Business is nothing other than being able to organize to make money. Thus, family businesses in Uganda are usually a test of organization. Can Ugandan families organize not just for today but for 10 or 20 years into the future?
It matters because there’s an elite overproduction in the country, existing businesses cannot absorb all the incoming talent. The most formidable option is for families to organize into businesses and absorb their own talent. T
It all starts with a visionary – a Patriarch or Matriarch that leads the way for the family. This is the person who takes that initial step, the risk of organizing all the rest. The most important thing is for the rest of the family to trust this visionary, the unity of direction as he or she forges a way forward through the foggy world of business. The point I am stretching here is that successful family businesses have one head, there’s no conflict of direction or vision, and one person is entrusted with the ultimate final decision at the onset.
It is this visionary who then imbues their qualities, values, way of thinking, principles, ethos into the rest of the members, this later gets translated into the corporate culture. The greatness of family business comes from the bond that the family members are able to make sacrifices, forgo salaries at the start, work harder, put in extra hours, just to push this vision. But all this is also not possible without this visionary, who is usually a strict disciplinarian, who drives the pace, and keeps everything integral.
The next test of Ugandan society is the test of building the next generation of family businesses, people coming together at family level and organizing for the long term towards running successful businesses. It’s a test of trust, bonds, long-term thinking, grit, resilience, and everything that’s currently a myth in Ugandan society.