Strengthen and safeguard your loved ones' business ventures and maintain familial bonds through a Family Business Charter
Family-owned businesses form a significant portion of Africa's economic landscape, contributing significantly to the continent's growth and development. However, managing the complex dynamics within these businesses can prove challenging, often resulting in only a small fraction of them surviving a generational transition.
Mark Achiampong, Head of Commercial and Business Banking at First National Bank, attributes many of these failures to a lack of succession planning and preparations for family conflicts, divorce, and leadership transitions. Achiampong suggests that adopting a comprehensive governance framework, such as a family business constitution, can help alleviate these issues and ensure long-term stability.
A family business constitution is a written document that aligns with other business governance frameworks, like a shareholder agreement or memorandum of incorporation. It outlines the rights, values, responsibilities, and rules that apply to all family members as stakeholders in the business, whether actively involved or not. The constitution can be customized to the evolving needs of the family-owned business and can be crafted early in the business's development or introduced at any point in its lifespan.
Family businesses in Africa are advised to establish a constitution as early as possible to ensure that relationships are strengthened and the best interests of the business are maintained. Although the process may initially be uncomfortable, particularly for long-standing businesses, the benefits far outweigh any discomfort—avoiding potential conflicts that could otherwise threaten the business's future success.
Additionally, a family business constitution can serve as an effective tool for various aspects of business management, such as recruitment, compensation, retirement planning, and succession planning. It can also provide clarity in the event of a family tragedy, such as severe illness, injury, or death of a family member who is a shareholder.
In essence, the sustainability and continuity of a family-owned business hinge on establishing a clear framework for governance, ensuring that the family's roles, responsibilities, and expectations are clearly defined, and minimizing potential risks and uncertainties that could jeopardize the business and relationships within the family.
- Establishing a family business constitution, as suggested by Mark Achiampong, can help family-owned businesses in Africa sustain their growth by defining roles, responsibilities, and expectations, and thus reduce potential risks during generational transitions, conflicts, or leadership changes.
- Adopting a comprehensive family business governance framework like a constitution can assist with various aspects of business management, such as recruitment, compensation, retirement planning, and succession planning, thereby contributing significantly to the long-term financial stability of family-owned businesses.
- In the face of unexpected events like family tragedies, a family business constitution can provide essential clarity, protecting the best interests of the business and alleviating potential conflicts that might threaten the business's future success and the integrity of family relationships.
